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Chinese shoppers are heading across the East China Sea to Japan for a fire sale, and changing the Japan-China economic relationship in the process.
China, although the world’s second-largest economy, is still home to many poor people. Chinese gross domestic product on a purchasing power parity basis divided by population ranked a lowly 125th place, at an estimated $7,600 in 2010, well behind 34th placed Japan with an estimated $34,000, according to figures from the CIA handbook.
But China’s rich are big spenders, and their numbers are growing rapidly while Japan’s economic growth is stagnant. Indeed, the gap between the richest cities in China — Shanghai and Beijing — and the poorest prefectures in Japan — Okinawa prefecture and Aomori — could shrink to just 2.6 times income by 2016.
Present Chinese income levels are now on par with those of Japan in 1964, according to Hideo Kumano, executive chief economist at Dai-ichi Life Research Institute. That is also the year when the Tokyo hosted the Olympic Games, which became a symbol of Japan’s economic miracle during the 1960s and 1970s.
“This is an extremely symbolic level, and is a warning that China is now the country to keep up with, and that Japan needs to change,” said Kumano.
While Chinese people are increasingly seeing their fundamental needs satisfied for food, clothing, furniture and some electrical goods, the challenge is to improve quality, said Saori Tsuiki, a senior economist at Mitsubishi Research Institute. “Top-of-the-line Japanese products available in places like Akihabara meet this challenge, and represent the arrival of a new civilisation for some Chinese consumers,” Tsuiki said.
Chinese shoppers are a now a major presence in Tokyo shopping areas such as Akihabara, which is also known as Electric Town.
Toshiyuki Hamada, a manager at the Akihabara outlet of Yodobashi Camera, said that Chinese customers, including both tourists and those normally resident in Japan, account for about 10% of total sales at the mass merchandiser.
That is a significant number in a country where average household spending has fallen for eight consecutive months, from March to October.
Rice cookers are a continuing favourite with Chinese visitors to Yodobashi Camera in Akihabara. The shop now caters to Chinese speaking customers with about 50 Chinese speaking staff, including approximately 30 native speakers. That is about the same number as English speaking staff, and equates to approximately 10% of total staff levels, Hamada said.
The acceptance of Chinese credit cards has also worked to boost purchases by Chinese in Japan, who before the 2005 acceptance of Chinese Union Pal were obliged to carry wads of cash on each visit. The value of transactions using Chinese Union Pal in Japan rose to ¥20 billion ($260 million) in 2009 from ¥2.7 billion in 2007, according to a Mitsui Sumitomo Card survey.
It wasn’t always this easy for Chinese people to visit Japan.
In July 2009, Japan started granting individual tourist visas to Chinese nationals with an annual income of Rmb250,000 ($39,432) or more, but lowered this requirement to Rmb60,000 per year in July. That potentially opens the flood gates to 16 million households in China to visit Japan.
It will also be easier for Chinese visitors to fly directly to Okinawa, which was not affected by the March 11 disaster.
Fears about the nuclear fallout after the March tsunami have affected tourism to Japan. In April the total number of overseas visitors was down 62.5% compared to the same month in 2010, following a 50.3% decline in March, according to data from Japan National Tourism Organisation.
There were 49.5% less Chinese visitors in April, but even these figures are mild compared to the 87.6% decline in visitors from Hong Kong in April.
“The disaster had a severe impact on visitor numbers and sales, especially as the effect carried over through the Golden Week period at the end of April and beginning of May, which is a high season for Chinese shoppers,” said Takahiro Kazahaya, a senior retailing analyst in global market research at Deutsche Securities in Tokyo.
Hamada at Yodobashi Camera said there are signs Chinese tourists are overcoming radiation worries and are returning.
But while China has lifted import bans on a number of foods from Japan, those for fruit remain in place, and it will take a concerted effort to check, review and disclose data on Japanese food safety, before Chinese visitor numbers can be coaxed back to pre-disaster levels, Dai-ichi’s Kumano said.
“The Japanese government needs to be extremely thorough in its explanations of food safety before Chinese tourists return in any great numbers,” he said.
And that makes it even more of an imperative that Japanese mass merchandisers, and government organisations pull out the stops in an attempt to draw back Chinese business.
