Illustration: Liu Rui/GT

Japan's manufacturing giant Toshiba Corporation said Thursday that it has signed a memorandum of understanding with Chinese appliance maker Midea Group to sell its white goods business. The two sides are expected to sign an agreement by the end of this month.

Chinese enterprises have conducted overseas acquisitions frequently in recent years, some of which involved Japanese companies. Suning Appliance Co. Ltd. took a controlling stake in Japanese retailer Laox in 2009. Haier Group acquired Sanyo Electric Co. in 2011. Lenovo bought NEC mobile patents in 2011 and Taiwan's Hon Hai Precision Industry Co. took over Sharp Corporation recently. Midea's agreement with Toshiba does not bear special significance. It is a normal acquisition much like those which have been conducted by many Chinese companies. But given the recent hyperbole about China's economic collapse in international media, Midea's acquisition should be a solid response to these misleading claims.

Midea Group, which was founded in 1968, has relatively little worldwide brand recognition. It can enhance its international popularity with the acquisition. According to data from British research firm Euromonitor, Midea held the second-largest global share with 4.6 percent in white goods in unit terms last year, and the biggest share of the Asia-Pacific region with 10.5 percent. The acquisition enables Midea to use the brand of Toshiba and also tap into the latter's sales network in Japan and Southeast Asia so as to solidify its position in Asia.

What Midea is really eyeing is Toshiba's technology and confidence in the home appliances market. Toshiba used to be an innovative leader. As home appliances go smart, Midea has to change its strategy of remaining competitive by offering low prices, and hence needs the technological advantages of Toshiba.

Besides, Chinese tourists to Japan have hit a record high since 2014 and high on their shopping lists are Japanese toilet lids, rice cookers and air fresheners. Against this backdrop, Midea taking over Toshiba is a long-sighted move, as Suning did with Laox.

Toshiba's own deficiencies also led to the acquisition. It was struck by an accounting scandal in April last year. In September, Toshiba disclosed that it had overstated its profits by 224.8 billion yen ($2.02 billion) over the past seven years. On March 15, Toshiba was again found to have overstated past profits by 5.8 billion yen on a pretax basis due to seven new accounting irregularities.

The recent acquisition of Sharp Corporation and Toshiba by Hon Hai and Midea respectively will have a profound influence on Japan's political and business circle. It remains unknown whether the impact will prompt Japan to be more open or conservative. However, the fundamental reasons lie in the stagnation of the Japanese economy, in addition to the rise of manufacturing in China and South Korea, defects in the management of Japanese enterprises and conservative ideas of Japan's political and business sectors.

Japan's rapid economic recovery and development after WWII largely resulted from the support of outstanding Japanese enterprises like Panasonic, Sony, Toyota, Toshiba and Sharp. But now, these companies either lack innovation or are often involved in product recalls and financial scandals. These problems show a full picture of current Japanese economy and explain why it remains sluggish.

The overseas acquisition of China's State-owned enterprises (SOEs) in recent years has mostly focused on energy companies. But this year, the acquisition of General Electric Co.'s appliances business by Haier Group and the latest Midea takeover showed that Chinese enterprises are switching from energy companies to technological ones in overseas acquisition. In comparison with well-funded SOEs, the overseas acquisitions by private Chinese companies shows China's economic prowess.

In his book Japan as No.1: Lessons for America, written in 1979, Harvard University Professor Ezra Vogel lauded the high efficiency of Japanese enterprises. Their decline today warns Chinese companies that the only approach to staying vibrant is continuous innovation and reform. 

The author is a PhD candidate at the Graduate School of Sociology at Toyo University. opinion@globaltimes.com.cn