Japanese Retailers and Manufacturers Leave China

Category: Business


Unlocking Word Meanings

Read the following words/expressions found in today’s article.

  1. withdraw / wɪðˈdrɔ / (v) – to remove something

    The shareholder withdrew his investments due to the company’s poor performance.

  2. stagnant / ˈstæg nənt / (adj) – not progressing

    The company is improving its marketing strategies to address its stagnant business growth.

  3. hub / hʌb / (n) – the center or focus

    This city is known to be the hub of technology and innovation.

  4. halt / hɔlt / (v) – to stop

    The seller will halt all transactions during the holidays.

  5. demonstration / ˌdɛm ənˈstreɪ ʃən / (n) – a public gathering where people raise their concerns

    I joined a number of demonstrations when I was a student.


Read the text below.

Some Japanese companies are withdrawing business from China due to tighter competition and continuous labor cost increase.

Growing competition between Japanese and Chinese retailers has resulted in stagnant profit for Japanese businesses in China. As a result, some retailers have pulled out their operations, while some have shut down flagship stores in the country.

Itokin, a Tokyo-based women’s apparel company, used to have over 300 branches in China. However, the company decided to shut down its operations in the country due to the increasing difficulty of competing with local retailers. Likewise, Honey’s, another Japanese-owned clothing company, has discontinued operations of its flagship stores in shopping centers in China.

Although China had been a hub for low-cost manufacturing, recent trends in the country such as wage hikes have caused production costs to increase. As a result, some Japanese manufacturers have been forced to halt operations in China, which were intentionally transferred there to cut production costs.

The effect of wage increase on labor costs may eventually end China’s cheap labor. Strikes, particularly in the southern province of Guangdong in China, were prevalent in the early 2000s. The demonstrations eventually resulted in a 35% increase in workers’ pay.

Over the years, several manufacturers have been slowly moving their operations to Southeast Asian countries such as Myanmar, Cambodia, and Vietnam, where the pay and labor conditions resemble those of China a decade ago.

Today, China holds a mid-range position when it comes to cheap labor, but it may take a while before its minimum wage rate becomes comparable to the rates in Japan, South Korea, and Hong Kong.

Viewpoint Discussion

Enjoy a discussion with your tutor.

Discussion A

• What are the possible disadvantages of Japanese retailers and manufacturers moving out of China?
• What adjustments do Japanese retailers and manufacturers need to make after moving out of China?

Discussion B

• Would you still start a business even if the competition is tough?
• What preparations can you make before starting a business?