Will the "China Boom" Continue?

(From Journal of Japanese Trade & Industry (JJTI))

With the severe acute respiratory syndrome (SARS) outbreak brought under control, Japanese businesses are pinning renewed hopes on the Chinese market, shaking off the pessimism that once gripped them at the peak of the epidemic. Manufacturers of steel and other key industrial materials, and automakers are expecting to benefit from the "China boom." Economists point to an emerging picture of the Japanese economy inevitably tied to the fate of the boom.

The steel industry, which embarked on streamlining and restructuring earlier than most other industries, has recovered remarkably. For instance, industry leader Nippon Steel Corp. posted a \142.9 billion operating profit for the 2002 accounting year ended March 31, 2003, almost double the previous year's level.

Many business deals come from China and other parts of East Asia. "We expect steel demand in China to continue growing at an annual rate of 7%," says Nippon Steel President Mimura Akio. "Steel demand is increasing only in East Asia, including China. South Korean and Taiwanese steel mills have chalked up record profits. We, too, will be doing so in three years' time," adds a confident Mimura.

Other material-producing industries have enjoyed the benefits of streamlining and the China boom. Most major chemical companies, for example, closed the 2002 fiscal year with better profits on increased sales.

Cho Fujio, president of Toyota Motor Corp., whose business performance has reached an all-time high, admits to the need for reliance on overseas demand, saying, "It's tough to depend on the domestic market alone." The Toyota group as a whole plans to spend some \1 trillion on new plant and equipment in the current business year, earmarking most of the investment to North ...