Editor's Note:
In a year marked by rising protectionism and "decoupling" attempts in the world economic arena, what has become of China's allure as a favored investment destination? Foreign enterprises' bullish moves have told a lot about it. From January 2025, GDToday initiates a series of "Global Insights on 2025 Outlook@Business Trends", inviting representatives from foreign chambers of commerce and foreign companies in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) to share their outlook on 2025. Please stay tuned.
As the global business environment navigates heightened uncertainties in 2024, shaped by increasing protectionism and growing fragmentation in international trade, Guangdong continues to demonstrate the resilience of its economy. According to the 2025 Guangdong Government Work Report delivered on January 15, Guangdong's GDP is projected to reach 14 trillion yuan in 2024. The province's foreign trade volume has surged to 9 trillion yuan, marking a 9.8% increase and solidifying its status as China's leading trading region for the 39th consecutive year.
In 2024, Japan and Guangdong have sustained robust trade relations, with the province as one of Japan's key trading partners in China. Japan remains one of Guangdong's largest foreign investors, particularly in manufacturing, automotive, and electronics sectors. This enduring partnership in bilateral trade further highlights the integral role of Guangdong within the broader economic framework of the Guangdong-Hong Kong-Macao Greater Bay Area (GBA).
In a recent interview with GDToday, Okada Eiji, Director-General of the Japan External Trade Organization (JETRO) in Guangzhou (South China) pointed out that Japanese enterprises in Guangdong are increasingly shifting their investment toward the service industry due to the GBA's huge consumer market, while automobile companies in Guangdong are accelerating their paces to produce NEVs.
GBA's Tax Incentives and Consumer Power: A Key Investment Magnet
JETRO's survey on the business conditions of Japanese-affiliated companies overseas, released at the end of last year, revealed that while many Japanese companies remain cautious about expansion, nearly all of them are committed to maintaining a presence in the Chinese market and making long-term investments. This trend is also noticeable in the GBA.
"One of the unique features of the GBA, and something that Japanese-affiliated companies care most about, is the personal income tax incentives," Okada explained. These tax breaks, according to Okada, distinguish the GBA from other regions in China. "These incentives are unique and not found in other regions," he added.
The GBA offers a personal income tax subsidy policy aimed at attracting high-end and urgently needed talents from abroad. Under this policy, individuals are eligible for a subsidy equivalent to the portion of personal income tax paid in the GBA that exceeds 15% of their taxable income. This subsidy is exempt from personal income tax.
Japanese Investment Trends: Services & Automotive Sector in Focus
Beyond tax advantages, the GBA's consumer market is a major draw for Japanese businesses. Okada pointed out that the region's cities, including Guangzhou and Shenzhen, are home to a high level of consumer activity, which bolsters the region's attractiveness as an investment destination. Thus, Japanese investments in China are increasingly shifting towards the service industry.
Okada used the example of KFC, the American brand that boasts over 10,000 stores in China, contrasting it with Japan's Ajisen Ramen, which has only 600 outlets in the country. "For Japanese companies, there is still room for growth in such areas," Okada said.
Okada shared his view, noting that with the recent relaxation of foreign investment entry restrictions in China, retail and healthcare are two key sectors where Japanese companies see significant potential for expansion in the GBA. He mentioned that Japanese convenience stores are planning to increase their presence in Guangdong, especially in Guangzhou.
The automotive industry is another area of focus in the GBA, particularly as several Japanese-affiliated automotive companies plan to launch new electric vehicle (EV) models in 2025. "Many Japanese-affiliated automotive companies will start launching new electric vehicles from this spring," Okada noted, adding that the sales performance of these vehicles will play a pivotal role in shaping the future of Japanese automotive companies in China. His JETRO Guangzhou has been committed to facilitating collaboration between Japanese automotive parts companies and their Chinese counterparts.
In 2024, the Chinese automotive market experienced a significant shift, with electric vehicle sales surging over 40%, while traditional gasoline-powered vehicle sales declined. This rapid growth in the EV sector has intensified competition, posing challenges for Japanese-affiliated automotive companies operating in China. In response to these challenges, Japanese automotive companies are focusing on innovation and strategic partnerships.
The Impact of Visa Policies and Future Prospects
Another significant factor influencing Japan's investment decisions in the GBA is China's visa-free policy for ordinary passport holders from Japan, which took effect in late November 2024.
"It has a clear positive impact on the economic interactions between the two nations," Okada added that senior executives from Japanese companies can visit China to gain firsthand knowledge of the local market and business environment.
In addition to promoting Japanese investment in China, Okada's role also involves helping Chinese companies invest in Japan. He noted that many Guangdong companies are interested in entering the Japanese market, particularly in fields like logistics automation and factory automation. He pointed out that Japan is facing labor shortages, and automation technology is seen as a solution to this social issue. "We look forward to these companies investing in Japan to help solve Japan's societal problems," Okada said.
Reporter: Zeng Xiangxing
Video Shooting & Editing: Qin Shaolong
Poster: Lai Meiya
Editor: Ouyang Yan, Hu Nan, James, Shen He