(Yicai Global) Jan. 12 -- Ninety-one percent of Japanese firms in China plan to maintain or increase their investment in the country over the next three to five years, according to the findings of a survey by PricewaterhouseCoopers.

When formulating future investment plans, 61 percent and 32 percent of the respondents aim to prioritize the Yangtze River Delta region and the Guangdong-Hong Kong-Macao Greater Bay Area, respectively, according to the report PwC released yesterday.

Eighty-three of the 180 firms surveyed indicated that they will boost investment to meet customer demand, citing China’s growing domestic market, the report said.

Among those opting to downsize business, a number said they would repatriate business to Japan while others plan to scale up investment in other member nations of the Regional Comprehensive Economic Partnership. There were also some that said they would focus on North America.

The survey pointed out that the integrity of the industrial chain, supporting measures for new business development, convenience of logistics and financial subsidies are the factors that Japanese companies value the most when considering to lift investment in China.

Nearly 90 percent of the companies said that their main consideration for entering China was the market’s huge potential, with 31 percent talking up low-cost labor. Around 65 percent believed that they enjoyed the same treatment as Chinese companies, or even better.

The RCEP came into effect on Jan. 1, marking the first time that China and Japan have established bilateral free-trade relations. But, more than half of the firms surveyed said the pact was unlikely to have an impact on plans for their China operations.

Many Japanese companies are taking a wait-and-see attitude towards the RCEP, Stephen Lee, a tax services partner at PwC China, told Yicai Global.

As for the transfer of Japanese firms’ supply chains, Lee said that some manufacturers shifted to Southeast Asia about four or five years ago due to cheap local labor. But they found that the technical capabilities of local employees were not as good as those in China. The production costs may have been lower, but output was not high.

Chen Youjun, a professor at the Shanghai Institute of International Studies, said that amid the Covid-19 pandemic, the transfer or restructuring of supply chains by Japanese companies has fluctuated greatly. Time is needed to verify the actual effects of the RCEP, he said.

PwC polled Japanese firms in mechanical and electronic equipment, automobiles, marine and aviation components, chemicals, retail, finance, information technology and other fields between July and October last year.

Editor: Peter Thomas