| BUSINESSWEEK ONLINE : NOVEMBER 29, 1999 ISSUE | ||||||||
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| INTERNATIONAL -- ASIAN COVER STORY
A Flash Flood of Japanese Goods? (int'l edition) As American executives ponder the implications of the World Trade Organization agreement with China, their biggest rivals in Asia stand to gain from the deal, too. The Japanese have long played the China card aggressively. Giants from NEC to Matsushita to Honda built plants in China to tap the market and export abroad--especially to the U.S. All told, according to the Japan External Trade Organization, Japanese companies have invested more than $20 billion in mainland ventures--on par with the U.S. It's no wonder the Japanese are sizing up the WTO deal. Matsushita Electric Industrial Co. makes an estimated $2.4 billion in goods--everything from mobile phones to digital video-disk players--in 35 plants from Shenyang in the north to Zhuhai in the south. It sells those locally made goods to Chinese consumers and exports them to Japan, the U.S., and Southeast Asia. But Matsushita imports precisely zero from its plants elsewhere. To bring in products such as its popular flat-panel televisions, it would pay duties as high as 100%. It would also have to deal with Chinese middlemen who hold import licenses, and who often bog down the process of getting goods to market. It's the kind of nontariff import barrier the Japanese themselves know can be powerfully effective against foreign competition. For Matsushita and other foreign companies, says Yukio Shohtoku, Matsushita's managing director for China, the WTO deal ''will make it possible for us to import models that we do not manufacture in China.'' That would change Japan's export mix. Parts and materials account for more than half of Japan's exports to the mainland, and they usually go to Japanese factories. With China's door propped open, electronics, cars, and other finished goods could flood in. There are many problems a WTO agreement will not necessarily solve. Japanese manufacturers in China must battle it out in markets that suffer from overcapacity in everything from cosmetics to cars. ''The problem has not been access,'' says Stephen Usher, automotive analyst for Jardine Fleming Securities Ltd. in Tokyo. ''It's that there is not enough money to buy cars. It's the lack of demand.'' Arguably, a WTO deal will boost China's economy--and demand. But there's no instant payoff. Equally, some of China's bold pledges won't be realized for seven years. That leaves plenty of time to erect non-tariff barriers. It's doubtful China will open up to a flood of Japanese imports. China's 120 auto makers are protected by a labyrinthine distribution system that can triple prices of imports. A 1.5-liter Toyota Corolla compact sells for $14,300 in Tokyo--and $43,000 in Beijing. ''My guess is that China will concede on import duties but keep a stranglehold on the critical path to consumers,'' says Michael Dunne, president of Automotive Resources Asia in Beijing. ''They'll fight, kick, and scream to keep distribution in their own hands.'' Yet the Japanese won't quit the China market: They never quit markets they've entered. Americans take note: A WTO deal could intensify the fight for China's 1.2 billion consumers. By Emily Thornton in Tokyo _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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