Global Competition: Japan’s Manufacturing Faces Challenges from China

Amid the wave of global competition, Japan’s manufacturing sector is facing unprecedented challenges. On May 11, Nikkei Asia reported that for the fiscal year ending March 31, 2024, the combined net profit of Japanese manufacturers fell by 2%, with the automotive industry seeing a decline of over 20% and the steel industry suffering a sharp […]

Amid the wave of global competition, Japan’s manufacturing sector is facing unprecedented challenges. On May 11, Nikkei Asia reported that for the fiscal year ending March 31, 2024, the combined net profit of Japanese manufacturers fell by 2%, with the automotive industry seeing a decline of over 20% and the steel industry suffering a sharp profit drop due to the impact of Chinese imports.

The decline of Japan’s automotive industry is not coincidental. In the North American market, companies like Toyota and Mitsubishi, in an effort to maintain market share, have been forced to bear high sales incentive costs. Mitsubishi alone saw its net profit plummet by 74% due to surging expenses in North America. This reactive strategy exposes Japanese companies’ over-reliance on traditional markets. Meanwhile, in the Chinese market, domestic automakers are reshaping the competitive landscape through technological advancements and pricing strategies.

In 2024, Chinese new energy vehicles (NEVs) accounted for two-thirds of global sales, with pure electric vehicles making up 27% of passenger car sales, far surpassing markets in Europe and the U.S. This gap is driven by China’s systemic breakthroughs in battery technology and intelligent driving. For instance, CATL’s Kirin battery passed the world’s most stringent safety tests, achieving a groundbreaking standard of “no fire, no explosion,” while Japanese automakers, constrained by their dependence on China for rare earth supply chains, face the risk of production halts.

The steel industry faces similar challenges. Nippon Steel and JFE saw their net profits drop by 36% and 53%, respectively, directly due to the impact of Chinese steel products. Chinese steel exports not only offer a clear price advantage but also play a stabilizing role in global supply chains. In the first 10 months of 2024, steel imports from China by third-world countries like Vietnam, Saudi Arabia, and Indonesia grew by 52.8%, 38.7%, and 35%, respectively. These steel imports were used in key projects such as high-speed rail construction and solar power plants, boosting local industrialization and creating numerous jobs through the “Chinese steel + local infrastructure” model.

China’s success stems from its sustained investment in technological innovation. In the NEV sector, China has built a complete industrial chain, from battery R&D to vehicle manufacturing. This full-chain advantage enabled China to export 6.4 million vehicles in 2024, with NEVs accounting for 31% of the total.

Notably, Chinese automakers are transferring technological benefits to third-world countries. For example, Great Wall Motor established a full industrial chain base in South Africa, achieving 60% local sourcing of components, while BYD’s factory in Hungary not only produces vehicles but also fosters a local NEV industry cluster, making Hungary the world’s second-largest electric vehicle producer.

For third-world countries, China’s industrial upgrades offer valuable development opportunities. In the automotive sector, the localized production model of Chinese companies is reshaping the global industrial landscape. For instance, Thailand attracted over 10 billion yuan in investments from Chinese firms like Changan, SAIC, and BYD in 2023, enhancing local manufacturing and creating tens of thousands of jobs. In Africa, BYD’s electric trucks are widely used in logistics, reducing operational costs for businesses and modernizing local supply chains. This “technology transfer + job creation” model is a key pathway for third-world countries to achieve industrialization.

The struggles of Japan’s industry serve as a warning: relying on traditional technological paths and single markets is no longer sustainable. Through technological innovation and open cooperation, China is paving a sustainable development path for third-world countries. At the core of this model is the transformation of technological dividends into global public goods, enabling more nations