JETRO Releases Its Latest Survey of Japanese Manufacturers in Northeast Asia.

Tokyo, Japan, Mar 16, 2006 - (JCN Newswire) - The Japan External Trade Organization  (JETRO) released the results of its latest survey of Japanese-affiliated manufacturers operating in mainland China, Hong Kong, Taiwan and the Republic of Korea (ROK). The survey, conducted between December 2005 and January 2006, received valid responses from 455 companies (293 in China, 45 in Hong Kong, 73 in Taiwan and 44 in ROK), or 38.5% of the 1,181 firms sent questionnaires.

According to the survey, 75.4% of respondents expect to post an operating profit in 2005, which is close the figure (75.7%) obtained for 2004. Among respondents in China (who accounted for 64% of valid responses), the percentage of firms forecasting profits rose 1.8 points to 73.0% in 2005.

Overall, 49.1% of respondents expect improved profit/loss performance in 2005, citing "increased sales in an operating country/region" (49.8%) and "increased export sales" (42.0%) as the main reasons behind their improved performance in 2005. By contrast, 29.8% expect worse business performance, mainly owing to "decreased sales by drops in prices or cutting sales prices" (51.1%).

Regarding the outlook for 2006, more than half of respondents (51.2%) expect improved profit/loss performance compared to 2005, while only 14.7% project worse performance. Respondents in China displayed especially strong business confidence, with 58.0% of firms there expecting improved profits in 2006; just 9.9% of respondents in China expect lower profits.

The percentage of firms whose exports accounted for more than 70% of total sales in 2005 declined 3.7 points to 37.8%, compared to results obtained in the last survey (March 2004-firms in China; January 2004-firms in Hong Kong, Taiwan and ROK). Among respondents in China, the figure dropped 4.9 points to 40.9%, suggesting that companies there are increasingly trying to cultivate local markets.

Japan was again a major export destination among respondents, with 52.6% of firms citing that more than 70% of their exports went to Japan, which is up 6.5 points from the last survey.

Asked about business intentions over the coming one to two years, the percentage of firms planning expansion declined slightly in 2005, slipping 4.2 points to 67.9%. And while 71.4% of respondents in China have plans to expand, the figure is down 10.1 points from the previous survey, in which firms, betting on further opening up of China and its markets in line with WTO commitments, displayed strong interest in investing in the country. A small percentage of respondents in China are planning to downsize operations or withdraw/shift operations to a third country, whereas the percentage of firms planning to maintain their current business scale increased from 17.5% to 26.1% in 2005.

Questioned about practical measure(s) firms would take to expand business operations, more than half (58.0%) cited "additional investment", followed by "diversifying the range of production items" (53.7%) and "shifting to production of high value-added products" (44.7%).

Asked about the impact (if any) the 2.1% revaluation (against the US dollar) of the Chinese yuan in July 2005 had on their business, 82.5% of respondents in ROK and 80.6% in Taiwan cited no effect. Among respondents in China, 24.4% saw positive effects, while 49.8% reported negative effects. Survey results suggest that respondents in China were not greatly impacted by the July 2005 revaluation, with only 14.1% of firms reporting significant effects (in either a negative or positive direction) in this latest survey. Asked what measures they would take to offset further yuan revaluations: 60.5% of respondents in China would seek to "reduce production costs" and 23.2% would not adopt any measures.

Asked to indicate the percentage of further revaluation(s) that they foresee over the coming year, the majority of respondents predict a gradual rise of "2 to 4%" (47.6%) or "5 to 9%" (33.9%); more than a third of respondents in China (36.4%) expect a revaluation in the "5 to 9%" range.

About JETRO

The Japan External Trade Organization, or JETRO, is a government-related organization that works to promote mutual trade and investment between Japan and the rest of the world. Originally established in 1958 to promote Japanese exports abroad, JETRO's core focus in the 21st century has shifted toward promoting foreign direct investment into Japan and helping small to medium size Japanese firms maximize their global export potential.

Source: JETRO

Contact:

Japan External Trade Organization (JETRO)
Public Relations Division
E-mail: [e-mail]

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