Japanese firms exit China in record numbers

Japanese businesses are withdrawing from China at an unprecedented rate, according to recent statistics. As of June 2026, there were only 10,118 Japanese companies with a presence in mainland China, marking a 22 percent decline from 2024 and a 30 percent drop from their 2012 peak. Teikoku Databank, Japan’s largest corporate credit research firm, attributes this shift to the economic slowdown in China, US tariffs, and strained diplomatic relations between Tokyo and Beijing.

Researchers from the firm state that this "China withdrawal" is likely to continue as Japanese companies reassess the risks of investing in Chinese manufacturing and domestic competition for consumer markets. Some companies are diversifying their supply chains to reduce reliance on China, while others aim to pivot to other Southeast Asian destinations like India, Vietnam, and Thailand.

The diplomatic tensions between Japan and China, triggered by Prime Minister Sanae Takaichi's comments about potential military involvement in a Taiwan conflict, have also contributed to the trend. Rising labor costs and economic challenges in China, such as collapsing real estate prices and industrial overcapacity, further fuel the exodus.

In August, Chinese tourists visiting Japan dropped by 59 percent year-on-year, and the annual Guangzhou travel expo saw no Japanese representatives for the first time. The number of new Japanese companies entering China between 2024 and 2026 was the lowest on record, save for the Covid-19 pandemic, while over 4,137 withdrew during that period.

US tariffs imposed by President Donald Trump have also impacted Japanese manufacturers with production bases in China, with around 60 percent reporting revenue impacts.