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back to index backASIAtalk July,  2005

Don't put all eggs in China basket: METI

Japanese companies should seek to establish a regionwide network in East Asia to maximize their business efficiency, turning not only to China but also to the 10-member Association of Southeast Asian Nations as their production bases, a government white paper on trade said Friday.

The annual paper by the Ministry of Economy, Trade and Industry called on Japanese businesses to avoid relying only on China, because labor costs do not vary greatly between the country and ASEAN, and various business risks exist in China.

"Japanese companies could face obstacles to their businesses which cannot be seen in matured markets, such as low levels of compliance and structural problems" in China, the 2005 White Paper on International Trade and Economy says. The document was approved by the Cabinet earlier in the day.

The report singles out as business risks the spread of pirated or counterfeit items in China, outflows of knowhow or technology from Japanese enterprises, expected rises in labor costs and energy shortage caused by rapid economic growth in the country.

The paper also cites health risks that became evident in 2003 with the SARS outbreak, the massive anti-Japanese rallies and boycotting of Japanese goods in April over Japan's history textbooks, Japan's ambition to become a permanent U.N. Security Council member and other bones of contention.

As structural problems, the report indicates overheating in investment, income gaps between farmers and urban dwellers, a high unemployment rate and uncompleted reforms of state-owned companies.

The report also proposes that Japanese firms establish close ties with India to include the rising economy in the proposed East Asia-wide network.

"For India, East Asia has gained importance as a trading partner. The country, which has been discussing a free-trade agreement with ASEAN, has a potential to become a major destination of East Asian exports as well as a supplementary member in the regional production network," the paper notes.

Source: The Japan Times Online

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