Media International Exchange 2023.09.14
Synergistic effects that improve Sino-Japanese relations and underpin the Japanese economy
The article was originally posted on JBpress on August 17, 2023
On August 10, the Chinese government removed the ban on Chinese group tours to 78 countries, including Japan. Owing to the spread of COVID-19, group tours had been prohibited since January 2020, but the ban was lifted in about three and half years. With this decision, the number of Chinese visitors to Japan is expected to grow rapidly in the future. This paper discusses the impacts of the lifting of the ban.
During the second half of the period of the Shinzo Abe administration, Sino-Japanese relations were not as bad as today. In May 2017, Mr. Toshihiro Nikai, Secretary-General of the Liberal Democratic Party, visited China and delivered a personal letter of Prime Minister Abe to President Xi Jinping, and this led to the rapid improvement of Sino-Japanese relations as typified by Premier Li Keqiang’s visit to Japan and Prime Minister Abe’s visit to China in 2018. Since the Senkaku dispute arose in 2012, Sino-Japanese relations had continued to be at their worst, but thanks to Prime Minister Abe’s diplomatic ability, they improved quickly.
In 2020, President Xi was expected to visit Japan -- an event that would have been realized if COVID-19 had not broken out. When in January of the same year COVID-19 started to spread in Wuhan, Japanese people sent masks, medical gowns and other supplies, donations, and messages of support to the citizens of Wuhan as many of the Western countries prohibited the export of relief supplies to China. Later, when COVID-19 spread in Japan, Chinese people delivered many backup resources to Japan in return. After Mr. Abe resigned as prime minister in September 2020, however, Sino-Japanese relations worsened again as the diplomatic policy of Japan, which struck a balance between the United States and China, underwent changes.
After October 2020, Sino-Japanese relations came to be significantly affected by the stance of the Yoshihide Suga and Fumio Kishida administrations, which followed the U.S. and took a hard line in their diplomatic policy, as the relations between the U.S. and China became even worse. The Japanese government came to take tough measures against China since it considered it as important to proceed at a common pace with the U.S. in such issues as an emergency in Taiwan and economic security (restrictions on the export of semiconductors). In opposition to these measures, the Chinese government took actions such as detaining senior managers of Japanese businesses, criticizing the release of ALPS-processed water, and restricting the export of rare metals such as gallium and germanium, and as exemplified by these and other actions, both the Japanese and Chinese governments have been locked in a vicious cycle. One of the major reasons for deteriorating Sino-Japanese relations as described above is that owing to the effects of COVID-19, the traffic of people between Japan and China stopped.
In addition, Japanese politicians and mass media increasingly criticized China, and anti-China sentiments grew mainly among the elderly in Japan, and affected by these tendencies, the Japanese government has practically shown no effort to improve relations between the two countries. This influenced bilateral economic exchange, and although people became able to go back and forth between Japan and China after February 2023, most of the Japanese businesses still remain negative toward business in China.
By contrast, with sidelong glances at the U.S. Government’s hard-line policy toward China, leading American businesses have adopted a tough attitude of developing business in China actively. Since German Chancellor Olaf Scholz and French President Emmanuel Macron clearly distinguish themselves from their American counterpart and emphasize economic relations with China, major European businesses, chiefly in Germany and France, are more active than American ones. The Chinese government warmly welcomes this active stance of European and North American businesses. These businesses, which clearly distinguish diplomacy from business, are developing the Chinese market steadily.
On the other hand, Japanese businesses, which pay regard to the Japanese government’s diplomatic policy toward China and do not relax their cautious stance for investing in China, are getting behind in the fierce competition with their European and North American competitors in the Chinese market.
Despite these Sino-Japanese relations, the number of Chinese tourists to Japan is expected to grow rapidly with the lifting of the ban on overseas group tours. In this area, too, diplomatic relations are clearly distinguished as another matter.
In 2019, the year just before the outbreak of COVID-19, the number of visitors to Japan from China reached 9.59 million. With the focus of consumption gradually shifting from the explosive buying of electric rice cookers, warm-water washing toilets, and other apparatuses to services, enjoying destinations in various parts of Japan for hot springs and Japanese cuisine was becoming the main purpose of Chinese tourists. But afterward, owing to the effects of COVID-19, the traffic of people stopped, and Sino-Japanese relations deteriorated. For this reason, there was concern that the boom of traveling to Japan might not recover even if the restrictions on the traffic between the two countries were removed.
When the author told his Chinese friends about such concern, however, most of them said positively, “The boom of traveling to Japan among Chinese has not died down. The number of Chinese tourists to Japan will grow rapidly if the ban on the traffic between the two countries is lifted.” One sign that seemed to support such a view is that during the spread of COVID-19, in China, there was a growing trend to enjoy Japanese food instead of going to Japan. In particular, high-grade Japanese restaurants are becoming increasingly popular. Clearly, despite the ban on group tours, the number of Chinese visitors to Japan independently began to rise in March 2023 and thereafter. Recently, when walking in Ginza and Shinjuku, the author has come to hear the Chinese language wherever he goes.
In February, the number of Chinese visitors to Japan was only 36,000, but in June, it jumped to 208,000. In June, in terms of the number of visitors, China was only exceeded by three countries: South Korea (545,000 persons), Taiwan (389,000 persons), and the United States (227,000 persons). Some Chinese friends said that if the ban on group tours to Japan was removed, more Chinese tourists than Japanese expected would begin to rush to Japan. If the ban on group tours is lifted and Chinese tourists visit Japan at a rate of 10 million persons a year as they did in 2019, they will become conspicuous in various parts of Japan again.
However, since the number of flights has not returned to the pre-COVID level yet, there is concern about restrictions on tourism as Chinese tourists cannot purchase air tickets even if they want to travel to Japan. If the recovery of demand becomes clear, airline companies will certainly make efforts to increase the number of flights they operate. The author hopes that the traffic of tourists between the two countries will normalize as soon as possible and that vigorous exchange will revive at the private level.
For Chinese visitors to Japan, the heavy buying of daily necessities and brand-name items is not as important a purpose as before. It is no longer necessary to buy them because Chinese can obtain an increasing number of items in China through e-commerce. Since they come to Japan more frequently, they do not need to buy them in large numbers each time they come. For this reason, consumption during a stay in Japan focuses on services such as dining centered on Japanese cuisine, sightseeing, hot spring resorts, skiing, and other experiences.
If the number of visitors to Japan recovers to the pre-COVID level of 2019, at about 10 million, and they each spend about 210,000 yen, the average amount of purchases per person at that time, consumption by inbound tourism would total two trillion yen or more annually. Since this consists mainly of service consumption and it is difficult to mass-produce services in a capital-intensive way, demand growth is highly likely to benefit a wider range of people than before. Furthermore, if Chinese exchange with Japanese with a happy smile, that would naturally have positive effects on relations between the two countries. If many Japanese understand and accept Chinese through such direct exchange, they would not be easily affected by reports from mass media, which discuss Chinese issues in general terms and emphasize only the negative aspects of China. Such a deeper understanding of China at the national level would affect politicians, prompting them to make efforts to improve Sino-Japanese relations. If such efforts lead to an active traffic of ministers and top leaders, that would be highly effective in improving bilateral relations.
This year marks the 45th anniversary of the conclusion of the Treaty of Peace and Friendship between Japan and China. Last year, although 2022 marked the 50th anniversary of the normalization of relations between Japan and China, the implementation of many congratulatory events was canceled. Or they were forced to be carried out on a smaller scale. The author hopes that this year, wider exchange between people of the two countries will give a boost to efforts to effect a breakthrough in Sino-Japanese relations. Private exchange between Japan and China is expected to have favorable effects on not only diplomacy but also the economy.
Since early 2023, European and North American businesses have been increasingly active in investing in China, but Japanese businesses remain negative, and this is conspicuous. One of the major reasons for this is that most of the top managers of Japanese businesses have not been able to obtain a clear understanding of needs in the Chinese market today because they do not visit China. The Chinese macroeconomy has slowed down since April 2023 and is now continuing to face extreme difficulties. Despite these difficulties, however, China’s gross domestic product (GDP) in 2022 grew to 4.3 times that of Japan’s, and even today, China is estimated to maintain a real economic growth rate at the 4% level.
Chinese have lost confidence in the Chinese economy in recent years, but if looked at calmly, opportunities to develop the Chinese market are much larger than those for Japan as well as European and North American countries in terms of both economic scale and growth rates. This is exactly why leading European and North American businesses remain active in investing in China. There are not a few Japanese businesses which are improving business results steadily in this adverse situation. If many Chinese tourists come to Japan in the future, Japanese will witness with their eyes changes in the needs of Chinese people who consume products and services.
This provides good opportunities to understand the needs of Chinese consumers to many corporate managers who have not seen the Chinese market personally by visiting China or those who are considering taking on the challenge of entering the Chinese market. If they understand needs in the Chinese market in this way, that would be useful in working out a business development strategy in the Chinese market. This information is not new to a handful of global corporations which are strong in China business. But it provides the majority of Japanese businesses with precious opportunities to grasp the needs of Chinese.
The author hopes that in the future, an increasing number of Chinese visitors to Japan will contribute greatly to improving Sino-Japanese relations and recovering the business performance of Japanese companies, and bringing synergistic effects in these two areas.