Japan’s curbs on tech investment won't affect Chinese firms

By Zhang Hongpei Source:Global Times Published: 2020/5/11 19:58:40

A woman wearing mask passes a closed department store in Tokyo, Japan, April 8, 2020. (Xinhua/Du Xiaoyi)

Japan's new restrictions on foreign direct investment (FDI) in key technology areas, a move widely seen as more closely monitoring investment from China, will dent its attraction to foreign capital - a key force in the world's third-largest economy - and obstruct international cooperation, experts told the Global Times.

The changes won't affect FDI from China, which rarely has ownership stakes in listed Japanese companies with exposure to national security, which the new rules involve, experts said.

Japan's Ministry of Finance on Friday released a document saying that foreign investors purchasing a stake of 1 percent or more in Japanese companies in 12 areas deemed crucial to national security will be subject to pre-screening, compared with the 10-percent threshold previously. 

The rules, which took effect on Friday, focus on such areas as oil, railways, utilities, arms, space, nuclear power, aviation, telecoms and cybersecurity.

The document designated 518 listed businesses including Toyota Motor, SoftBank and Sony - 14 percent of the nation's publicly traded companies, according to Nikkei Asian Review.

"The changes will not affect Chinese investors since we didn't have access to those sensitive areas in Japan in the past, but the move sends a negative signal that is not beneficial for globalization or for China-Japan economic and trade ties," Chen Zilei, director of the Research Center for Japanese Economics at the Shanghai University of International Business and Economics, told the Global Times on Monday.

Japan is concerned that China's intensifying research and development into key technologies over recent years would shake its position as a global high-end manufacturing power, said Chen.

In 2017, the Japanese government took the lead in buying Toshiba's memory-chip unit after expressing concerns about technology transfer to Chinese buyers. The $18 billion deal closed in 2018 and Toshiba sold the unit to a consortium led by US private equity firm Bain Capital.

Japan's move follows similar steps taken by the US and some European nations to implement greater scrutiny of ownership in certain industries, citing so-called national security.

Japan's move will block any win-win scenario for Chinese investors eagerly seeking technologies and talent, and hurt Japanese firms that need a boost in the sluggish economy, said Chen.

China's cutting-edge digital economy could also contribute to Japanese society's transformation, Chen added.

The Invest Japan Report 2018 released by the Japan External Trade Organization said that foreign investment had brought innovations in the fourth industrial revolution field to Japan and in turn created new value.

It specifically identified Alibaba and Tencent, two Chinese technology giants that introduced QR code payment services to Japan.

Chinese investment in Japan rose in recent years. Data from Japanese mergers and acquisition (M&A) consulting firm LECOF showed that the number of Chinese companies participating in investment or M&A deals of Japanese companies reached at least 59 in 2018, a five-year record and a rise of 22 percent year-on-year.

A spokesperson of Chinese start-up Dorobot, a provider of automated warehouse solutions using artificial intelligence and robotics, told the Global Times on Monday that the new rule might only represent a protective move during the pandemic. Shenzhen-based Dorobot has been working with Japanese logistics providers.

There are many industrial issues that require multinational cooperation, the spokesperson said.

A Chinese e-commerce firm, which has invested a Japanese duty-free chain brand, told the Global Times that despite the new legislation will not cause direct impact on the firm, it poses obstacles for Chinese firms' entering Japan and the bilateral capital cooperation, as well as Chinese financial institutions' participating in the investment of Japan stock market.


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