October 27, 2000

Japanese Manufacturing Companies Show Intention to
Expand Overseas Business Operations as They Continue
Domestic and International Management Reformation at
Brisk Pace
JBIC FY 2000 SURVEY
THE OUTLOOK OF JAPANESE FOREIGN DIRECT INVESTMENT(12th Annual Survey)

I. Overview of the Survey Method・・・・・・・1
II. Summary ・・・・・・・・・・・・・・・・・・・・・・・ ・ 3
III. Overview of the Survey Results・・・・・ ・4

For further information , please contact the following address :Press and External Affairs Division , Policy Planning and Coordination Department
Mr. Nao Kawakami
Phone:
03-5218-3100
E-mail:n-kawakami@jbic.go.jp

＜ I. Overview of the Survey Method ＞

The purpose of this survey is to identify the current and future trends of foreign
direct investment (FDI) activities including overseas business operations by
Japanese manufacturing companies. This year’s survey, taken over from theformer EXIM Japan, was the twelfth of an annual series that began in 1989.
The survey covered 791 manufacturing companies that have three or more
foreign affiliates, including at least one manufacturing base, as of October 1999.
The questionnaire was mailed on July 1, 2000. 469 valid responses werereturned over the period from July to August in 2000. The effective response
rate was 59.3%. (In the previous year’s survey, valid returns were 472 out of 786
companies surveyed, with the response rate of 60.1%.)
This year’s survey examines the medium-term prospect of Japanesemanufacturing companies’ overseas business operations through FDI. As a
special topic, this survey also focuses on “efforts to restructure overseas business
operations” and the “introduction of IT for overseas business operations”.

※ The following is the main regions covered by this survey:

NIES
ASEAN4EU: Singapore, Korea, Taiwan, Hong Kong
: Thailand, Malaysia, Indonesia, the Philippines: U.K., Germany, France, Italy, Netherlands, Belgium, Greece,
Luxembourg, Denmark, Spain, Portugal, Austria, Finland, Sweden, Ireland
Central Europe : Poland, Hungary, Czech Republic, Slovakia
Eastern Europe : Bulgaria, Romania, Slovenia, Albania, Croatia, Macedonia,
former Yugoslavia (Serbia, Montenegro, Bosnia and Herzegovina)

1＜I. Profiles of companies surveyed ＞

2(Unit: Companies, %)Number of companies surveyed
Number of respondent companies
Response rate
Number of overseas affiliates

FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00
551
614
652
700
718
722
743
749
786
791
298
314
338
382
422
432
445
455
472
469
54.1
51.1
51.8
54.6
58.8
59.8
59.9
60.7
60.1
59.3
4,617 5,269 5,428 5,385 6,496 6,730 6,978 6,654 7,225 7,285(1) Respondents by paid-in capital (Individual company base)
Number ofcompanies%
Less than ¥100 million
29
6.2%¥100 million – less than ¥500 million
449.4%¥500 million – less than ¥1.0 billion
20
4.3%¥1.0 billion – less than ¥5.0 billion
105 22.4%¥5.0 billion – less than ¥10.0 billion
62 13.2%¥10.0 billion or more
209 44.6%
Total
469 100.0%(3) Number of respondent companies, by number of
employees (Individual company base)
Number ofcompanies%
300 employees or less48 10.2%
301 to 500 employees
47 10.0%
501 to 1,000 employees
95 20.3%
1,001 to 2,000 employees
103 22.0%
2,001 to 5,000 employees
103 22.0%
5,001 to 10,000 employees
37
7.9%
10,001 to 30,000 employees
27
5.8%
30,001 or more employees
9
1.9%
Total
469 100.0%(2) Number of respondent companies, by annual sales (Consolidated base)
Number ofcompanies%
Less than ¥50.0 billion
179 38.2%¥50.0 billion ‐less than ¥100.0billion
80 17.1%¥100.0 billion ‐less than¥200.0billion
72 15.4%¥200.0 billion ‐less than¥300.0billion
37
7.9%¥300.0 billion ‐less than¥500.0billion
367.7%¥500.0 billion ‐less than ¥1.0 trillion
28
6.0%¥1.0 trillion or more
36
7.7%
Total
468 100.0%※ One company did not provide this information(5) Number of overseas affiliates, by type of base and by region
NIES

ASEAN4China

Other Asian
countries

U.S. &
CanadaManufacturing
bases
530
918
643
137
643
(Joint ventures)
316
570
485
103
189
Sales bases
608
275
238
42
519
R&D bases
16
10
13
2
88
Other
95
60
43
10
279
Total
1,249
1,263
937
191
1,529
(Note) NIES: Singapore, Korea, Taiwan, Hong Kong
ASEAN4: Thailand, Malaysia, Indonesia, the Philippines
Central Europe: Poland, Hungary, Czech Republic, Slovakia

Latin
America

196
77
111
2
54
363

EU

433
95
787
44
175
1,439

Former Soviet
Union & Eastern
Europe

14
9
30
1
6
51

CentralEurope

19
6
26
0
5
50

Other

59
25
127
1
26
213

Total

3,592
1,875
2,763
177
753
7,285

(4) Number of respondent companies, by industrial classification
Number of
Ratio
Industrial classificationcompanies（％）
Foodstuffs
25
5
Textiles22
5
Wood and wood products
3
1
Paper and pulp
82Chemicals
72
15[Chemicals (excluding pharmaceuticals)]
62
13[Pharmaceuticals]
102
Petroleum and rubber
123
Ceramics, cement and glass
13
3
Steel
16
3
Nonferrous metals
17
4
Metal products
20
4General machinery
41
9[Assembled products]
32
7[Components]
92Electrical equipment and electronics
86
18[Assembled products]
37
8[Components]
49
10
Transportation (excluding Automobiles)
92
Automobiles
77
16[Assembled vehicles]
92[Components]
68
14
Precision machinery
22
5[Assembled machinery]
16
3[Components]
6
1
Other
26
6
Total
469
100

＜II. Summary ＞
As Japanese manufacturing companies devote themselves to restructuring
their existing businesses, the Number One priority issue for their domestic andforeign business operations is to “review and strengthen management methods(establishing procedures such as new financial indicators or operating
performance evaluation standards)”. This is followed in importance by“review and improvement of the efficiency of group management (sell or
spin-off a unit of existing businesses, etc.)” and “acquire business resources tostrengthen principal business (acquisitions, alliances, mergers, etc.)”.
.

. On the whole, evaluations of Japanese manufacturing companies’
satisfaction with the profitability of overseas business operations through FDI
are at a comparatively low level. Although depressed operating performance
was seen in the results of the prior fiscal year survey, operating performance
has improved moderately in the current fiscal year survey results.

. As for their medium-term (next three years) outlook regarding future
overseas business operations, 54.5% of the companies that responded to thesurvey answered that they “will strengthen or expand overseas business
operations”. Japanese manufacturing companies are expected to expand
overseas business operations, especially in sectors such as automobiles,
electrical equipment and electronics.

As international competition grows increasingly intense, Japanesemanufacturing companies must further improve the efficiency of overseas
business operations. The tendency for overseas business operations andorientations to differ greatly depending upon each region will continue togrow stronger in the future.

In the EU, where relatively slack conditions with respect to the evaluation ofsatisfaction with profitability will continue, the most pressing issue has
become “recovery from depressed operating conditions as quickly as possible
by restructuring existing businesses in the region .

3○ “Qualitative enhancement based on restructuring of existing businesses inthe same manner as in North America, and a preparatory stance aimed at
expanding business size” can be seen for the ASEAN4, which are recoveringfrom the Asian economic crisis.
○ Despite the fact that local business operations is not so easy, Japanesemanufacturing companies foresee the potential of a future market in China.
The orientation of these companies is to “move quickly to restructure existing
businesses in the region, and expand the size of FDI by strengthening andexpanding business operations, including new businesses”.

5. The introduction of IT for overseas business operations will continue toproceed gradually. Companies with a high level of satisfaction in theirevaluation of profitability are addressing this trend relatively early, compared
to companies with a low level of satisfaction. Looked at by main regions, theintroduction of IT for business in North America is proceeded at the fastest
pace, followed in turn by Europe and Asia. The largest number of respondentcompanies said “management and control (accounting, etc.)” is the area where
they are putting IT to practical use. Other areas for IT investment include“sales” and “information gathering”.

6. The largest number of respondent companies (242 companies) said they
consider China to be the most promising destination for overseas business
operations through FDI over the medium-term (next three years). This wasfollowed by the U.S. (154 companies) and Thailand (88 companies). Numerous
problems and issues confront business operations in China, but the number of
respondent companies that see potential there rose substantially (Fiscal 1999
survey: 153 companies → current fiscal year survey: 242 companies), with 126
companies answering they will “actively advance into the market in the future
while utilizing existing bases”, and 57 companies saying they will “actively
advance into the market with new investment”.

＜ III. Overview of the survey results＞[Table of Contents]○ Priority issues for domestic and overseas business operations through FDI ・・・ 5○ Overseas Production Ratio ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 6○ Overseas business operations through FDI over the medium-term (next three
years) ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 7○ Evaluation of overseas business performance〜Satisfaction with sales and profitability〜 ・・・・・・・・・・・・・・・・・・・・・・・・・・・ 8○Business restructuring and overseas business operations through FDI
over the medium-term (next three years) ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 9○ Efforts to restructure overseas business operations through FDI ・・・・・・・・・・・・ 13○ Introduction of IT for overseas business operations through FDI ・・・・・・・・・・・ 14○ The effect of FDI on domestic production ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・16○ Promising destinations for overseas business operations through FDI over the
medium-term (next three years)

・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・17

4

【Priority issues for domestic and overseas business operations through
FDI】
Figure 1 Top Priority issue for undertaking domestic
and overseas business operations
Number of companies

Rank
1
2
3
4
5
6

(among 435 Responsecompanies)
rate

Review and strengthen management methods (establishingprocedures such as new financial indicators or operating
performance evaluation standards)
Review and improve efficiency of group management (sellor spin-off a unit of existing businesses, etc.)
Acquire business resources to strengthen principal business(acquisitions, alliances, mergers, etc.)
Expand and strengthen the company’s own customers
Review overseas production systems from the viewpoint of
total cost
Strengthen service activities related to company’s
own manufactured products

104

23.9%

93

21.4%

66

15.2%

60

13.8%

42

9.7%

20

4.6%

7

Introduce or establish a global supply chain management

18

4.1%

8

Expand percentage of overseas production

17

3.9%

9

Attach importance to overseas research and development
systems

2

0.5%

9

Expand transactions over the Internet

2

0.5%

2

0.5%

1

0.2%

Outsource the activities of production to companies such as
EMS/OEM manufacturers
Strengthen technology development by utilizing venture
12companies※ 8 companies answered “Other” as a priority issue

9

The Number One priority issue is to “Review andstrengthen management methods (establishing procedures
such as new financial indicators or operating performance
evaluation standards)”
When asked which subjects they regard as the top priority issue for domestic andoverseas business operations (number of companies providing valid responses: 435
companies), the considerations given the most responses included “review and strengthen
management methods (establishing procedures such as new financial indicators or operating
performance evaluation standards)” (104 companies), “review and improve efficiency ofgroup management (sell or spin-off a unit of existing business operations, etc.)” (93companies) and “acquire business resources to strengthen principal business (acquisitions,alliances, mergers, etc.)” (66 companies).
Because of the fact that the qualitative conversion of business activities andprocedures has become a pressing issue for every company, the intention to strengthen corecompetencies while promoting “selection and focus in terms of business operations” after
review of traditional management methods is evident.
When examined by dividing the respondent companies into “companies with arelatively high level of satisfaction with profitability” (operating performance evaluation
value※(Note 1) of 4 or greater: ‘satisfied’ or ‘somewhat satisfied’)” and “companies with alow level of satisfaction with profitability (operating performance evaluation value of lessthan 3 : ‘dissatisfied’, or ‘somewhat dissatisfied’)”, the survey shows the following subjects
to be priority issues※(Note 2) concerning domestic and overseas business activities for bothtypes of companies, with “selection and focus in terms of business operations” being evenmore urgent for companies with a low level of satisfaction with profitability.
※ Note 1; Please refer to Page 8※ Note 2; The table at left summarizes the issues that were given as the concerns withthe highest ranking as a “top priority issue”. “Priority issues” include concerns thatwere cited as the second and third most important, in addition to the concern cited as
Number 1.

< Companies with a high level of satisfaction with profitability >Review and strengthen management methods (establishing procedures such as new financial
indicators or operating performance evaluation standards)< Companies with a low level of satisfaction with profitability >“Review and improve efficiency of group management (sell or spin-off a unit of existing
businesses, etc.)”5

【Overseas Production Ratio】

6

Figure 2 Change in Overseas Production Ratio(Unit: %)30

Increase in the Overseas Production Ratio gains momentum
26.7

As the trend in the Overseas Production Ratio for Japanese manufacturing
companies rises, companies are adding momentum to the size of the increasein the ratio in their future plans (Fiscal 1999 actual increase: 21.1% → Fiscal
2003 projection: 26.7%).

25

21.7

20.9 21.1

19.0 19.2

20

17.3
16.1
15

15.1 14.8

13.7 14.1

The changes in the Overseas Production Ratio when examinedby major industries are as follows. The plan value for the electricalequipment and electronics, which already has the highest Overseas
Production Ratio, is expected to rise sharply by Fiscal 2003.

10

Plan
value

Actualvalue
5

Fiscal 1999 actual
0
89

90

91

92

93

94

95

96

97

98

99

2003

(Fiscal year)※ Overseas Production Ratio = (Overseas production volume)/(Domestic production
volume + overseas production volume)Figure 3 Size of the increase in Overseas Production
Ratio and the amount of foreign direct investment(Unit: %)( Unit: ¥100 million)
Amount of foreign direct investment (Manufacturing)【based on the statistics data of the Ministry of Finance】

50,00010

47,1939Size of increases in the Overseas Production Ratio over afour-year period (※ For the current fiscal year survey,
calculated as Fiscal 2003 plan value - Fiscal 1999 actual
value)

8
7

25,00022,821

22,71813,038

7
5.5

0

3.3

36.9%

Precision machinery

24.5%

25.5%

31.8%

Automobiles

21.5%

23.9%

27.7%

General machinery

18.9%

20.0%

23.6%

Chemical

16.5%

17.4%

21.3%

The changes in the size of the increase in the Overseas
Production Ratio is related to the changes in the amount of FDI by
Japanese manufacturing companies (based on notifications to the
Ministry of Finance). Considering the size of the future increase in
the Overseas Production Ratio, manufacturers are expected toincrease the amount of their FDI over the medium term.

4

6.3
5.6

5.4
4.3

3.2

31.8%

15,686

14,426

5.3

29.1%

5

12,766

4.7

3

3.5

Fiscal 1990 survey
Fiscal 1992 survey
Fiscal 1994 survey
Fiscal 1996 survey
Fiscal 1998 survey
Fiscal 2000 survey
Fiscal 1991 survey
Fiscal 1993 survey
Fiscal 1995 survey
Fiscal 1997 survey
Fiscal 1999 survey

2

Fiscal 2002 plan value

Electric equipment and electronics

6

23,731

18,236

16,919Fiscal 2000 estimated actual

Investment excluding special cases such as the FDI
accompanying the purchase of RJR Nabisco by JT(Japan Tobacco Co., Ltd.): approximately ¥3,550
billion【Overseas business operations through FDI over the medium-term (next three years)】
Figure 4 Size of overseas business operations through FDI
over the medium-term (next three years) (by major
(22
(38
(440
(68
industry)
companies)
companies)
companies)
companies)(23
companies)(20companies)(78
companies)(71
companies)(Unit: %)

100

1.4

80

44.1

1.4

34.6
45.1
65.2

33.8

Will reduce or withdraw fromoverseas business operations
through FDI

35.0

Will maintain the size ofoverseas business operations
through FDI at the present level

55.3

59.1

60

Will strengthen or expand
overseas business operations
through FDI

40

65.4

54.5

20

53.5
34.8

66.2

65.0

44.7

40.9

0

Overseas business operations through FDI projected to bestrengthened or expanded over the medium-term (next three years)
Many Japanese manufacturing companies are indicating their intention tostrengthen or expand their overseas business operations through FDI over the
medium-term (next three years). In addition to companies that responded to thesurvey by answering they “will strengthen or expand” overseas business operationsin the future, which accounted for 54.5% of all companies providing valid
responses, 44.1% of the respondent companies indicated they “will maintain thesize of overseas business operations at the present level”. Only 1.4% of allcompanies that responded indicated they “will reduce or withdraw from overseas
business operations”.
Among the major industrial classifications, the sector with the most active stance
was automobiles, followed by industries such as electrical equipment andelectronics and precision machinery. In all three of these industries, parts
manufacturers in particular are showing a more active stance.
(Unit: %)(Unit: %)Generalmachinery

All industries
TextilesChemicals
Foodstuffs

Automobiles

100
28.9

Electricalequipment &electronics

47.9

46.9

50

39.2
29.2

28.2

27.5
30

23.8
16.3

20
9.8

20.0

0

0

(339
companies)(323
companies)

countries(149
companies)(321
companies)(156
companies)(361
companies)

Central Europe
FormerRepublics of theSoviet Union,
and Eastern
Europe(293
companies)(80
companies)

Automobile parts

Oceania

Other
Europeancountries

50

Near and Middle
East and Africa(92
companies)

46.0

33.3

30

31.3

30

21.1
16.7

33.3

36.8

35.5

40

36.4

40

40.9

47.9

45.8

50

53.2

Will strengthen or expand
overseas business activities
through FDI

54.8

60

16.7
7.1

10.5

20

15.6
11.1

11.1
7.1

10

10

(82
companies)(96
companies)

64.3 65.4

70Will strengthen or expand
overseas business operations
through FDI

20(Automobiles)(Unit: %)

77.6

60

Latin
America

Automobile assemblyElectrical equipment andelectronics parts(Electrical equipment and electronics)

70

ＥＵ

0.0

Assembled electricalequipment

In addition, when examined by region the country where the most active
business operations through FDI is expected is China. Other regions where strong
operations is projected include the U.S. and Canada, and the ASEAN4.

(Unit: %)

12.7

10

U.S. &
Canada

67.2

57.1

20

80

ＮＩＥＳ
China
ＡＳＥＡＮ４
Other Asian

40.0

71.1
57.6

The intention to strengthen or expand overseas business operations when looked
at by major industries is shown below. An active stance in China in electricalequipment and electronics in particular can be noted.

35

40

60.0

40

Will strengthen or expand
overseas business operations through FDI

42.9

80.0

60

59.5

60

32.8

42.4

80

Precisionmachinery

Figure 5 Intentions to strengthen or expand
overseas operations through FDI, by region(Unit: %)

100.0

0

0

(118
companies)

ＮＩＥＳ
China
ＡＳＥＡＮ４

U.S. & Canada
Other Asian
countries

Latin
America

ＥＵ

CentralEuropeＮＩＥＳ
China
U.S. & Canada
ＡＳＥＡＮ４
Other Asian

Oceania

Former Republics of theSoviet Union, and Eastern
EuropeOther European
countries

Near andMiddle East
and Africa

countries

ＥＵ

CentralEuropeOceania

Latin America
Former Republics of
the Soviet Union, andEastern Europe

Other European
countries

Near andMiddle East
and Africa7【Evaluation of overseas business performance〜Satisfaction with sales and profitability〜】

Despite low profitability, an improvement can be seen
through evaluation of satisfaction with profitability in North
America, China, the ASEAN4 and NIES

Figure 6 Evaluation of overseas business performance (FDI) –Fiscal 1999 survey(Evaluation ofsatisfaction with 3.3
profitability)(3.30 , 3.29)
NIES(Fiscal 1998 survey: Evaluation of satisfaction withsales, profitability)(Fiscal 1999 survey: Evaluation of satisfaction with sales,
profitability)

3.2
3.1

The level of satisfaction with the profitability performance of overseas business
operations through FDI by Japanese manufacturing companies remains relatively low.
Although sales and profitability overall were seen as depressed in the prior fiscal year
survey, an improvement in North America, China, the ASEAN4 and NIES is evident
in the current fiscal year survey.

(3.50 , 3.14)(3.12 , 3.07)
U.S., Canada(3.15 , 3.05)(3.20 , 2.99)

Central Europe

3.0(3.07 , 3.00)(3.21 , 2.97)(2.82 , 2.94)

2.9

As the primary causes of profitability improvement, the largest number of companies
cited “good sales of existing products”, regardless of the region. In the U.S. andCanada, the causes cited as the second most important factors were “good sales of new
products” and “satisfactory cost reductions (personnel expenses, raw material costs,etc.)”. In NIES, the ASEAN4 and China, the most frequently cited causes for
improved evaluations of performance were “satisfactory cost reductions (personnel
expenses, raw materials costs, etc.)” and “good sales of new products”.

EU

Latin America

2.8(3.00 , 2.78)(2.89 , 2.76)

ASEAN4(2.89 , 2.74)(2.74 , 2.67)

2.7

China

2.6
2.4

(2.81 , 2.67)(2.59 , 2.61)

2.6

2.8

3

3.2

3.4

3.6

(Evaluation ofsatisfaction with sales)

For business in the EU the tendency for the level of satisfaction with profitability waseven lower than in the past. As the reasons cited in the latest survey for the deepening
dissatisfaction with profitability, the percentage of companies that replied “difficult toobtain customers” was the highest among the companies answering the survey,
followed by “currency exchange rate losses” and “maturation of products”.

Figure 7 Evaluation of overseas business development performance –current fiscal year survey(Evaluation ofsatisfaction withprofitability)8

3.3(Fiscal 1999 survey: Evaluation of satisfaction withsales, profitability)(Fiscal 2000 survey: Evaluation of satisfaction withsales, profitability)

3.2(3.27 , 3.11)

NIES

3.1

(3.12 , 3.07)

3

In central Europe, the level of satisfaction slumped in the current fiscal year survey
despite the fact that a certain amount of improvement was evident in the prior fiscal
year survey. The main causes cited included “currency exchange rate losses (including
the yen conversion effect when preparing consolidated accounting” and “have notbegun full-fledged operations immediately after setting up business”.

U.S.,
Canada(3.07 , 3) (3.21 , 2.97)(3.39 , 3.04)(Evaluation ofsatisfaction withprofitability)(3.25 , 2.99)(Automobiles)

3.40

CentralEurope2.9(Evaluation ofsatisfaction withprofitability)(Electrical equipment and electronics)(3.42 , 3.32)

3.50(3.35 , 3.40)

CentralEurope3.20
3.30(3.51 , 3.30)(3.30 , 3.26)

ASEAN4(3.05 , 2.81)

2.8(3 , 2.78)

2.7(3.03 , 2.75)

2.6(2.81 , 2.67)(2.59 , 2.61)(3.17 , 3.00)

China

2.90

CentralEuropeLatin
America

Latin
America

2.6

2.8

3

3.2

3.4

3.6 (Evaluation ofsatisfaction with sales)※ Evaluation standards:(Compared to initial objective) 1. Unsatisfactory(3.25 , 2.95)(2.82 , 2.82)

2.80(3.34 , 2.98)(2.22 , 2.61)

2. Somewhat unsatisfactory

4 Somewhat satisfactory

5. Satisfactory

3. Can't say either way

Latin
America(3.06 , 2.75)(2.81 , 2.61)

2.60

EU

(3.00 , 2.55)
EU(2.98 , 2.50)

ASEAN42.40(3.00 , 2.63)(2.86 , 2.57)

2.8

2.9

(2.49 , 2.33)(Evaluation ofsatisfaction with sales
)
2.20

2.50
2.7

U.S.,
Canada(3.34 , 2.97)

NIES(3.07 , 2.77)

China(2.82 , 2.73)

2.6(3.35 , 3.00)(3.17 , 3.00)

3.00

U.S.,
Canada(2.87 , 2.74)
2.70(2.67 , 2.67)

2.4(3.31 , 3.21)(3.16 , 3.06)(2.93 , 2.73)(2.89 , 2.68)

China(3.21 , 3.15)(3.17 , 3.07)

3.10

EU

(2.89 , 2.74)(3.65 , 3.17)

NIES

ASEAN4

3

3.1

3.2

3.3

3.4

3.5

3.6

2.2

2.3

2.4

2.5

2.6

2.7

(Evaluation ofsatisfaction withsales)
2.8

2.9

3

3.1

3.2

3.3

3.4

3.5

(Fiscal 1999 survey: Evaluation of satisfaction with sales, profitability)(Fiscal 1999 survey: Evaluation of satisfaction with sales, profitability)(Fiscal 2000 survey: Evaluation of satisfaction with sales, profitability)(Fiscal 2000 survey: Evaluation of satisfaction with sales, profitability)※ Evaluation of satisfaction with sales refers to the assessment of sales “excluding sales to the parent company”.
Evaluation of satisfaction with profitability refers to the assessment of “return on investment”

3.6

3.7

【Business restructuring and overseas business operations through FDI
over the medium-term (next three years)】
Figure 8 Overseas business operations through FDI by region (No.
Evaluation of satisfaction with
1) profitability※ Evaluation standard: (Compared to the initial
objective) 1. Unsatisfactory 2. Somewhat unsatisfactory
3. Cannot say either way 4. Somewhat satisfactory 5.
Satisfactory

3.2
3.1

（46.9，3.05）

3.0

ASEAN43.3

North（59.5，3.12） America

○

○

△

△

（60.8，3.05）

ASEAN4

North
AmericaChina

2.9（51.3，2.90）（59.5，2.90）

2.8
2.7（45.3，2.59）

30

62 60 58 56 54 52 50 48 46

35

×

2.6

40

North （59.5，65.3）
America

45

55

50

○

65

○

(Completed/N
ow
implementing)EU

Intention tostrengthen or
expandoverseasbusiness
operations
through FDI
over themedium-term(next three
years)（39.2，2.59） EU×

Position ofbusiness
restructuring
efforts

60

North
America（47.9，65.3）

66

△

△

（60.8，67.5）

ASEAN469（51.3，70.3）

China

72

EU

（39.2，72.6）
×= (Number of companies that responded they will
strengthen or expand business) / (Number of companies
that will strengthen or expand business + Number ofcompanies that will maintain current business size +number of companies that responded they will reduce thesize of business or withdraw)（ 45.3,72.6 ）73

EU“Have” a need to restructure thebusiness“Have” a need to restructure the business (%):= Number of companies that responded they “have” a needto restructure business / (Number of companies that
responded they “have” a need to restructure the businessChina（59.5，70.3）

71×Intention to strengthen or expand business overthe medium-term(next three years) (%):

◇

70

◇

[Explanation of supplemental Figure]（46.9，67.5）

68+ the number of companies that responded they
do “not have” a need to restructure the business)

Considering the relationship to both axes with regard torestructuring, because of the fact that businesses in the EU face“sluggish performance”, the level of awareness of the “need torestructure” is the highest. In North America and the ASEAN4, on
the other hand, a shift towards “qualitative enhancement” isproceeding.

② “Position of business restructuring efforts” and “evaluation ofsatisfaction with profitability” for overseas business operations
The “position of business restructuring efforts” is at the lowest levelin the EU, where “evaluation of satisfaction with profitability” is also
the lowest.

67

ASEAN4For businesses in the EU, the “need to restructure” is the strongest
but the “position of business restructuring efforts” is the most delayed.
Accordingly, the situation for the EU can be regarded as the same as in
China.
In North America, the “position of business restructuring efforts” is
at a high level, while the “need to restructure” is low. In the ASEAN4,on the other hand, “position of business restructuring efforts” is themost advanced of any of the regions.

◇

◇

China

① “Need to restructure” and “Position of business restructuring
efforts” for overseas business operations(Note) The evaluation of satisfaction with profitability
discussed here is the evaluation of satisfaction ofcompanies that responded they will “strengthen or
expand medium-term business”. It therefore does notagree with the values given for the evaluation ofsatisfaction with profitability in page 8.
（47.9，3.12）

3.4

9

Status of business restructuring
effort(Completed/Now
implementing) (%):= (Number of companies that
responded “Completed or now
implementing
restructuring”)/(“Completed or now implementing”+ “Not yet implementing” +“studying when to implement”)
Evaluation of
profitability:

satisfaction

Evaluation
investment

the

of

returnwithon

In North America, on the other hand, the “position of businessrestructuring efforts” is the highest after the ASEAN4, and “evaluationof satisfaction with profitability” is also the highest. In the ASEAN4,
the “position of business restructuring efforts” is the highest, while the“evaluation of satisfaction with profitability” is second only to North
America.
Considering the relationship to both axes, because businesses inthe EU face “sluggish performance”, the “status of businessrestructuring efforts” is also low. In both North America and theASEAN4, on the other hand, “qualitative enhancement” continues togrow stronger and compared with other regions is connected to goodevaluation of satisfaction with profitability.

③ “Need to restructure” and “intention to strengthen or expand business”
for overseas business operations
The “need to restructure” is at the greatest in the EU, where the“intention to strengthen or expand business” is the weakest.
In China the “need to restructure” is at the highest level after the EU,
while the “intention to strengthen or expand business” is the highest. In
North America the “need to restructure” is the lowest, while the“intention to strengthen or expand business” is comparatively strong.
Considering the relationship to both axes, this means thatbusinesses in the EU face “sluggish performance”. On theother hand the feeling that businesses should be restructured
in North America has declined compared to other regions, andthe change towards expansion of business is continuing. In
China, companies are maintaining their intention towards“expansion of size” just as in North America, in addition tocarrying out efforts to restructure their existing business.
④ “Evaluation of satisfaction with profitability” and “intention tostrengthen or expand the business” for overseas business operations
The EU has the lowest level for “evaluation of satisfaction withprofitability” as well as the weakest “intention to strengthen or expand
business”.
On the other hand, compared to other regions, “evaluation ofsatisfaction with profitability” is the highest and the “intention tostrengthen or expand the business” is also comparatively strong in North
America. For the ASEAN4, the “evaluation of satisfaction withprofitability” is the highest after North America, while on the other handthe “intention to strengthen or expand the business” is nearly at the samelevel as in North America. In the case of China, while the level of the“evaluation of satisfaction with profitability” is not high, the “intention
to strengthen or expand the business” is the highest.
Considering the relationship to both axes, unlike the EU
which has been hit by “sluggish performance”, in North
America the orientation is towards “expansion of size” basedon the comparatively good evaluation of profitability. In thecase of China, despite the fact that the level of the “evaluationof satisfaction with profitability” is not high, the “intention tostrengthen or expand the business” is the highest.

10Figure 9 Overseas business operations through FDI, by region (No. 2)
EU

North
America

Evaluation of satisfaction with profitability

Intention tostrengthen or
expandbusiness
operations
through FDI
over themedium-term(next three
years)

Position ofbusiness
restructuring
efforts(Completed/N
ow
implementing)

Positionofbusiness
restructuri
ng efforts“Have” need to restructure the business

Evaluation of satisfaction with profitability

Intention tostrengthenor expandbusiness
operations
through FDI
over thePosition of businessrestructuring efforts

mediumterm (nextthree years)(Completed/Now
implementing)[ How to read thefigures ]11

Evaluation of satisfaction
with profitability

High level of satisfaction

Proceedingwith businessrestructuring(Completed/Now
implementing) ）

Evaluation of satisfaction with profitability

Aggressive
business
operations

ASEAN4

Intention
tostrengthenor expandbusiness
operations
through
FDI overthe
mediumterm (nextthreeyears)“Have” need to restructure the business

Evaluation of satisfaction with profitability

China

Delayed businessrestructuring

Intention tostrengthenor expandbusiness
operations
through FDI
over themediumterm (nextthree years)

Position ofbusiness
restructuring
efforts(Completed/Now
implementing)“Have” need to restructure the business“Have” need to restructure the business

Intention
tostrengthenor expandbusiness

Position ofbusiness
restructuring
efforts

operations
through
FDI overthe
mediumterm (nextthreeyears)(Completed/N
ow
implementing)“Have” need to restructure the businessFigure 10 Overseas business operations through FDI, by region (No.
3)
Evaluation of satisfaction withprofitability

Strengthen functions of new
production and sales bases

Qualitative enhancement

North
America

Establish new production and sales
bases
Expand existing production and sales
bases

Expansion ofsize

Overseas business operations through FDI aimed
at improving evaluations of satisfaction withprofitability

12

Past overseas business operations conducted by Japanese manufacturing companies werefocused on “quantitative expansion” and “follow-the-leader development” aimed at securingmarket share. In the future, however, the tendency will be to place greater emphasis on
profitability. Future issues and orientations of business as seen for each of the major regions of
the world are shown below.
< Business operations for Japanese affiliated companies in the EU >◯ Because the low level of evaluations of satisfaction with profitability continues, the mostpressing concern will be “recovery from sluggish operating conditions as quickly as possible
by restructuring existing businesses”
Restructuring procedures: Review sales systems, review management systems, review
distribution systems, etc.
< Business operations for Japanese affiliated companies in North America >Intention tostrengthen or
expand business
operation through
FDI over the
medium-term(next three years)

Position of businessrestructuring efforts(Completed/Now
implementing)◯ Because of renewed strong expectations toward North America as a promising market, theorientation of most companies will be to “continue restructuring of existing business, whileplanning qualitative enhancement and expansion of the business”.
Restructuring procedures: Review sales systems, review management systems, etc.
< Business operations for Japanese affiliated companies in the ASEAN4 >◯ Amid a mood of recovery from the Asian economic crisis, the “preliminary stance aimed at
expanding business size through aggressive, qualitative strengthening, by restructuringexisting businesses in the same manner as in North America” can be detected.
Restructuring procedures: Review management systems, review sales systems, consolidationand closing of multiple production bases

ASEAN4< Business operations for Japanese affiliated companies in China >China◯ Because manufacturers anticipate future markets despite the fact that local business activity
is never easy, the orientation of companies is to “move quickly to restructure existing businessand expand the size of FDI by reinforcement and expansion of business activity, including
new business”.
Restructuring procedures: Review management systems, review sales systems, etc.

EU

“Have” need to restructure the business[Explanation of supplemental Figure]
Intention to strengthen or expand business over the medium-term (Next three years) (%):= (Number of companies that responded they will strengthen or expand business) / (Number of companies that will strengthen or expand business + Numberof companies that will maintain current business size + number of companies that will reduce the size of business or withdraw)“Have” a need to restructure (%):

Sluggish operating
performance conditions= Number of companies that responded they “have” a need to restructure their business / (Number of companies that responded they “have” a need torestructure their business + the number of companies that responded they do “not have” a need to restructure their business)
Position of business restructuring efforts (Completed/Now implementing) (%):

※ Evaluation standards: (Compared to the initial objective)= (Number of companies that responded “Completed or now implementing”) / (Number of companies that responded “Completed or now implementing” +Number of companies that responded “Not yet implementing” + Number of companies that responded “studying when to implement”)

1. Unsatisfactory 2. Somewhat unsatisfactory 3. Cannot say either way

Evaluation of satisfaction with profitability:

4. Somewhat satisfactory 5. Satisfactory

Evaluation of the return on investment

【Efforts to restructure overseas business operations through FDI】
Figure 11 Main types of overseas business restructuring, by region (multiple
responses)
North America

ASEAN4
46.2
41

47.7

Review sales systems
16.7

Review distribution systems

18.6

Merge and eliminate multiple production

17.6
10.5

60 50 40 30 20 10 0

0 10 20 30 40 50 60
Europe

China
49.2

48.5

Review management systems

46.2

57.6

Review sales systems
19.2

12.9

Merge and eliminate multiple production

60 50 40 30 20 10 0

0 10 20 30 40 50 60

Figure 12 Principal reasons for restructuring overseas business
operations, by region
Rise in production / sales costs

ASEAN4Progress in regional integration (liberalization of trade within the region)

26.4

30

25.8 (Intense competition with other Japanese firms in the

Intense competition with non-Japanese companies in the same industry

same industry)

24.7
11.7

20
Numerical axis

10
41.4

18.4

33
17.2
5.9

24.3

0 8.116.8

15.5

21.1
35.6

※ Percentage of companies that answered the effect on restructuring of their business operation is “Large”.
A “Large” effect refers to a level that makes it necessary to promptly execute a serious response.

Furthermore, when companies are broadly classified by their evaluation ofsatisfaction with the profitability of their overseas business operations into
“companies with a high level of satisfaction” and “companies with a low levelof satisfaction”, there are differences in their intent to restructure their overseas
business operations (all regions consolidated) as shown below. The need torestructure is greater to the extent the evaluation of satisfaction withprofitability indicates “companies with a low level of satisfaction”.

(Unit: %)40

Intense competition with other Japanese companies in the same industry

EuropeLooking at the main causes for restructuring by region, the influence of“intense competition with non-Japanese companies in the same industry” was
the greatest in Europe (41.4%), followed by North America (35.6%) and China(33.0%). In the ASEAN4, the “rise in production / sales costs” was cited ashaving the greatest influence.

21.2

Review distribution systems
9.2

When it comes to undertaking efforts to restructure overseas business
operations, in both China and the ASEAN4 the response given most often bycompanies providing valid responses to the survey was “review management
systems”, followed by “review sales systems”. For both North America andEurope, on the other hand, the most frequent response was “review sales
systems”, followed by “review management systems”.

43.1

Review management systems

Undertaking the need to restructure overseas
business operations urgently

North America

18.8

China

< Need to restructure >In the case of “companies with a high level of satisfaction”, 44.7% of theapplicable respondent companies indicated they “have” a need to restructure.
In the case of “companies with a low level of satisfaction”, 60.8% of theapplicable respondent companies indicated they “have” a need to restructure.
< Contents of restructuring > (efforts made by each company)
In the case of “companies with a high level of satisfaction”, “review sales
systems” was the most frequent response, followed by “review management
systems” and “review multiple production bases”.
In the case of “companies with a low level of satisfaction”, the most frequent
response was “review management systems”, followed by “review sales
systems” and “review distribution systems”.

13【Introduction of IT for overseas business operations
through FDI】
Figure 13 Intention to introduce IT for overseas business operations
through FDI
Definition of IT (Information Technology):(Unit: %)Abbreviation for “Information Technology”. Indicates all technology related to
information transmission, covering a broad range from basic technology toapplications.

60

The phrase “introduction of IT” as used here also refers to creation of abusiness environment, including both the software and hardware aspects(including introduction of personal computers), in order to use the internet

41.3

50
40

34.9

30
20

25.1

18.9

(Searching for
further
applications)

The intention of Japanese manufacturing companies to introduce IT for their overseas
business operations through FDI was evident in the fact that 89.2% of the companies that
responded to the survey answered they “are interested”, while 10.8% replied that they“are not interested”. The status of efforts by companies that replied “interested” are as
follows.
1) Attitude towards the introduction of IT
Among companies that responded they “are interested”, the most frequent response
was “already completed introduction” (41.3%), followed by “studying the introduction ofIT” (25.1%) and “now actively building IT systems” (18.9%).
Compared to “companies with a low level of satisfaction” in their evaluation ofsatisfaction with profitability, “companies with a high level of satisfaction” are ahead in
their efforts to address the introduction of IT.

and intranets for business.

(Present situation issatisfactory)

For overseas business operations through FDI,
IT introduction is gradually proceeding

Already completed
introduction

14.6

Companies with a highCompanies with a low level

level of satisfaction
43.7%

of satisfaction
36.3%(Reference) Intention to introduce IT in the main regions

10
6.4
0
Already completed introduction

Studying the introduction of IT

Now actively building IT systems

Not considering at this time

Figure 14-1 Areas for IT introduction (multiple responses)(All industrial classifications)

50
40

39.9

Already completed introduction

50.6％

47.5％

39.0％

Now actively building IT systems

19.9％

19.1％

19.8％

Studying the introduction of IT

22.5％

23.3％

30.1％

Not considering at this time

7.0％

10.1％

11.1％

Compared to “companies with a low level of satisfaction” in their evaluation ofsatisfaction with profitability, the intention of “companies with a high level ofsatisfaction” to lead the way in introducing IT in the management and control areaand for manufacturing control aspects can be detected as shown below.

60
46.8

Asia

Among the companies that responded “already completed introduction”, “nowactively building IT systems” or “studying the introduction of IT”, the responses
given most frequently (multiple responses) regarding the areas where efforts areconcentrated were “management and control” (59.0%), followed by “sales” (57.0%),“information gathering” (46.8%) and “sharing of management information” (43.1%).

59

57

EU

2) Areas where IT efforts are concentrated(Unit: %)70

North America

43.1

33.7

30.3

Management and control

Companies with a high level Companies with a low levelof satisfactionof satisfaction
72.4％
52.4％

30

Sales

57.1％

56.7％

20

Information gathering

53.3％

49.4％

7.1

3.9

10

2.5

0
Procurement

Basic research
Sales

Applied research

For sharing of management
Management and control
information(Accounting, etc.)
For other areas
For information
Manufacturing
gathering
control(CAD/CAM, etc.)

Distribution(Reference) When we conducted supplemental questioning it became apparent that a reserved
approach was commonly shared in which companies “will introduce IT gradually as we study
its cost effectiveness”. Moreover, when introducing and applying IT companies are proceedingin separate areas such as management and control (accounting, etc.) and manufacturing control.
When organizations and structures within a company introduce IT along so-called vertical lines,
however, achieving connections between the systems in each organization and structure isdifficult, leading to fears of cases where the benefits of introducing IT will not be fully realized

14

(Areas of IT introduction for major industries)

15

Figure 14-2 Areas of IT introduction (multiple responses)(Electrical equipment and electronics)(Unit: %)Figure 14-4 Areas of IT introduction (multiple responses)(Chemicals)(Unit: %)

70

70

70

57.5
43

40

39

39.5

40

30

30

20

20

10

39.2

35.4
29.2
20.8
7.7

6.5

10

1.5

2.3

1.5

0

0
Procurement

Basic research
Sales

Applied research

70

60.1

Basic research
Sales

Distribution

Management and control
For sharing of management(Accounting,etc.)
information For other areas
Manufacturing
For information

Applied researchcontrol(CAD/CAM, etc.)

gathering

Figure 14-3 Areas of IT introduction (multiple responses)(Automobiles) 75.2
(Unit: %)(Unit: %)

62.3

58.5

60

48.4

gathering

Figure 14-5 Areas of IT introduction (multiple responses)

70

60.8
52.9

60

Procurement

For sharing of management
Management and control
information For other areas(Accounting,etc.)
For information
Manufacturing

Distribution

control(CAD/CAM, etc.)

50

43.8

50

44

40

4.5

53.8

60

60
50

60

59.4
50.9

50

41.8
34

40

30

30
15

20

34

40

28.3
22.6

20

8.5

4.6

10

9.4

5.7

3.8

10
0

0
Procurement

Basic research
Sales

Applied researchDistribution

Management and control
For sharing of management(Accounting, etc.)
information
Manufacturing
For information
For other areas
control(CAD/CAM, etc.)
gathering

Procurement

Basic research
Sales

Applied researchDistribution

Management and control
For sharing of management(Accounting, etc.)
information
Manufacturing
For information
For other areas
control(CAD/CAM, etc.)
gathering16【The effect of FDI on domestic production】
Figure 15 Medium-term (next three years) domestic
business outlook – Effect of FDI on domestic production
facilities (multiple responses)(Unit: %)70

66.6
Fiscal 1999 survey
Fiscal 2000 survey

60

52.2
50

Effect of overseas business expansion on domestic
business activity: production of higher added-value
manufactured products is becoming more important
The percentage of companies that responded (multiple responses) that “investments
will be made to maintain and expand market share and will have no effect on domestic
production facilities” with regard to the effect of FDI on domestic production facilities
was fewer than in the prior fiscal year survey results (Fiscal 1999 survey: 66.6% →Fiscal 2000 survey: 52.2%). On the other hand, the percentage of companies
responding they “will downsize domestic production facilities because overseas
production will replace production within Japan” increased (Fiscal 1999 survey 9.6%
→ Fiscal 2000 survey 13.6%).

40.7
Furthermore, the percentage of companies responding that “domestic production
will focus on products with higher added-value” increased (20.3% → 40.7%). Japanesemanufacturing companies are showing their intention to concentrate on the productionof manufactured products with greater added value.

40

30

20.3
20

13.6
11.3

(Electrical equipment and electronics)(Unit: %)

70

13.6
9.6

10

Fiscal 2000 survey

70

60

60

50

50

40

Fiscal 2000 survey

60.5

58.0

2.8 2.7(Automobiles)(Unit: %)

35.8

40

31.6
30

30

0

19.7
20

1

2

3

4

12.3

5
(Number of the answer
selected)

20

14.8

7.9
10

10

0

0
1

1. Investment will be made to maintain and expand market share and will have no effect on domestic production facilities
2. Will have no effect on domestic production facilities because products manufactured overseas are different from domesticallymanufactured products
3. Although domestically manufactured products will be shifted to production at an overseas location, domestic production
facilities will focus on products with higher added-value
4. Will downsize domestic production facilities because overseas production will replace production within Japan
5. Other

2.6

1.2
2

3

4

5

(Number of the answer
selected)

1

2

3

4

5

(Number of the answer
selected)【Promising destinations for overseas business operations through FDI
over the medium term (next three years)】

17

Figure 16 Countries with promising medium-term (next three years) overseas
business operations through FDI (Multiple responses)
Countries with promising mediumterm overseas business development
prospects
Number of
Current fiscal companies
year survey(firms)Ratio (%)

372

100

Rank
1
2
3
4
5
6
7
8
9
10

China

242

U.S.
ThailandIndonesia
Malaysia
TaiwanIndia
Vietnam
Korea
Philippines

154

24

54

15

41
37
35
32
30

Number ofcompanies(firms)Ratio (%)

278

100

153

55 China

65 China

88

43

Promising destinations for investment over the medium term (next three years)

Fiscal 1999
survey

41

12
11
10
9
9
8

FDI in China, which once again is
beginning to show activity that is
generating strong interest

U.S.

108

ThailandIndia
Indonesia

39

76

27

42

15

41

Vietnam

15

30

Malaysia

11

25

Philippines

9

25

U.K.

9

25

Brazil9

21

8

Fiscal 1998
surveyU.S.

Number ofcompanies(firms)Ratio (%)

299

100

163

55 China

124

ThailandIndonesia
India

68

23

49

16

46

Philippines

43

Malaysia42

Vietnam

41

Brazil

34

U.K.

41

31

15
14
14
14
11
10

Fiscal 1997
surveyNumber ofcompanies(firms)Ratio (%)

342

100

219

U.S.

123

Indonesia
ThailandIndia

Malaysia

28
25

47
46

Brazil36

84

66

Philippines

64 China

97

77

Vietnam

23
19
14
13

28

TaiwanFiscal 1996
survey828

8ThailandIndonesia
U.S.
Vietnam
Malaysia
India
Philippines
Singapore
U.K.
TaiwanNumber ofcompanies(firms)Ratio (%)

351

100

240

68

126

36

119

34

112

32

96

27

71

20

64

18

45

13

34

10

23

7

23

7

Figure 17 Reasons given for why countries look promising (Multiple responses)
China
U.S.
ThailandIndonesia
Malaysia
Number of firms
Number of firms
Number of firms
Number of firms
Number of firms(240)
Percent(153)
Percent(88)
Percent(54)
Percent(42)
Percent
Present market size

49

20.4%

92

60.1%

14

15.9%

7

13.0%

7

16.7%

Potentiality of future market growth

191

79.6%

80

52.3%

49

55.7%

27

50.0%

19

45.2%

Inexpensive labor force

139

57.9%

0

0.0%

42

47.7%

40

74.1%

20

47.6%

Low-cost parts and raw materials

56

23.3%

6

3.9%

14

15.9%

12

22.2%

7

16.7%

Export base to Japan

47

19.6%

4

2.6%

15

17.0%

10

18.5%

9

21.4%

Third-country export base

53

22.1%

7

4.6%

35

39.8%

16

29.6%

14

33.3%

Supply base for final assembly manufacturers

51

21.3%

46

30.1%

30

34.1%

15

27.8%

10

23.8%

Because other companies in the same industry
are advancing there

13

5.4%

6

3.9%

5

5.7%

3

5.6%

0

0.0%

Excellent human resources

20

8.3%

16

10.5%

12

13.6%

1

1.9%

6

14.3%

Favorable
investment
policiesandderegulation policies in the target country

10

4.2%

3

2.0%

6

6.8%

2

3.7%

8

19.0%

Product development suits the local market

26

10.8%

52

34.0%

7

8.0%

6

11.1%

4

9.5%

Acquisition of local technology, know-how,
etc.

4

1.7%

16

10.5%

0

0.0%

0

0.0%

1

2.4%

Progress towards regional integration

3

1.3%

2

1.3%

6

6.8%

4

7.4%

2

4.8%

Other

2

0.8%

2

1.3%

1

1.1%

0

0.0%

1

2.4%

Despite numerous problems and issues for business operation in
China, many of the respondent companies cited China as the mostpromising country as a target for business operations. The numberof companies responding also increased substantially compared tothe prior fiscal year survey (Fiscal 1999 survey: 153 companies →Fiscal 2000 survey: 242 companies). Of these, 126 companies areplanning to “aggressively advance into the market in the future
while utilizing existing bases”, and 57 companies indicated they
will “aggressively advance into the market with new FDI(establish new bases)”.

As reasons given for seeing China as a promising destination forbusiness operations through FDI (multiple responses), 79.6% of the
respondent companies cited “potentiality of future market growth”.
This was followed by reasons such as “inexpensive labor
force“ (57.9%), “low-cost parts and raw materials” (23.3%), and as
a “third-country export base” (22.1%). In addition to the future
potential of local markets in China itself, expectations that China’s
business environment will improve with China’s entry into the
WTO are also a factor. When looked at by industry, moreover, theelectrical equipment and electronics industry showed the strongest
interest (52 companies), followed by chemicals (including plastic
formation; 39 companies) and automobiles (32 companies).

※ The number of companies entered in the above table are the number of companies among those responding to the question regarding “promising destinations for medium-term
overseas business operations through FDI” that also responded with a “reason why market looks promising”.