Japanese companies are becoming less inclined to expand in China and are reviewing supply chains, but the available surveys do not show that they are leaving at a historic rate. They measure intentions, not completed exits. Risk and safety concerns are part of the picture; market demand and profitability still give many firms reasons to stay.
Are Japanese companies pulling out of China?
Not at a rate established by the available evidence. The clearest figures describe what companies say they plan to do—not how many have closed operations or completed a withdrawal.
| Survey finding | What it measures | Source and qualification |
|---|---|---|
| 33.9% intended to expand existing China business or consider new business | Expansion or new-business intentions | JETRO’s 2024 report on its FY2023 survey. The report calls this the lowest comparable share since December 2013; the China policy question was not asked in FY2018, FY2019, FY2021 or FY2022. |
| 1.3% were considering withdrawal; fewer than 10% were considering scaling down or withdrawing | Stated consideration of withdrawal or scale-back | JETRO’s 2024 report on its FY2023 survey. These are intentions, not completed exits. |
| 1.4% expected relocation or withdrawal from China operations | Expected relocation or withdrawal | JETRO’s FY2024 global survey release, published December 26, 2024. Its question and survey population differ from the FY2023 survey. |
The 33.9% and 1.3% figures describe opposite kinds of intentions, not the proportion of firms leaving. Nor should the 1.3% and 1.4% figures be read as a precise year-on-year increase: the surveys used different populations and question wording. Taken together, the evidence points to weaker appetite for expansion, alongside a much smaller share reporting plans to withdraw.
Why are Japanese firms reducing investment in China?
JETRO’s FY2023 survey asked firms considering a scale-back or withdrawal why they were doing so. Geopolitical risk was the most frequently selected reason. Of 207 valid responses to that question, 56.0% selected it. That is a share of respondents to the reasons question—not 56% of all Japanese companies—and respondents could select multiple reasons.
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- Political and trade uncertainty: Respondents also cited trade restrictions, including export controls, and Chinese regulations.
- Demand and competition: Reported considerations included low local-market growth potential, declining local demand and intensifying competition.
- Supply-chain choices: Firms cited disruption risk and reviews of production, procurement and sales networks.
- Relative costs and alternatives: Some pointed to a reduced cost advantage or the increased appeal of destinations outside China.
- Business relationships: Partner relationships also appeared among the reported reasons.
These are reasons selected by firms contemplating retrenchment, not proof that any one factor explains every company’s decision. JETRO also found that about 70% of firms had reviewed some aspect of their sales, procurement or production strategy since 2023, while about 30% reported a procurement review. A review can mean changing suppliers or balancing production across locations; it does not by itself mean closing a China operation.
Does safety explain the retreat?
Safety concerns have a documented basis in specific attacks and Japan’s diplomatic response, but the cited sources do not establish how much those incidents affected company decisions.
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Japan’s Ministry of Foreign Affairs reported that a Japanese school student was attacked on the way to school in Shenzhen on September 18, 2024, and died the next day. Its September 19 safety alert also referred to a June 2024 attack in Suzhou in which a Japanese mother and child were injured. The alert said the background to the Shenzhen incident was unknown; the evidence cited here does not establish a motive.
In a September 18, 2024 diplomatic release describing Vice-Minister for Foreign Affairs Okano Masataka’s meeting with China’s ambassador, Japan’s ministry said Okano requested steps to prevent a recurrence and urged stronger security, including around Japanese schools throughout China. These incidents and the official response show why safety entered public discussion. They do not show that all Japanese residents or firms feel unwelcome, or quantify an effect on corporate exits.
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For some firms, the outlook remains attractive. In JETRO’s FY2023 survey, expected market size and growth was the leading cited reason for maintaining or expanding China business. Respondents also cited established operations, demand linked to rising incomes, production and procurement cost advantages, infrastructure and proximity to Japan.
JETRO’s FY2025 Asia and Oceania survey adds a recent counterpoint to a simple exodus story. Its report, released January 20, 2026 and corrected February 20, 2026, says the share of firms expecting profits in China rose for the first time in four years. JETRO attributed the improvement to demand as well as production-efficiency and labor-cost improvements. China expansion intentions still declined, but the decline narrowed year on year.
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The same release said 66.5% of surveyed firms anticipated profits in their 2025 operating-profit forecast. That figure covers the surveyed Asia and Oceania region, not China alone, and should not be treated as a China profitability rate.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What the surveys can—and cannot—tell you
JETRO’s FY2024 global survey was conducted online in late August and September 2024. It covered Japanese-affiliated local subsidiaries with at least 10% Japanese investment, branches and representative offices in 83 countries and regions. JETRO distributed 18,186 questionnaires and received 7,410 valid responses, an effective response rate of 40.7%.
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JETRO’s FY2025 Asia and Oceania survey was fielded from August 19 to September 17, 2025. It covered 12,900 Japanese firms across 20 countries and regions and received 5,109 valid responses, a 39.6% response rate. These survey populations and questions are not interchangeable, and stated expectations can change before a firm acts.
Company exposure also extends beyond factories and merchandise exports. In an April 2025 summary of its survey work on Japan–China economic relations, the Research Institute of Economy, Trade and Industry (RIETI) noted that conventional trade statistics can miss services trade and cross-border data transfers. Its work also examines outsourcing and uncertainty related to China’s economic policy. A company might diversify physical production while continuing other commercial relationships, so factory closures or goods-trade figures alone cannot describe every business tie.
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