Japanese companies are becoming less inclined to expand in China and are reviewing supply chains, but the available surveys do not show a historic wave of completed exits. They measure business intentions, not how many firms have actually closed or left. At the same time, JETRO’s latest survey found China’s profit outlook improving for the first time in four years, underscoring that reassessment is not the same as abandonment.
Are Japanese companies pulling out of China?
Not on the evidence available. The clearest signal is a long-running decline in firms saying they plan to expand existing China operations or consider new business there. That is different from saying they have withdrawn. Survey intentions can indicate a change in direction, but they do not establish completed closures or an exit rate.
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| Measure | What the survey found | How to read it |
|---|---|---|
| Expansion or new-business intention | 33.9% in JETRO’s FY2023 survey of Japanese firms, reported in 2024 | The lowest share since December 2013 among comparisons made under the same conditions; it is not the share leaving China. |
| Considering scaling down or withdrawing | Less than 10% of all firms in JETRO’s FY2023 survey | A combined measure of firms considering either response, not completed reductions or exits. |
| Considering withdrawal | 1.3% in JETRO’s FY2023 survey | A stated intention, not a count of firms that had already left. |
| Expecting relocation or withdrawal | 1.4% in JETRO’s FY2024 global survey, released in 2024 | A separate survey and question; it should not be treated as a precise year-on-year change from the FY2023 result. |
| Profit outlook in China | The share expecting profits rose for the first time in four years in JETRO’s FY2025 Asia and Oceania survey, released January 20, 2026 and corrected February 20, 2026 | The improvement coexists with falling expansion intentions; it does not mean every firm is profitable. |
The surveys are not a census of completed exits. JETRO’s FY2024 global survey was conducted online in late August and September 2024. It covered Japanese-affiliated subsidiaries with at least 10% Japanese investment, branches and representative offices in 83 countries and regions; 7,410 of 18,186 questionnaires were valid responses, a 40.7% effective response rate. Its finding that China expansion intentions were at an all-time low describes intentions among respondents, not a historic count of closures.
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JETRO’s FY2023 report describes 33.9% as the smallest expansion/new-business share since December 2013 under comparable conditions. The China policy question was not asked in FY2018, FY2019, FY2021 or FY2022, so this is not an uninterrupted annual series.
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Why are Japanese firms reducing investment in China?
For firms considering a pullback, risk and commercial calculations overlap. In JETRO’s FY2023 survey, geopolitical risk was the most frequently selected reason. It represented 56.0% of 207 valid responses to the reasons question—not 56% of all Japanese companies. Respondents could select from multiple reasons, so the results describe reported concerns rather than a single cause shared by every firm.
- Geopolitical and trade risk: respondents cited increased geopolitical risk and trade restrictions, including export controls.
- Demand and competition: low local-market growth potential, declining local demand and intensifying competition appeared among the selected reasons.
- Supply-chain strategy: firms cited disruption risk and reviews of production, procurement and sales networks.
- Changing economics: the relative appeal of destinations outside China, reduced cost advantages, partner relationships and Chinese regulation were also cited.
These factors can reinforce each other. A company facing uncertain demand may be less willing to accept concentrated sourcing risk; a competitor location may become more attractive if costs or operating conditions change. The survey records what respondents selected, but it does not quantify how much each factor changed an individual company’s investment.
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Are companies changing supply chains even when they stay?
Yes. In JETRO’s FY2023 survey, about 70% of firms had reviewed some part of their sales, procurement or production strategy since 2023, and about 30% reported a procurement review. A review can mean diversification or adjustment rather than shutting down a China operation.
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That distinction matters for technology and manufacturing businesses. A firm can add suppliers or production capacity elsewhere while continuing to sell in China, source some components there, or keep an established local operation. A shift in the location of physical production therefore does not, by itself, show that all commercial links have ended.
Nor do factory and goods-trade figures capture every connection. The Research Institute of Economy, Trade and Industry (RIETI) noted in an April 2025 research summary that conventional trade statistics miss services trade and cross-border data transfers. Its survey work examined outsourcing, services, data transfers and uncertainty related to China’s economic policy. Those activities can persist even as a company diversifies physical production.
Why do some Japanese companies still want to remain in China?
China remains both a production base and a major customer market. In JETRO’s FY2023 survey, market size and growth was the leading cited reason for maintaining or expanding China business. Firms also cited established operations, market needs as incomes rise, production and procurement cost advantages, infrastructure, and proximity to Japan.
The improved profit outlook in JETRO’s FY2025 Asia and Oceania survey adds a current counterpoint to the falling expansion trend. The report attributed the increase in the share expecting profits in China to demand as well as production-efficiency and labor-cost improvements. It also said China expansion intentions continued to decline, though the decline narrowed year on year. The survey covered 5,109 valid responses from 12,900 Japanese firms across 20 Asia and Oceania countries and regions, a 39.6% response rate; it was fielded from August 19 to September 17, 2025.
JETRO reported that 66.5% of firms across the surveyed Asia and Oceania region anticipated profits in their 2025 operating-profit forecast. That is a regional figure, not a China-only result. The China-specific finding is that the share expecting profits there rose for the first time in four years.
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Do “unwelcome and unsafe” conditions explain the reassessment?
There is a documented basis for safety concerns, but the evidence does not show that those incidents caused a measurable number of company exits. Japan’s Ministry of Foreign Affairs said a Japanese school student was attacked on the way to school in Shenzhen on September 18, 2024, and died the following day. The ministry also referred to a June 2024 attack in Suzhou in which a Japanese mother and child were injured. Its September 19 alert said the background to the Shenzhen incident was unknown.
In a September 18, 2024 diplomatic release describing Vice-Minister for Foreign Affairs Okano Masataka’s demarche to China’s ambassador, Japan’s foreign ministry said Okano urged steps to prevent a recurrence and stronger security, including around Japanese schools. These official statements establish that the Japanese government raised serious concerns after specific attacks. They do not measure how welcomed Japanese residents generally feel, or establish a causal link between the attacks and corporate withdrawal decisions.
What the numbers do—and do not—say
The evidence points to a strategic rebalancing: fewer firms express interest in expanding, some are considering reductions or relocation, and many are reviewing parts of their operating networks. It does not establish that Japanese companies are leaving China at a historic rate. The distinction is essential: expansion intentions, contemplated scale-backs and completed exits are separate measures, while a change in one part of a supply chain need not end a company’s wider China business.
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