China looks West as Japan cuts production
Updated: 2011-03-25 10:42
By Zhong Nan (China Daily European Weekly)
The closed Fujitsu semiconductor plant in Fukushima. Japan's earthquake and tsunami have forced businesses to shut down. Provided to China Daily |
China will need to source a wide range of products from Europe and the United States to make up for the shortage stemming from the natural disasters in Japan, businesses and experts say.
"In two to three months, motor and electronic processing manufacturers in China will start to import from the European Union and the US to offset the shortage of Japanese supplies," says Bai Xuefeng, director of the trade department at the China Chamber of Commerce for Import and Export of Machinery and Electronic Products.
China imports many electro-mechanical products from Japan, but the March 11 earthquake and tsunami damaged much of the infrastructure.
Last year, about 18 percent of China's electro-mechanical imports came from Japan, making Japan China's biggest source of electro-mechanical products, according to the General Administration of Customs.
After the earthquake and tsunami, Japanese electro-mechanical and auto manufacturers such as Sony, Sharp, Toyota, Nissan, Shin-Etsu, Toshiba and Honda suspended much of their operations, affecting exports of semiconductors, chips for electronic devices, precision instruments, industrial bearings, auto and electronic components.
A survey by the chamber after the disasters shows more than 50 percent of Chinese electronic processing enterprises believe the import, information communication and logistics of Japanese electro-mechanical products have been severely affected.
Wang Cun, manager of the marketing department of China Automobile Trading Co Ltd, says the shortage of motor components may result in fewer cars being produced by Japanese manufacturers in China. Japanese vehicle sales in China account for 27 percent of the market.
Wang feels this could lead many buyers to switch to German, French or American cars.
Nissan Motor Co (China), which has several factories in China, says its stocks of some components will last until the end of March, but no one knows when supplies from Japan will resume.
"We will consider buying components from European countries if our Japanese factories cannot keep the goods supplied," says Shen Li, general manager of the company's PR and branding department.
Ericsson Ltd (China) says on its website that it has been trying every means to maintain supplies of components such as semi-conductors, memory chips and batteries. The measures include spot market purchases and redirecting orders to suppliers from other countries.
Zhao Ying, a professor at the Institute of Industrial Economics of the China Academy of Social Sciences, says that although the majority of Japanese auto and electronic companies have joint ventures in China, they can cope only in the short term.
"A large number of high-tech components still need to be imported from Japan," he says.
Zhao says it is unlikely that Japanese factories will be able to resume full production of bearings, electronic chips and devices in the short term. This, he says, will lead Chinese enterprises to buy precision instruments and bearings from Germany, Switzerland and Sweden, electronic chips from Silicon Valley and vehicle components from Detroit.
"In comparison with EU and US electromechanical standards, Japanese products are relatively cheaper," he says. "However, Chinese enterprises have no other choice but to accept this reality, even though it is troublesome and costly."
Germany's Schneider Electric and Siemens tell China Daily that it is premature to make any comment, as it is a very complex situation involving second- and third-tier suppliers.
Last year, Japan was China's third largest trading partner, with China sourcing 13 percent of its imports from Japan. Machinery, electronic products and vehicle were the main products China bought from Japan, a report from Morgan Stanley Asia Ltd says.
In 2010, imports from Japan increased by 36.6 percent from a year earlier to $177 billion (125 billion euros), with electromechanical products accounting for 67 percent of its total import amount, or $118 billion, according to the Customs.
Bilateral trade between China and Japan stood at $21 billion in February, with China having a trade deficit of $4.62 billion.
Wang Yongzhong, a researcher with the Chinese Academy of Social Sciences in Beijing, predicts that imports from Japan will decline and that prices of Japanese industrial products will rise dramatically over the next three months.
He believes finding sellers from the EU and the US is a flexible option to resolve the shortage of electro-mechanical products in China after April or May.
On March 18, the Ministry of Commerce said the country would boost high-tech trade exchanges with developed nations, and called for countries to ease restrictions in exporting high-tech products and advanced equipment to China over the next five years.
"The shortage of Japanese electromechanical products to a certain extent would strengthen the high-tech trade relations between China, the EU and US in the second half of this year," Wang says.
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