Riots at Japanese factories, stricter customs inspections and other barriers thrown up over a territorial row have reawakened an alarmed Japan Inc. to the risks of doing business with China, analysts say.
Although abandoning well-developed manufacturing bases in China is not an option, Japanese firms are starting to look at other countries, such as Myanmar, as alternatives.
Sometimes violent demonstrations erupted in cities across China earlier this month while consumers have boycotted Japanese products in response to Tokyo’s nationalization of an island chain it controls but which Beijing also claims.
Factories and stores were shuttered amid vandalism and arson, or feared assaults on staff.
Most quickly reopened, but Japanese companies in China then began reporting difficulties with getting their products through customs, and longer waiting times for visas for their staff.
There has been nothing big enough to dam two-way trade — worth $342.9 billion last year, according to Chinese figures — but the strictures have been enough for Japanese firms to reconsider the cost of doing business with its neighbor.
“No one knows when such demos will happen again in China in the near future,” said Takeshi Takayama, an economist at NLI Research Institute in Tokyo.
Takayama says China, which is no longer a mere production base, is likely to remain Japan’s biggest trading partner for now, as the world’s second largest economy is too big to ignore.
“But I think Japanese companies will shift part of their investment from China to other Asian countries for sure,” Takayama said. “The demos reminded Japanese companies of China risks again.”
Toyota and Nissan said Wednesday they would cut production in China because demand for Japanese cars has been hit.
And the airline ANA announced it had received 40,000 seat cancelations for the three months to November, as tourists from both countries get cold feet.
Two years ago, a diplomatic row — over the same islands — stymied shipments of rare earths to Japan, hampering the manufacture of hi-tech products.
Calm was eventually restored and Japan Inc. resumed its huge investment in China, worth $6.3 billion last year, up 50 percent from the previous year. The United States invested $3.0 billion over the period, down 26 percent, according to official Chinese data.
But the renewed diplomatic tensions have rung alarm bells.
“We understand why one Japanese business leader after another is expressing wariness about investment in China,” the Yomiuri Shimbun said in an editorial.
“It is highly likely that Japanese companies will sharply curb their investment in China and instead increase investment in other Asian countries,” the mass-circulation daily said.
Analysts say a slowdown in the Chinese economy, as well as a rise in labor costs are practical factors that come into play as part of a rethink that means China is no longer the destination of choice.
The Philippines on Wednesday said it was courting companies stung by the territorial spat, offering tax incentives and promoting a well-educated population, economic stability and a drive to stamp out corruption.
Thailand and Vietnam offer well-worn paths, but rapidly opening-up Myanmar could prove a real investment frontier, commentators say.
“Myanmar is quite a hopeful destination for Japan,” said Yukio Suzuki, chief analyst at Belle Investment Research of Japan, in Tokyo.
“Sentiment toward Japan is not so bad there,” he said.
During years of isolation, Japan — unlike Western allies — maintained trade ties and dialogue with Myanmar, wary that a hard line on the then-ruling junta could push it closer to China.
And Tokyo has moved to capitalize on the thawing in Naypyidaw’s relations with the outside world since decades of outright military rule were ended, announcing in April it would waive about $3.7 billion of debt.
All Nippon Airways will start regular flights between on October 15, while major Japanese contractor Shimizu will reopen a branch it closed in 1999.
The Japan Chamber of Commerce and Industry dispatched a large delegation to Myanmar this week to hold talks with local business leaders and high-ranking government officials.
Belle Investment analyst Suzuki said a push into Myanmar could prove a boon, and the timing of the spat with China might just play in Japan’s favor.
“Myanmar is near empty and short-term profit cannot be expected,” he said. “But Japanese companies may steal a march if they take action now.”
Japan Inc. sees ‘China risks’ anew in island row
Japan Inc. sees ‘China risks’ anew in island row
Art and the deal: market slump pushes galleries to the Gulf
DOHA: With global sales mired in a slump, art dealers have turned to buyers in the oil-rich Gulf, where culture sector spending is on the rise.
Art Basel, which runs elite fairs in Miami, Hong Kong, Paris and Switzerland, held its Gulf debut in Qatar earlier this month.
“The second you land here, you see the ambition. It’s basically the future,” Andisheh Avini, a senior director at New York-based Gagosian Gallery, told AFP at the Doha fair.
“We see a lot of potential in this region and in Qatar,” Avini said, explaining it was “extremely important” for galleries to be exploring new consumer and collector bases.
“That’s why we’re here. And with patience and a long view, I think this is going to be a great hub,” he added.
A 2025 report on the global art market by Art Basel and the Swiss bank UBS showed sales fell across traditional centers in Europe and North America in the previous year.
Economic volatility and geopolitical tensions have weighed on demand, meaning global art market sales reached an estimated $57.5 billion in 2024 — a 12 percent year-on-year decline, the report said.
“The value of sales has ratcheted down for the past two years now, and I do think we’re at a bit of a turning point in terms of confidence and activity in the market,” Art Basel’s chief executive Noah Horowitz told AFP in Doha.
‘Time was right’
“Looking at developments in the global art world, we felt the time was right to enter the (Middle East, North Africa and South Asia) region,” he added.
Gulf states have poured billions into museums and cultural development to diversify their economies away from oil and gas and boost tourism.
In 2021, Abu Dhabi, home to the only foreign branch of the Louvre, announced a five-year plan for $6 billion in investments in its culture and creative industries.
Doha has established the National Museum of Qatar and the Museum of Islamic Art. The gas-rich country’s museums authority has in the past reported an annual budget of roughly $1 billion a year to spend on art.
Last year, Saudi Arabia announced that cultural investments in the Kingdom have exceeded $21.6 billion since 2016.
Gagosian had selected early works by Bulgarian artist Christo to feature at Art Basel Qatar.
Best known for large-scale works with his French partner Jeanne-Claude, like the wrapping of Paris’s Arc de Triomphe in 2021, Berlin’s Reichstag in 1995 and Pont Neuf in 1985, the Doha fair exhibited smaller wrapped sculptures.
Avini said the works had sparked curiosity from an “interesting mix” of individuals and potential buyers.
“Of course, you have the Qataris. You’re meeting other dealers, for instance, from Saudi and other parts of the region,” he said.
Among the Christo works were “Wrapped Oil Barrels,” created between 1958-61 shortly after the artist fled communist Bulgaria for Paris.
‘Turn of the cycle’
The barrels — bound tightly with rope, their fabric skins stiffened and darkened with lacquer — inevitably recall the Gulf’s vast hydrocarbon wealth.
But Vladimir Yavachev, Christo’s nephew and now director for the artists’ estate following their deaths, said the barrels were not developed with “any connotation to the oil industry or criticism.”
“He really liked the proportion of this very simple, everyday object,” Yavachev said. “It was really about the aesthetics of the piece,” he added.
Horowitz said there had been an “evolution that we’ve seen through the growth of the market in Asia and here now in the Middle East.”
“With each turn of the cycle in our industry... we’ve seen new audiences come to the table and new content,” he added.
Hazem Harb, a Palestinian artist living between the UAE and Italy, praised Art Basel Qatar for its range of “international artists, so many concepts, so many subjects.”
Among Harb’s works at the fair were piles of old keys reminiscent of those carried during the “Nakba” in 1948, when around 760,000 Palestinians fled or were forced from their homes.
Next to them was a pile of newer keys — 3D-printed replicas of the key to Harb’s own apartment in Gaza, destroyed in the recent war.
In the Gulf and beyond, Harb said he thought there was a “revolution” happening in Arab art “from Cairo to Beirut to Baghdad to Kuwait... there is a new era, about culture, about art.”
