Strengthening the Functions of the Japanese Chamber of Commerce and Industry in China, the Core of Cooperation among Japanese Businesses in the Country

1. Commercial and industrial organizations of businesses operating in China and their activities

Major Japanese, European, and North American businesses operating in China are affiliated with organizations of businesses from their respective countries: the Japanese Chamber of Commerce and Industry in China (589 companies (Beijing only) in April 2021), the American Chamber of Commerce in China (about 1,000 companies), and the European Union Chamber of Commerce in China (about 1,700 companies).

The three organizations listed above have their headquarters in Beijing, but there are independent commercial organizations in major cities other than Beijing.

For example, there is an organization of Japanese businesses in Shanghai called the Shanghai Japanese Commerce & Industry Club (2,216 companies in December 2020), and that of American businesses in the city called the American Chamber of Commerce in Shanghai (about 1,300 companies).

Among these organizations, the Japanese Chamber of Commerce and Industry in China, the American Chamber of Commerce in China, and the European Union Chamber of Commerce in China put together the opinions of their member companies about the business environment in China in annual white papers and submit requests for improvements on the investment environment and other matters to the central and provincial governments of China.

In addition, the American and EU Chambers annually conduct a questionnaire survey of their member companies concerning China business, analyze the results of the survey, and publish the results of the analysis.

These published materials are important in understanding European and North American businesses’ attitudes to address the Chinese market.

Since they indicate the member companies’ replies to almost the same questions each year, one can also interpret chronological changes.

2. The Chinese government values the requests of commercial organizations

The Chinese government considers information communicated by the commercial organizations that consist of major Japanese, European, and North American businesses as important.

The white paper of the Japanese Chamber mentioned above covers a wide range of subjects, including trade, investment, competitive laws, taxation and accounting, labor affairs, intellectual property, the environment, technical standards, logistics, and government procurement.

It also analyzes points at issue by industrial sector and region, enumerating Japanese businesses’ specific, practical requests to the Chinese government for improvements in each sector.

Originally, the American Chamber submitted similar requests to the Chinese government, and its representative members explained to central and provincial government officials the details of the white paper. Thus it has continued to request improvements in the business environment, and the Chinese government has taken the Chamber’s activities seriously.

In the second half of the 2000s, when the author was stationed in China, the Japanese Chamber also started to compile a white paper on Japanese businesses, referring to the activities of its American counterpart.

As the Japanese Chamber continued to compile and publish a white paper each year, senior Chinese government officials gradually came to pay attention to the details of its individual requests, and this has helped improve the investment environment.

Recently, it has become clear that Prime Minister Li Keqiang, too, highly evaluated Japan’s white paper, and the author hears that provincial leaders have also begun to seriously examine the specific improvement requests included in the white paper.

Taking these circumstances into consideration, Japanese Chambers in various places in China are submitting specific requests in forums where views are exchanged with provincial governments there.

In Shanghai, for example, representatives of the Shanghai Japanese Commerce & Industry Club work with senior managers of JETRO Shanghai and other parties concerned to convey requests for improvements in the business environment to the Shanghai city government while obtaining the support of the Japanese Consulate General in Shanghai as required.

In Shanghai, together with managers from various related departments of the city government, the deputy mayor personally attends important meetings held between the city government and representatives of Japanese businesses where these managers present the progress in examining Japanese businesses’ requests and taking measures to address them.

If, at a meeting, the policy measures taken are evaluated as insufficient, the deputy mayor immediately gives instructions to the departments involved so that additional improvement measures are taken.

When proposed new laws and ordinances that affect foreign-affiliated businesses’ China business are publicly announced, it is not unusual that the Chinese government hosts meetings to exchange views in an effort to seek public comments.

3. Provincial governments are becoming active in attracting foreign-affiliated businesses

Formerly, if a Japanese business conveyed its straightforward requests for improvements to the local government at such a meeting, it was often harassed by the manager or person in charge of the related department of the government after the meeting.

In those days, these requests were taken as criticisms of the local government’s policy. For this reason, Japanese businesses were cautious about making improvement requests on public occasions.

During recent years, however, the provincial governments of China have taken an even more active stance to attract foreign-affiliated businesses, and the policy of listening sincerely to foreign-affiliated businesses’ specific requests to improve the investment environment so that such requests were met has become firmly established among them.

Behind this shift is the adoption of success in attracting superior foreign-affiliated businesses as an important evaluation standard for provincial governments’ policy administration, and it affects changes in the stance of provincial governments.

For this reason, provincial governments are competing to accept foreign-affiliated businesses’ requests and concentrating on improving the business environment swiftly to create one that is more attractive to foreign-affiliated businesses.

As a result, even after they expressed their frank opinions at important meetings attended by the top managers of local governments, Japanese businesses have been less harassed by the departments involved.

At first, Japanese businesses could not quite believe this change that began several years ago because it was so sudden.

But recently, it seems that Japanese businesses have come to express their opinions and requests frankly at important meetings in which senior managers of local governments are present.

By contrast, European and North American businesses have always conveyed their requests to provincial governments frankly.

This was because European and North American governments backed up businesses from their countries with considerate care, and if the latter received disadvantageous treatment from the Chinese government, the official from the former supported the latter by protesting to the Chinese government directly.

Since early on, the Japanese government had not been active in helping solve specific business problems with which individual Japanese businesses were faced.

This often forced Japanese businesses to solve their problems by their own effort without relying on the Japanese government.

In such cases, since running counter to the intentions of the Chinese government was detrimental, Japanese businesses were more modest in making requests to the Chinese government than their European and North American counterparts.

Partly because of deteriorating Sino-Japanese relations, involvement by the Japanese government exacerbated problems and was often counterproductive as the Chinese government resisted emotionally, and this was also the difference with European and North American governments.

However, Sino-American relations have recently become worse than Sine-Japanese relations, and in addition, since the relations between China and Europe have involved difficult factors, there have been less differences between the situation in which Japanese businesses stand and that of their European and North American counterparts.

4. A comparison of the functions of the Japanese Chamber and those of the American and European Union Chambers

Nonetheless, there is no denying that the Japanese Chamber still compares unfavorably with the American and EU Chambers when the functions of both chambers are compared.

For example, while the American and EU Chambers annually conduct a questionnaire survey of their member companies to assess the business environment in China, the Japanese Chamber does not (though JETRO carries out a similar survey and publishes its results).

The Japanese Chamber does not have staff members with a high level of expertise in compiling white papers and analyzing the business environment.

In contrast, the American and EU Chambers have specialized staff members, including economists familiar with the Chinese economy, who continuously analyze China’s business environment in detail and reflect the results of analysis in white papers.

When he visits Beijing on a business trip, the author sometimes exchanges views with such specialized staff members from the American and EU Chambers, who have a profound understanding of the Chinese economy.

Retaining such specialized staff members requires a budget to pay necessary expenses, but I hear that the budget of the Japanese Chamber is considerably smaller than that of its European and North American counterparts.

The greatest difference between the American/EU and Japanese Chambers in China is that the presidents of the former serve as such for several years or more.

Furthermore, the presidents of the former, who are proficient in Chinese, negotiate directly with the Chinese government and build a network of connections with high-ranking government officials.

The presidency of the Japanese Chamber is based on a single-year rotation system with both the president and the vice president replaced annually. This is clearly disadvantageous when it comes to accumulating know-how in negotiations with the Chinese government and building a network of human connections.

If, as in the American and EU Chambers, the term of office of top manager was several years or more, he or she could build more extensive human connections with senior Chinese government officials through discussions at several important meetings a year, and in addition, he or she could establish smoother communications with the local embassy and consulate general.

Mass media would give greater publicity to the president, enhancing his or her ability to communicate information, and this would allow his or her comments at press conferences and on other occasions to be reported globally.

The presidents of the American and EU Chambers return to their home country periodically to give lectures to and exchange opinions with government officials, economic organizations, mass media, and so forth.

Details of his or her activities are reported at home and abroad, affecting the trade and diplomatic policy of the government in his or her country. For this reason, the government in his or her country also emphasizes the opinions, requests, and suggestions of the Chamber’s senior managers.

In terms of the ability to communicate information as described above, the influence of the Japanese Chamber is inferior to that of its European and North American counterparts.

Recently, as the harsh confrontation between the United States and China has become prolonged, issues related to economic security have increasingly affected the managerial decisions of Japanese businesses.

It seems that Japanese businesses are acting more cautiously as they are more concerned about these economic security issues than their European and North American counterparts.

This is also affected by differences in the channel of information sharing between Japanese businesses in China and the Japanese government.

If the Japanese Chamber had as strong an ability to communicate information as its European and North American counterparts and constantly maintained close relationships with the Japanese and Chinese governments, it would have clearer standards for making decisions on economic security issues and would not need to guess and take into consideration the intentions of the Japanese and U.S. governments.

This also causes differences between European and North American businesses’ active stance toward investment in the Chinese market and their Japanese counterpart’s cautious one.

5. Proposals to strengthen the functions of the Japanese Chamber of Commerce and Industry in China

From the above discussions, the necessity of strengthening the functions of the Japanese Chamber of Commerce and Industry in China is clear. The following is the author’s proposals for strengthening them.

First, the single-year rotation system for the presidency and the vice presidency should be revised so that the term of office of the president and vice president is several years as in the Keidanren and the Japan Association of Corporate Executives. For the presidency, it is desirable to elect a person who is proficient in Chinese and capable of negotiating directly with the Chinese government.

Secondly, the secretariat should retain an economist and experts in tax affairs, accounting, intellectual property, and other fields and constantly put together requests by Japanese businesses and their issues surrounding China’s business environment in reports and publish such reports. It should also support senior managers of the Japanese Chamber in making comments at important meetings with the Chinese government.

Thirdly, the Japanese Chamber should annually conduct a business questionnaire survey for its member companies, analyze its results, and publish the results of the analysis.

Fourthly, the president and other senior managers should return to Japan periodically, or two to three times a year or more frequently, and explain to the Japanese government, business leaders, mass media, and other parties concerned the actual condition of the business environment in China, the results of business questionnaire surveys for Japanese businesses, their issues and requests, and other relevant matters.

If the organization of the Japanese Chamber is strengthened through the new framework described above, it could be expected that it will develop into an organization with strong functions to communicate information and the ability to negotiate with the Chinese government that are comparable to those of the American and EU Chambers.

At the same time, it can be expected that the Japanese, American, and EU Chambers will work more closely to enhance their ability to negotiate collectively with the Chinese government.

The measures listed above will encourage many Japanese businesses to expand their China business smoothly, enhance their competitiveness, and increase their profitability. The author hopes that the Japanese Chamber of Commerce and Industry in China will make early progress in bringing about such improvements.