Japan may lose on infrastructure to China due to lower cost

‘The competition is greater in sectors such as infrastructure, as Japan loses out on costs’

by ALIFAH ZAINUDDIN / Pic by MUHD AMIN NAHARUL

THE expansion of Chinese investments globally, including in Malaysia, has differing effects on Japan — some negative, while others present opportunities for the country to tap into.

Gakushuin University economics Prof Motoshige Ito said the competition is greater in sectors such as infrastructure, as Japan loses out on costs, due to the fact that China could afford lower prices.

“In Malaysia, I hope the high-speed rail project goes to Japan but the Chinese government is doing many things to subsidise the project, so it is not a fair competition. So, in infrastructure, the competition probably has a bad impact [on Japan],” Ito said at a seminar in Kuala Lumpur yesterday.

Unlike in the electrical and electronics segment, Ito said Chinese expansion into overseas markets presents an opportunity for Japanese companies as the processes and components needed to create a complete consumer product involve the collaboration of companies from China, Japan and Korea.

However, he said the biggest concern about Chinese expansion comes from big data, as seen in the domination of e-commerce giant, Alibaba Group Holding Ltd.

“Alibaba’s potential is huge because the Chinese economy excludes foreign companies to participate in the Chinese market in this segment. In that sense, Alibaba is enjoying a kind of monopoly in the Chinese market and companies like Amazon.com Inc and Google Inc have a lot to complain about this.

“China can have a competitive strategy in this area using their policy. I don’t know if that is fair or not but as I’ve said, the impact varies depending on industry,” Ito said. Commenting on the state of the Japanese economy, Ito said economic policies under Japan Prime Minister Shinzo Abe — dubbed as Abenomics — has resulted in various improvements to the economy as reflected in several key indicators.

The latest data available showed that Japan’s nominal gross domestic product has been on an uptrend since Abe took office in 2012, while corporates are posting profits at historically high rates. The ratio of current profit to sales in Japan stood at a record 4.8% in 2016, from 1.5% in 2009.

Job-offer job-seek ratio had improved to one worker for every 1.4 jobs in 2016 from one worker to 0.4 jobs in 2009, while unemployment rate had declined to 3.1% from 5.5% over the same period.

Despite the improved performances, Japan’s inflation and growth rate remained at a concerningly low level. Ito said Japan has to utilise its advantages and make necessary changes through big data to see the desired growth for Japan’s matured economy.

“The corporate sector in Japan has a lot of savings but it is not using that money to stimulate the economy. The rise of financial technology, electric vehicles and artificial intelligence show that corporations in Japan must recognise the importance of change. They cannot survive without doing it,” Ito added.

Additionally, he said Japan must also channel its reserves to increase the wages of its labour force to enhance income and boost labour productivity.