Foreign companies that have expanded into China are now planning to scale back their operations there, and even some are withdrawing from the country. In fact, the decline in foreign investment in China is unstoppable. Recently, major electronics companies such as Toshiba and Panasonic have announced that they will withdraw production from China and close factories one after another. Japanese companies are also increasingly moving away from China. Compared to five years ago, wages in China have roughly doubled the minimum wage. And a system is being created that will raise the minimum wage every year at the discretion of the national and local governments. The benefits of expanding into China are disappearing.
On the other hand, even though the Chinese economy is stagnating, the reality is that China is a major consumer nation with 1.4 billion people. In this situation, China’s “Uniqlo” announced that it would raise wages by 40%. Until then, Uniqlo’s wages were about the same as those of foreign-affiliated companies in big cities. Uniqlo raised its prices beyond the wages of its competitors. For Uniqlo employees, the average annual salary increase was 28%, with some employees seeing it as high as 44%. It seems that this wage increase and improved working conditions are intended to increase the motivation of employees who are on the front lines of customer service. In addition, there is an aim to secure talented people to work in the stores. There is also a hidden aim to secure talented people and support future store opening strategies in China. Some companies are boldly challenging the risky Chinese market.
There was also a company that took a business strategy opposite to Uniqlo. In terms of the expected dividend yield for the fiscal year ending March 2024 among listed companies, Citizen Watch was among the excellent companies. In addition to the steady sales of watches in Europe and the United States, the company has secured increased revenue due to the recovery of inbound demand in Japan. This Citizen did something drastic in February 2015. It suddenly closed its watch parts factory in Guangzhou, China, and fired all of its approximately 1,000 employees at once. Citizen completed the surprise closure one week after announcing the closure on the 5th. Chinese public opinion responded immediately to this move. The internet was flooded with slanderous comments such as “We cannot forgive such irresponsible Japanese companies.” National television even aired a special program criticizing Citizen. One of the reasons for the factory’s closure was the soaring labor costs. Compared to neighboring Asian countries, the location advantage of labor-intensive industries such as watch parts was gradually fading. As a result, it seems to have become a drastic measure. However, eight years after the drastic measure, the company still exists as a good company.
