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China looks West as Japan cuts production

Updated: 2011-03-22 16:41

By Zhong Nan (chinadaily.com.cn)

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BEIJINGChina will need to source a wide range of products from Europe and the United States to make up for the shortage stemming from the natural disasters in Japan, businesses and experts said.

"In two to three months, motor and electronic processing manufacturers in China will start to import from the European Union and the US to offset the shortage of Japanese supplies," said Bai Xuefeng, director of the trade department at China Chamber of Commerce for Import and Export of Machinery and Electronic Products.

Chinaimports many electro-mechanical products from Japan, but the March 11 earthquake and tsunami damaged much of the infrastructure.

Last year, about 18 percent of China's electro-mechanical imports came from Japan, making Japan China's biggest source of electro-mechanical products, the General Administration of Customs said.

After the earthquake and tsunami, Japanese electro-mechanical and auto manufacturers such as Sony, Sharp, Toyota, Nissan, Shin-Etsu, Toshiba and Honda suspend much of their operations, affecting exports of semiconductors, chips for electronic devices, precision instruments, industrial bearings, auto and electronic components.

Related: Global supply chain rattled by Japan quake, tsunami

A survey by the chamber after the disasters showed that more than 50 percent of Chinese electronic processing enterprises believed the import, information communication and logistics of Japanese electro-mechanical products have been severely affected.

Wang Cun, manager of marketing department of China Automobile Trading Co Ltd, said the shortage of motor components may result in fewer cars being produced by Japanese manufacturers in China. Japanese vehicle sales in Chinese market is about 27 percent.

Wang felt this could lead many buyers to switch to German, French or American cars.

Nissan Motor Co (China), which has several factories in China, said its stocks of some components will last until the end of March, but no one knows when supplies from Japan will resume.

"We will consider buying components from European countries if our Japanese factories cannot keep the goods supplied," said Shen Li, general manager of the company's PR and branding department.

Ericsson Ltd (China) says on its website that it has been trying every means to maintain supplies of components such as semi-conductors, memory chips and batteries. The measures include spot market purchases and redirecting orders to suppliers from other countries.

Zhao Ying, a professor at Institute of Industrial Economics of the China Academy of Social Sciences, said that although the majority of Japanese auto and electronic companies have joint ventures in China, they can cope only in the short term.

"A large number of high-tech components still need to be imported from Japan," he says.

Zhao said it is unlikely that Japanese factories will be able to resume full production of bearings, electronic chips and devices in the short term. This, he says, will lead Chinese enterprises to buy precision instruments and bearings from Germany, Switzerland and Sweden, electronic chips from Silicon Valley and vehicle components from Detroit.

"In comparison with EU and US electromechanical standards, Japanese products are relatively cheaper," he said.

"However, Chinese enterprises don't have other choices but accept this reality, even though it is troublesome and costly."

Germany's Schneider Electric and Siemens tells China Daily that it is premature to make any comment, as it is very complex situation involving second- and third-tier suppliers.

Last year, Japan was China's third largest trading partner, with China sourcing 13 percent of its imports from Japan. Machinery, electronic products and vehicle were the main products China bought from Japan, a report from Morgan Stanley Asia Ltd says.

In 2010, imports from Japan increased by 36.6 percent from a year earlier to $177 billion (125 billion euros), with $118 billion worth electromechanical products, accounting for 67 percent of its total import amount, Customs said.

Bilateral trade between China and Japan stood at $21 billion in February, with China having a trade deficit of $4.62 billion.

Wang Yongzhong, a researcher with the Chinese Academy of Social Sciences in Beijing, predicted that imports from Japan will decline and that prices of Japanese industrial products will rise dramatically over the next three months.

He believed finding sellers from the EU and the US is a flexible option to resolve the shortage of electro-mechanical products in China after April or May.

On March 18, China's Ministry of Commerce said the country would boost high-tech trade exchanges with developed nations, and called for countries to ease restrictions in exporting high-tech products and advanced equipment to China over the next five years.

"The shortage of Japanese electromechanical products to a certain extent would strengthen the high-tech trade relations between China, the EU and US in the second half of this year," Wang said.

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