Changes in the Locational Conditions of the Japanese Machinery and Instrument Industry in China: A Case Study of Dalian Economic and Technological Development Zone

Abstract

The study aimed to clarify prevailing changes in the locational conditions of the Japanese machinery and instrument industry in Dalian, China. According to a survey of 26 companies in 2008, political and social factors such as government policies aimed at attracting Japanese investment had been crucial for those that had expanded before the 2000s, while from 2000, for example, the existence of business partners became more important. However, the business environment of Japanese companies went into decline from 2006. The influence of rising wage levels and prices was especially negative. Moreover, politico-economic problems affected Japanese companies badly. Most of them had taken advantage of the preferential tax relief offered by the central government which by 2010 was no longer available. Meanwhile, a combination of political and economic incentives was tempting companies to establish new factories in Southeast Asian countries to produce their goods. Nevertheless, survey findings showed most companies had decided to remain in Dalian as the advantages of investing there outweighed the disadvantages. For example, in addition to the effects of accumulation of existing partner companies, replicating the high number of well-trained Dalian workers would be very difficult elsewhere.