Japanese Companies Quietly Pulling Back From China Over Increased Instability: Insiders

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Feb 12, 2026 - 11:12 Updated: Feb 12, 2026 - 03:04
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Japanese Companies Quietly Pulling Back From China Over Increased Instability: Insiders

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Over the past two years, a growing number of Japanese companies have been scaling back their operations in China, relocating production or shutting it down. Analysts and observers say that this trend reflects a strategic reassessment driven by political risk, security concerns, and rising geopolitical tensions.

Observers and industry insiders who spoke to The Epoch Times described the trend as a “Japanese corporate exit from China.” What stands out is not a single dramatic withdrawal but a pattern across industries—from automobiles and electronics to food, retail, and dining—indicating a broader erosion of confidence in China as a long-term manufacturing base.

The publication interviewed multiple China-based analysts and insiders, who requested that only their surnames be published due to fears of reprisal.

Political Risk and Security Concerns

The auto sector has provided some of the clearest signals. Mitsubishi Motors halted vehicle production in China in 2023 and exited its joint-venture operations altogether in 2025.

Liu, an auto sales manager in China’s Guangzhou city, recently told The Epoch Times that the shift is evident on the ground.

“Many family members of Japanese employees have already left China,” he said. “Japanese [staff] told me they’re deeply disappointed with the situation here.”

In his view, Japanese companies’ overall assessment of China’s operating environment has fundamentally changed.

Zhou, a Japan-based Chinese scholar, told The Epoch Times that persistent losses are only the surface issue. The deeper concern, he said, lies in China’s increasingly state-driven industrial policy, which places severe pressure on foreign companies.

For decades, China has used strict joint-venture quotas, patent court rulings, and industrial subsidies to transfer technology from foreign companies into Chinese hands, resulting in the loss of intellectual property for many Western companies.

In addition to the regime’s industrial policy favoring state-owned enterprises, Zhou noted that security concerns are another factor driving Japanese companies to reconsider their presence in China.

“After several incidents involving attacks on Japanese nationals in China, many Japanese employees’ families left over the past year due to personal safety concerns,” Zhou said. “Some companies have already begun moving production equipment to Southeast Asia.”

In the past two years, violent attacks in China targeting Japanese nationals have triggered travel warnings from the Japanese government. Due to the CCP’s increasingly ultranationalist rhetoric, online threats against Japanese schools in China have also increased.

Zhou said that anxiety over security, combined with regulatory opacity under the Chinese Communist Party (CCP), has become a decisive variable in corporate planning—not an abstract risk but a practical one that shapes where companies choose to operate.

The electronics sector tells a similar story. Chinese media Jiemian News reported that Japanese camera and film equipment manufacturer Canon closed its China-based laser printer factory in November 2025 after 24 years. Once employing more than 10,000 workers, the plant had shrunk to about 1,400 employees when it ceased operations.

Li, a Beijing-based scholar, told The Epoch Times that the relocation of Japanese—and increasingly American—production lines to Southeast Asia signals a fundamental shift in how companies assess China.

“Political risk and supply-chain security have become core variables in corporate decision-making,” Li said. “This is no longer a short-term business fluctuation but a long-term risk-avoidance strategy tied to the CCP’s system.”

Foreign Capital ‘De-Risking’ From China

Over the past five years, foreign brands—from cars and electronics to food and retail—once leveraged a quality premium to dominate segments of the Chinese consumer market. Today, Japanese brands are retreating at varying speeds. A survey by the Japanese media outlet Yomiuri Shimbun found that brands once central to Chinese household consumption have become markedly less visible in everyday life.

Yao, a representative of a business association in Zhejiang, China, told The Epoch Times that rising operating costs and political factors have made exit part of long-term planning.

“Driven by operating costs and political factors, Japanese companies’ decision to leave is also part of a long-term strategy,” she said.

Yao noted that amid the CCP’s frequent policy shifts, tightening regulations, and strained bilateral relations, Japanese companies are being forced to reassess the risk of investing in China.

Late last year, Japanese Prime Minister Sanae Takaichi told lawmakers that a potential Chinese attack on Taiwan could constitute a situation requiring Japan to activate its self-defense forces. Her remark angered Beijing, prompting China to impose import bans on Japanese seafood and issue travel warnings for Japan. Japan also moved forward with plans to deploy missiles to a military base near Taiwan to deter the Chinese regime’s threat to seize Taiwan.

Yao noted that Western companies are now systematically “de-risking” their exposure to China’s institutional environment. While Japanese capital has not fully withdrawn, she said, the redistribution of industrial focus is already underway.

“If this trend continues,” Yao warned, “China’s attractiveness to foreign investment in end-stage manufacturing will weaken further, and regional supply chains will accelerate their shift away from China.”

Xing Du contributed to this report. 
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