Japan-China Relations: As Japanese Prime Minister Fumio Kishida contemplates a potential meeting with Chinese President Xi Jinping during this week’s APEC summit, one issue looms large — the case of a detained executive from drugmaker Astellas Pharma. The individual, along with other Japanese nationals facing legal challenges in China, is likely to dominate discussions as plans for the leaders to talk take shape. Tokyo was shaken by the arrest of this well-connected Japanese veteran in China, which reduced foreign investment and accelerated expatriate emigration.
The U.S. ambassador to Japan, Rahm Emanuel, expressed concern over Japanese firms’ worry in China. He said “Right now, you can’t get people to go staff the companies in China because they’re scared of their own safety.” The detained Astellas Pharma executive, identified as Hiroshi Nishiyama, was taken into custody on suspicion of espionage in March and formally arrested last month. This arrest, coming amid a sweeping national security crackdown, has not only impacted the individual involved but has broader implications for business operations between the two countries.
While there has been no official confirmation of a meeting between Fumio Kishida and Xi, sources familiar with the planning suggest that the case of the detained executive and broader concerns about Japanese nationals facing legal challenges in China may feature prominently in discussions. The Japanese foreign ministry has consistently urged Beijing to repatriate Japanese nationals detained in China and ensure transparency in the judicial process. However, China’s foreign ministry has yet to respond to these concerns.
These legal issues have greatly affected enterprises and expatriates. Nishiyama, a Mandarin speaker and former board member of the Japanese Chamber of Commerce in China, was arrested, adding symbolic weight to the safety and security of Japanese citizens operating in China. His detention has raised concerns among businesspeople about visiting to China due to his high profile and official connections.
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Japanese companies in China have responded to this situation by advising employees to keep a low profile and refrain from pushing too hard in sales and other activities. The uncertainty and fear surrounding potential arrests have created a cautious atmosphere, impacting the willingness of individuals to take up assignments in China. Takeshi Niinami, chairman of the Japan Association of Corporate Executives, highlighted the challenging environment, stating, “Considering the current situation in China, it is very difficult to create an atmosphere that encourages people to do something new.”
The consequences of these concerns are reflected in Japan’s foreign direct investment (FDI) into mainland China, which recorded a significant decline of 30.6% in the first nine months of this year, reaching 393.4 billion yen ($2.6 billion). This drop contrasts with Japan’s overall worldwide FDI, which grew by nearly a fifth during the same period. The cautious sentiment is echoed in a survey of Japanese companies doing business in China, where half of the respondents expressed intentions to cut investments this year.
Factors contributing to this caution include sluggish demand, cross-border regulations, and concerns about the risk of investment in China, particularly raised at the head office level. While China remains one of Japan’s most significant trade partners alongside the U.S., the apprehensive environment may pose challenges for Japanese firms seeking to maintain their operations in China.
The declining number of Japanese expats living in China over the last decade, reaching 102,066 in 2022, indicates a trend that may continue. If this trend persists, it would mark the lowest number of expats since at least 2004. A Beijing-based real estate agent revealed the tangible impact of the Astellas case on Japanese clients, stating that individuals are refusing assignments in China, and families are opposing moves due to concerns about legal trouble.
Stefan Angrick, a senior economist for Moody’s Analytics based in Tokyo, emphasized the shift in sentiment among even the most pro-China business executives in Japan. He noted that concerns about security risks in China have altered the perspective of decision-makers in business and politics, making the current juncture a challenging one to navigate. The delicate balance between Japan and China, deeply intertwined and economically vital to each other, adds complexity to the decision-making process amid evolving geopolitical and legal dynamics.