ス ポ ッ ト研 究Survey Report on Overseas Business
Operations by Japanese Manufacturing
Companies—Results of the JBIC FY2015 Survey: Outlook for Japanese Foreign Direct
Investment (27th Annual Survey)—
Research Division, Policy and Strategy Office for Financial Operations
Japan Bank for International Cooperation
1. Introduction

Figure 1. Ratios of Overseas Production, Overseas
Sales, and Overseas Income

The Japan Bank for International Cooperation (JBIC) conducted a survey on trends in overseas business operations byJapanese manufacturing companies. As in previous years,
this year’s survey was sent out at the beginning of July andresponses were collected by September (no. of target companies: 1,016, no. of valid responding companies: 607, valid
response rate: 59.7%). The response rate of close to 60% wason a par with the 60.4% recorded last year. As well as continuing to make efforts to make the survey easier to answer inthe future, we would once more like to express our gratitude
to the companies who cooperated in the survey.
This year’s survey included topics that are covered every
year (“Evaluations of Overseas Business Performance,”“Prospects for Overseas and Domestic Business Operations,”“Promising Countries or Regions for Overseas Business Operations”) as well as questions on specific topics such as“Management Challenges to be Addressed,” “Status of Overseas M&A and Policy of Engagement,” “Trends of Production
Repatriated from Overseas,” and “Situations in China andStance towards Future Business Operation.”(%)
44

2. Prospects for Overseas and Domestic BusinessOperations(2) Stance toward Overseas Business Operations
Companies answering intention to “strengthen/expand” overseas business over the medium term accounted for 80.5%,
which was more or less the same with the previous survey(down 0.4 percentage points), showing a continuous downward trend since the FY 2011 survey. Though companies that
intended on strengthening/expanding have surpassed the80% mark, this represents a standstill in comparison to thepast results, in reflection of the recent world economy.

(1) Performance Evaluations Regarding Overseas
Production, Sales, and Income
The FY2014 overseas production ratio1 was 35.1%, which
dipped slightly below the actual FY2013 performance(35.2%). However, the projected figure in medium-termplans (FY2018) was close to the 40% level (39.6%), indicating that the responding companies continue to have a plan of
expanding overseas production. The overseas sales ratio2
based on the FY2014 performance was 37.9%, while theoverseas income ratio3 was 34.3%, which are increases inperformance over the previous year by 0.4 percentage points
and 0.6 percentage points, respectively. As for the overseas
sales ratio, an increase of about 1 percentage point more is
anticipated in FY2015 (Figure 1).
By major industries, the overseas production ratio based on
FY2014 performance was highest for the automobile industry at 44.6%. The projected FY2015 performance is 45.4%
38

2016.3

Overseas Production Ratios

403633.5% 34.0%

34323027.9%

282024.6%

34.7%

34.2%

34.7%

35.4%
34.2%

33.3%

29.1%
28.0%

262237.5%

Overseas Income Ratios

38

24

Medium-term Plans(FY2018)

Overseas Sales Ratios

42

29.2%

30.5% 30.6% 30.8%

31.0%

31.3%

32.9%

37.9%

38.9%

35.2% 35.1%
33.7% 34.3%

39.6%

36.0%
35.2%

FY2015
Projected

26.0% 26.1%

Actual01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 (FY)and in medium-term plans (FY2018) is 48.9%, which indicate that the automobile industry is prepared to continue tostrengthen overseas production.
＊１：(Overseas Production) / (Domestic Production + Overseas Production)＊２：(Overseas Sales) / (Domestic Sales + Overseas Sales)＊３：(Overseas

Operating Income) / (Domestic Operating Income +Overseas Operating Income)(3) Domestic Business Operations and the Repatriation ofProduction
Since the FY 2012 survey, the response ratios of “strengthening/expanding” domestic business operations have been in an
upward trend. Out of the responding companies in this survey, 29.6% (2.0 percentage points more than the previoussurvey) chose “strengthen/expand,” a stance that can be partially attributed to the recent domestic economy and thecurrency exchange market situations.
In relation to this, we asked whether companies had repa-【スポット研究】Survey Report on Overseas Business Operations by Japanese Manufacturing Companies

Figure 2. Status of Production Repatriated from Overseas
1. Has been done(with new domestic investments)
12 companies, 2.2%

Total for 1 to 3
77 companies, 13.8%

2. Has been done(without new domesticinvestments)
43 companies, 7.7%

5. Don’t know
42 companies,7.6%

3. There are plans(sometime from FY2015)
22 companies, 4.0%
4. Has not been done
(no immediate plans to do so)
437 companies, 78.6%(No. of respondent companies = 556)

triated production, to which a total of 13.8% responded either“Has been done” or “There are plans” (Figure 2). Given themost as the reason for the response “Has been done” was“Due to improvement of export competitiveness via yen depreciation.” The overseas production bases transferred backto Japan had mainly been in China.
Still, the repatriation of production does not necessarily
lead to downsizing or closing of overseas bases. In China, forinstance, while companies transferred some production, suchas that of for the Japanese market back to Japan due to theimpact of soaring labor costs and the depreciation of yen,they indicated that they would continue to keep manufacturing in China for products intended for the Chinese market.
In terms of the future possibility of repatriation to Japan, amajority of companies (319 companies, 56.6%) chose “3.
Produce in countries or surrounding regions where there isdemand regardless of exchange rate fluctuations.” However,there were 146 companies (25.9%) that chose “4. Don’tknow.” It means that, among companies that have not repatriated production to Japan currently, there is still the possibilityof repatriating, depending on future foreign exchange trends(Figure 3).
A look at the mutual relationship between prospects foroverseas and domestic operations shows that of the companies that answered that would “strengthen/expand” overseas
business (471 companies), the ratio of those indicating aFigure 3. Possibility of Repatriating Production in theFuture
11 companies, 2.0%
28 companies,
5.0%

60 companies,
10.6%

146companies,
25.9%
319 companies, 56.6%

1. If the current level ofexchange rate continues,
we will transfer back toJapan or consider it
2. If the yen depreciates
further, we will repatriate
to Japan or consider it
3. Regardless of fluctuations
in exchange rate, we willbasically manufacture incountries and surrounding
regions where there isdemand
4. Don’t know
5. Other(No. of responding companies = 564)

stance of maintaining or expanding domestic operations increased for the third consecutive year and was about 90%.
Very few companies showed the intention to downsize domestic operations, an indication of the willingness of more
and more companies to accommodate both overseas and domestic operations.

3. Ranking of Promising Countries
The responding companies were each asked to name the top
five countries/regions that they consider to have promisingprospects for business operations over the medium-term (thenext 3 years or so) and the results are shown in Figure 4. In
this year’s survey, India continued to hold the top spot as was
the case in the previous survey, with Indonesia and China
finishing in 2nd place. The percentage shares of these threecountries vied closely for around 40%, outscoring the countries that were ranked below them. While Brazil (9th place)and Russia (12th place) saw significant decreases in their percentage shares, Mexico (6th place), the USA (7th place), andthe Philippines (8th place) each received higher percentages,
an indication of the recent economic situation in each country/region.
Having won the 1st-place spot for the first time ever in theprevious survey, India again won high marks as a promisingnation. Though the number of companies selecting India
dropped to 175 from 229 in the previous survey, it was theonly country to receive a percentage share in excess of 40%.
Of the companies answering that India was promising, 88.9%
gave “Future growth potential of local market” as a reason.
Along with its potential appeal as a market indicated once
again, the response ratio of “Current size of local market”(31.0%) has been increasing each year, an indication that
Figure 4. Promising Countries/Regions for Overseas
Business over the Medium-termRanking
2015 ← 2014
12IndiaIndonesia

No. ofCompanies
2015
2014

Percentage
Share (%)
2015

2014

229
228

40.4
38.8

45.9
45.7

433

499

175
168

－
－

1
2
3

China

168

218

38.8

43.7

－

4

Thailand

133

176

30.7

35.3

24

Country/Region(Total)5－5Vietnam

119

155

27.5

31.1

6－

6

Mexico

102

101

23.6

20.2

78

USA

72

66

16.6

13.2

811

Philippines

50

50

11.5

10.0

710Brazil
Myanmar

48
34

83
55

11.1
7.9

16.6
11.0

129

Malaysia
Russia

27
24

4660

6.2
5.5

9.2
12.0

13

14

Singapore

2025

4.6

5.0

14

13

Turkey1726

3.95.2

1415

Korea

1720

3.9

4.0

1617

Taiwan

1619

3.7

3.8

1715

Cambodia

1420

3.2

4.0

1718

Germany

149

3.2

1.8

19

Saudi Arabia

77

1.6

1.4

2025

Bangladesh

66

1.4

1.2

20
20

32
32

LaosUK

66

33

1.4
1.4

0.6
0.6

910－111219－

2016.339

Business management

Business operations

Business policies

Figure 5. Management Challenges to be Addressed
India is gradually developing into a market
where Japanese companies are able to conduct
0 10 20 30 40 50 60 70 80（％）
1. Create new businesses that drive growthbusiness operations. At the same time, 49.4% of
41.6
2. Expand current businesses qualitatively and quantitatively
71.0
responding companies gave “Underdeveloped
3. Move on from a business model of simply manufacturing and selling
13.1
infrastructure” as the paramount issue, a trend
4. Identify and phase out unprofitable businesses
15.4
unchanged since the previous survey (51.6%).
5. Develop products that are strongly competitive
52.2
Second-place Indonesia was chosen by 168(high market share product in niche market)
6.
Developproducts
thatmeetneedsof
localmarkets40.8
companies, a decrease from the 228 companies
7. Strengthen business operations intended for the
21.8
in the previous survey, while the percentage
middle class in emerging economies
8. Make inroads to securing more non-Japanese customers
23.7
share also dropped from 45.7% in the previous
9. Strengthen collaboration among the sales,survey to 38.8% in this year. Still, there is a34.0
manufacturing and development divisions
deep-rooted belief in the promise of Indonesia.
10. Integrate the system between domestic and overseas bases through IT
10.2
investment (in the realms of accounting, production management, etc.)
Similar to India, “Future growth potential of lo11. Enhance unity of the company by instilling the corporate identity
17.8
and principles within the group
cal market” (83.4%) was given as a reason for
12. Introduce a global HR program
13.0
the perceived promise, an indication of the con13. Develop individuals who are capable of managing overseas bases
45.3
tinuing high assessment Indonesia is receiving.
14. Improve response capacity for dealing with other cultures, customs,
19.0
languages, etc. (by Japanese employees)“Rising labor costs” (40.9%) and “Execution of
15. Other 0.7
legal system unclear” (40.3%) were each cited(No. of respondent companies = 579)
as issues by over 40%, the same as in the previous survey.
For China, which also ranked in 2nd place, the main reason
lowed by “5. Develop products that are strongly competitive
given for perceived promise was “Current size of local mar(high market share product in niche market)” (52.2%). Bothof these are matters that have been regarded as major manket” (67.9%). The response ratio of “Future growth potentialof local market” (59.9%) has been on the decrease each year,
agement issues by the manufacturing sector for a long timeand in this year’s survey it fell to 2nd place. Though the per(Figure 5).
Relatively large differences in the response ratio were obcentage is by no means low, expectations in the growth of theChinese market in the future have been fading, and it is shown
served between large corporations and mid-tier firms/SMEs
in numbers. Among the issues given, “Rising labor costs”
for “1. Create new businesses that drive growth” (large corpo(73.0%) was by far the top response and followed in 2nd
rations: 45.8%, mid-tier firms/SMEs: 30.1%) and for “6.
place by “Execution of legal system unclear” (54.1%), which
Develop products that meet needs of local markets” (large corwas given most among the top-ten countries. Out of the topporations: 43.0%, mid-tier firms/SMEs: 34.6%). These suggest
ten countries, only China was given “Insufficient protectionthat large corporations have a stronger recognition of the imfor intellectual property rights” (43.4%) – the fourth highest
portance of creating new businesses and product development
issue – in double digits.
in line with local needs. On the other hand, among mid-tier
The top-five countries, from 1st-place India through 5thfirms/SMEs, the second most common response was “13. Deplace Vietnam, all saw decreases in the number of responding
velop individuals who are capable of managing overseas
companies, while 6th-place Mexico received responses frombases” (52.9%), as over half of them selected this as an issue.
about the same number of companies in this year (102) as theprevious survey (101), but saw an increase in the percentage
5. Status of Overseas M&A and Policy ofshare: 23.6% (up from 20.2% in the previous survey). Mexico
Engagement
received particular strong evaluations in the automobile industry; a look at the promising countries by industry shows
As there has been a recent increase in the expansion of operthat Mexico ranked 1st place in the automobile industry inations through the use of M&A, responding companies were
this year’s survey for the first time.
asked about how they position M&A within the scheme ofThe rest of the countries that made the top 20 includes
overseas business operations. 76.7% of responding compaMalaysia (11th place), Singapore (13th place), Cambodia
nies regarded M&A as an important means of expanding(17th place), and Laos (20th place), indicating the increasing
business, indicating that M&A are widely recognized as apresence of ASEAN countries as promising countries/regions.
means of management for business expansion. In addition,
when combining the responses for “handle it by setting up adedicated section” (6.1%) and “have staff such as a business
4. Management Challenges to Be Addressedplanning department handle it” (50.8%), the majority of reResponding companies were asked to give up to five answers
sponding companies are handling M&A (Figure 6).
as matters they considered to be management challenges toWhen asked about their purposes of overseas M&A, 77.7%
be addressed in an aim for long-term growth. “2. Expand curof responding companies chose “Exploration of new markets,
expansion of sales network,” indication of a stance of acquirrent businesses qualitatively and quantitatively” (71.0%) wasby far cited as the top management challenge. This was foling overseas market being the main purpose. The 2nd-place40

2016.3

【スポット研究】Survey Report on Overseas Business Operations by Japanese Manufacturing Companies

16 companies, 34 companies,
6.1%
2.9%

Regard M&A as an importantmeans of expanding business andhandle it by setting up a dedicatedsection113
companies,20.4%

Regard M&A as an importantmeans of expanding
business and have staff such as abusiness planning department
handle it without setting up adedicated section

110
companies,
19.8%

Though M&A is regarded as animportant means of expanding
business, we don’t have individuals
in the company capable of dealing
with it

282 companies,
50.8%

M&A is not regarded as animportant means of expanding
businessOther

M&A is an important means of management :76.8% (34+282+110 = 426 companies)
Is handling M&A : 56.9% (34+282 = 316 companies)

Figure 7. Objectives of Overseas M&A
02040

Exploration of new markets,
expansion of sales network

80100（％）

77.7
37.7

Expansion of production capabilities

34.0

Acquisition of technology/know-how

24.2

Expansion of product lineups

14.0

Business diversification
Enhancement of service andmaintenace work
Acquisition of management HR(Human Resources)
Acquisition of brand60

12.5
7.5
5.7

Investment objectives such as
capital gains

0.4

Other1.5(No. of responding companies = 265)

response was “Expansion of production capabilities” (37.7%)
and 3rd-place response was “Acquisition of technology/know-how” (34.0%) (Figure 7). In terms of the target regions
for “Exploration of new markets, expansion of sales network,” the ratio of ASEAN5 was highest (54.1%) andfollowed by North America (34.6%), Europe (30.8%), andChina (26.4%). Though the number of responses was small,the response ratio exceeded 5% for Russia, the Middle East,and Africa, showing regional expansion.

6. Situations in China and Stance towards Future
Business Operation
Many Japanese manufacturing companies conduct business
operations in China. In this survey, we posed questions about
eight issues on recent situations in China to the responding
companies that operate in China. Over 90% of them wereconcerned about “Trends of the Chinese economy” and“Wage levels.” And not only did over 80% express concerns
about “Political relations between Japan and China,” but also
around 40% had concerns about “China’s maritime advances,” “Resource diplomacy,” and “One Belt, One Road”(Figure 8).

020

4060

80 100（％）

1. Trends of the Chinese economy
(446)

96.4

3.6

2. Wage levels (432)

93.8

6.3

Economics(No. of responding companies = 555)

Figure 8. Outlook on Situations in China

76.0

3. Level of the RMB rate (416)
4. Trends in environmental
regulations (412)

Politics and diplomacy

Figure 6. Positioning of Overseas M&A24.0

65.5

5. Political relations between Japanand China (422)

34.5

82.7

17.3

6. China’s maritime advances (401)

42.4

57.6

7. China’s acquisition of overseas
resources (resource diplomacy) (396)

39.1

60.9

39.0

61.0

Concerned

Not concerned

8. Promoting infrastructure projects
in China and abroad (One Belt, OneRoad, etc.) (395)(Note) The figures within the parentheses to the right of the options are thenumbers of responding companies.

These results demonstrate that Japanese companies withbusiness operations in China are keeping a close eye on trends
in not only the economy but also politics and diplomacy.
When asked about their basic stance toward business operations in China in the future, 49.8% of 446 companies withbusiness operations in China answered that they would pursue
business while considering risk diversification across othercountries and regions, while 40.4% responded that they would
proactively pursue business operations over the long term, and7.2% would passively pursue business with the possibility ofwhen to withdraw or downsize business in mind.
A look at the results of companies with business operationsin China engaged in local production for the purpose of selling to the Chinese market (217 companies) shows that 44.2%
will proactively pursue business operations over the longterm, while an almost equal 45.6% responded that they would
pursue business while considering risk diversification. Those
responding that they would passively pursue business withthe possibility of when to withdraw or downsize in mind accounted for 7.4% (Figure 9).Figure 9. Basic Stance toward China Business byBusiness Operations
0Total (446)

1. Produce in China(to mainly sell in the Chinese market) (217)
2. Produce in China(to mainly export from China to Japan) (42)

2040

60

80

40.4%

49.8%

44.2%

45.6%

35.7%

42.9%

25.0%

75.0%

4. Produce in China (attaching importance to bothselling in the Chinese market and exporting) (113)

32.7%

62.8%

55.0%

7.4%

0.0%

4.4%
7.5%

2.8%
4.8%

0.0%

35.0%

6. Other (5) 20.0% 20.0% 20.0%

2.7%

7.2%

16.7%

3. Produce in China(to mainly export from China to third countries) (16)

5. We only have sales operations and no local
production bases (40)

100（％）

0.0%
2.5%

40.0%

We will proactively pursue business operations over the long term
We will pursue business while considering risk diversiﬁcation across othercountries and regions
We will passively pursue business with the possibility of when to withdraw
or downsize business in mind
Other(Note) The figures within the parentheses are the numbers of responding companies.

2016.341