The 5th Study Meeting on Asia
1. Date: December 14, 2010 15:00 – 17:00
2. Venue: Meeting Room, the Takeda Foundation
3. Title: Greater China and inevitable structural changes in China industry
Speaker: Mr. Koji Yoshida, Visiting Scholar, Fudan University
4. Participants：
01

Koji Yoshida

Visiting Scholar, Fudan University

02

Tsuneo Kanazawa

03

Yoshiyasu MIkami

CEO, Excel of Mechatronix.Co
Society for Researchers of InternationalDevelopment.
FormerCEO,UnicoInternational Co.

04

Kazutoshi OyamadaInternational Program Department, Japan
Society for the Promotion of Scienc

05

Ikuo Moriwaki

Dou Yee International06

Ikuo Takeda

Chairman, the Takeda Foundation

07

MIstuo Akagi

Senior ManagingFoundation

08

Ysuo Tarui

Managing Director, the Takeda Foundation

09

Yuzo Mizobuchi

Director, the Takeda Foundation

10

Norio Ohto

Director, the Takeda Foundation

11

Naoaki Aizaki

Program Officer, the Takeda Foundation

12

Aiko Ubasawa

Program Specialist, the Takeda Foundation

13

Setsufumi Kamuro

Program Specialist, the Takeda Foundation

14

Mototaka Kamoshida

Program Specialist, the Takeda Foundation

15

Emiko Mitsui

Program Officer, the Takeda Foundation

16

TakamiMember, the Takeda Foundation

Director,theTakeda

5. Memo
Mr. Yoshida is a former Managing Director of Mitsui Chemicals. Currently heteaches Japanese economy and business as a Visiting Scholar at Fudan
University, China. He was a representative of Mitsui Chemicals in China and has
been staying in Shanghai since 2004. He submits reports on China’s industry
and business to various media including Kagaku Keizai, Chemical Economics,
based on his experience and research. China’s economy is supported by not1

only mainland China’s economic activities, but also by networks of the 65 million
overseas Chinese. . This fact leads to the understanding of China and overseas
Chinese economic activities as a set, which is now called Greater China. Mr.
Yoshida will explain China’s economic activities from the viewpoint of Greater
China and talk about their challenges in industry.
1. Has China become a developed country?
China’s GDP was the third after Japan’s in 2009, but it is sure that China will
become the number two economic giant in 2010 because their fourth quarter
GDP surpassed that of Japan. However, China’s GDP per capita was only 3,300
US dollars in 2008, which is less than 10% of Japan’s GDP per capita (US38,600). Even when they become the number two economic giant, their GDP per
capita will still be at the level of developing countries. There is a big economic
discrepancy between the developed areas such as Shanghai, Beijing, andTianjin and the remote areas such as the Provinces of Anhui and Yunnan.
Together with other domestic problems, including ethnic problems, dwindlingbirthrate and an aging society, and housing problems, the economic discrepancy
is a big challenge that China should address.
2. Effects of the Shanghai Expo
It is estimated that direct investment in the Shanghai Expo and indirect economiceffects were 7 and 14 trillion yen, respectively. The Shanghai Expo seems tohave economic effects that account for 4.1% of China’s GDP. The Expo also
seems to have significant soft effects, including educational effects on people
who came to Shanghai from all over China, and advertising effects that China iscivilized enough to manage a world affair.
3. Greater China, networks of Chinese descendent
The number of overseas Chinese is estimated to be 65 million, including 8million who live in Taiwan. Trade between China and overseas Chinese isincreasing every year. Especially, trade between China and Taiwan increased
from 80 billion US dollars in 2005 to 300 billion US dollars in 2008. Many
exporting firms in China have their origins in Taiwan. Trade between China andASEAN increased by a factor of 10 from 21.6 billion US dollars in 1998 to 225.9
billion US dollars in 2008. As for direct investment in China, Singapore increased
its direct investment from 2.0 billion US dollars in 2004 to 4.4 billion US dollars in2

2008, whereas Japanese direct investment in China decreased from 5.7 billion
US dollars in 2004 to 3.6 billion US dollars in 2008. As these numbers show,
China has been promoting its economic growth by strengthening ties withoverseas Chinese.
4. Deepening mutual dependency: Japan-Sino relations
Of China’s export goods in 2009, 21.8% were bound for the US, 9.5% for Japan,
and 5.2% for Korea. When exports to the US are suppressed, then theexpectation for exports to Japan rises. Of China’s imports, 13% of goods arefrom Japan, 10.2% from Korea, and 8.5% from Taiwan. Imported goods fromJapan include capital goods such as semiconductor parts, steel materials, andintegrated circuits, and China manufactures export goods using these capital
goods. It will be difficult for China to develop energy-saving systems andenvironment friendly mechanisms without support from Japan. However, China’s
dependency on Japan decreases and Japan’s dependency on China increases
as China’s trade expands. Japan should develop trading structures that do notexcessively depend on China.
5. Inevitable structural changes in China’s industries
China’s economy has basically investment and export structures. There is anexcessive demand for factory workers whereas the demand for clerical workers
is low, and it is estimated that there are 2 to 3 million college graduates who do
not have regular jobs. Together, China’s industries essentially make up an
assembling industry, which produces low added value goods and does not makehigh profits. Labor costs are rising because of workforce shortages in coastal
areas, and there is a possibility of losing international competitiveness in the
manufacturing industry. The Chinese government is trying to expand its
domestic market under pressure from the US, but they need to change theirindustrial structure from manufacturing to consumption and a ,service economy.
The Chinese government is trying to develop newly rising industries including
new energy, environment and energy-saving industry, and IT industry, with their
5 year plan. Japanese technologies in IT and energy-saving industries are far
more advanced than their Chinese counterparts, and Japan should consider
what kinds of technologies and how they can be exported to China in case of theexport of capital goods and technologies.

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6. Problems in China
The dwindling birthrate and an aging society are big problems for China. It isestimated that the growth of the productive population will stagnate in 15 years,
and that there is a danger of losing the driving force of economic growth. China
also has other problems such as a one-party regime, ethnicity problems derived
from Chinese supremacy over other races, and the demand for democratic
political systems, and these problems are hamper efforts by the Chinese
government to promote diplomatic actions toward the US. There is also thepossibility of an explosion of people’s frustrations over the fixation of theprivileged class. China’s one-party regime will sometime collapse, but not in thesame way as the Soviet Union did.
7. Future Japan-Sino relations
In consideration of Japan’s dependency on China, Japan should take friendly
approaches to help improve their environment and energy-saving systems andfood safety systems, and, at the same time, Japan should try to develop
conditions to pressure China to follow international rules by building multi-lateraldiplomatic relations with the US, Russia, India and Vietnam. It will be mutually
beneficial for both Japan and China not to stir up boundary disputes such as“Senkaku Retto”. However, the Senkaku Retto problem has made it clear that
there are risks to dealing with China, such as the supply of rare metals, andJapan should take measures to disperse investment targets and secure multiple
sources of natural resources to avoid the risks China presents. Japanese firms
should maintain important R&D in Japan to secure the competitiveness oftechnologies even if they move manufacturing sites to China. China moves
strategically while Japan moves passively. Japan should take the initiative in thedevelopment of international cooperation frameworks such as the East AsianCommunity, but, unfortunately, China will not go along with Japanese initiatives.
China would not ask Japan to pay reparations for its loss in the Japan-Sino War
when Kakuei Tanaka and Zhou Enlai electrifyingly restored diplomatic relationsin 1972. When China lost the Japan-Sino War in 1894, China had to pay a large
amount of reparations, which caused the Chinese people great hardship. Zhou
Enlai said that he would not want the Japanese people to suffer the samehardship. I think that the Japan-China relationship should return to the mindsetof the restoration of diplomatic relations in 1972.

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