In a recent survey of 100 Japanese entrepreneurs, more than 60 percent of the respondents said the risk of doing business in China is rising. Fears of a property bubble bursting are growing louder. As for the global economic situation, nearly 60 percent of Japanese entrepreneurs answered "flat," and the expectation of expansion is still low. Japanese business leaders are increasingly wary of the future.

The Nihon Keizai Shimbun survey of 100 Japanese entrepreneurs is conducted every three months on the ceos (including chairmen) of major Japanese companies. From August 28 to September 11, 145 companies (including 137 listed companies) responded.

Cautious about business expansion in China

Evergrande Group, a Chinese real estate conglomerate, filed for Section 15 of the U.S. federal bankruptcy Code in August. Regarding concerns about the collapse of China's real estate bubble and the ensuing economic downturn in China, 30.8 percent were "strongly worried" and 60.7 percent were "slightly worried", with a total of 90 percent of Japanese entrepreneurs feeling uneasy.

The number of respondents who believe the risks facing their business in China are currently "rising" reached 63.8%, while 30.6% said they are "unchanged" and only 0.8% said they are "decreasing".

Of the 79 companies that answered "rising", "Sino-US trade friction" topped the list, accounting for 82.3%, followed by "real estate bubble bursting", accounting for 78.5%. Conflicts between the two sides also reached 64.6 percent.

Itochu CEO Keita Ishii said, "China is stagnating due to real estate problems, falling exports and sluggish consumption recovery, and this situation will continue for some time." There have also been examples of actual sales reductions. Takeshi Sina, president of Suntory Holdings, said: "Due to the impact of strict epidemic prevention and control measures and the downturn in the real estate market, the current economic situation in China is very serious, and the sales of alcohol products are beginning to be affected."

In the face of increased risks, the company asked about its future business policy in China in terms of the short term in the next two to three years and the long term in the next 10 years. In the short term, 20.5 percent answered expansion, 74.4 percent maintained, and 5.1 percent contracted. The willingness of companies to observe the situation seems strong. The companies that have stated their expansionist approach envision capturing domestic demand in China.

Shingo Hada, president of Nissui, said that "the country's approach changes quickly and the risk of emotion is high", but added that he would "strive to choose the right partners and establish a business model that is done in China, and expand if possible". Kensuke Hosumi, president of FamilyMart, a Japanese convenience store chain, said: "We recognise the risks of doing business in China, but from a retail perspective, we are positioning China and Taiwan as potential markets and as areas to strengthen".

On the other hand, only 10 per cent of Japanese entrepreneurs thought they would "increase" the share of their business in China in the long term. 48.3 percent said they would maintain the status quo, while 7.5 percent said they would reduce it. "I don't know" accounted for 34.2 percent. Takashi Mori, president of OKI, said: "From the perspective of the Chinese market, the company faces high policy risks in its business areas, and we do not consider it a key market."

60% of Japanese entrepreneurs think the global economy is "stagnant"

While recognizing the heightened risks in China, Japanese entrepreneurs remain uncertain about the outlook for the world economy. Regarding the perception of the current situation, "stagnant" was the most common, accounting for 57.2 percent. It is up 1 percentage point from the previous survey and the highest since December 2011, when comparable data were available. The combined numbers of "expanding" and "slowly expanding" were 24.8%(up 2.6 percentage points from the previous survey) and "deteriorating" and "slowly deteriorating" were 17.3%(down 3.6 percentage points).

As for the reasons for the stagnation (multiple choices), 80.7 percent of respondents answered that the Chinese economy is stagnant. This was followed by "economic stagnation in Europe" and "high prices of resources and raw materials" at 48.2% each. The economic index (DI), which subtracted from expansion from deterioration, recorded positive growth for the first time in four quarters at +4. However, China risks are a burden and there is no decisive factor for economic expansion.

Kazuyuki Inoue, president of Shimizu E&C, said, The world economy is slowing down due to high inflation in Europe and the United States, high benchmark interest rates, high resource prices caused by the prolonged crisis in Ukraine, and uncertain economic prospects in China.

Honda CEO Tohiro Mibe said, Due to the impact of long-term monetary easing, the effect of raising the benchmark interest rate to curb inflation is weakening. High interest rates are expected to continue for a long time, bad loans in various regions are expected to intensify, and the instability of the financial system is also a concern.

On the other hand, 75.8 percent of respondents said that the Japanese economy is expanding and that it is expanding slowly. In Japan, the domestic sentiment DI was +38, unchanged from the previous survey. The majority view is that the high level will continue on the back of the expansion of inbound tourist spending.