TOKYO- Most Japanese companies expect a slowdown in China’s economy to persist into 2025, with nearly two thirds of firms that operate there looking to shift some production elsewhere in search of sales in other markets, according to a Reuters monthly poll.
That cautious outlook comes even though recent data suggests that an economy weighed down by infrastructure project debt and a downturn in property values has bottomed out. China’s factory activity in September expanded for the first time in six months, with sales growth accelerating in August.
Of 502 major Japanese companies surveyed by Reuters, 52 percent said they expected the slowdown in China to continue into 2025, with 17 percent predicting weaker economic growth to persist until the end of 2024. Only 5 percent said they expected a rebound by the end of the first quarter next year.
“Cargo shipments are stagnant, and it’s difficult for cargo handlers to take measures to tackle that,” a representative from a transport company said, on condition the company was not identified.
More than two thirds of household wealth in China is tied up in the property market, and with youth unemployment rising, consumers and companies have been reluctant to spend.
Analysts polled separately by Reuters last month, predicted the World’s No. 2 economy will grow by 5 percent this year and by 4.5 percent next year.
China is Japan’s biggest trading partner. The value of that cross-border economic activity jumped 14 percent to 43.8 trillion yen ($294 billion) last year, according to the Japanese government. Japanese companies also operate from more than 31,000 locations in the country.
Some 45 percent of the firms that responded to the survey said the slowdown in China had affected their businesses. In addition to those companies shifting production out of China, 12 percent said they were curbing capital investment there.
In Japan, 86 percent of the companies said they want Prime Minister Fumio Kishida to boost the economy with a stimulus package worth more than 10 trillion yen, with nearly a fifth calling for at least 30 trillion yen of spending, including on measures to tackle price rises and to help companies raise wages.
“Priority should be given to creating an environment where wages can be increased over the medium to long term on the assumption that prices will continue to rise,” said a manager at a wholesaler.
The Reuters Corporate Survey, conducted for Reuters by Nikkei Research between Sept. 27 and Oct. 6, canvassed 502 big non-financial Japanese firms.
They were polled on condition of anonymity, allowing respondents to speak more freely.