Japan Cannot Beat China At Its Own Manufacturing Game

Whether you call it “winning” or “losing” depends on definition, but becoming like China again is, I think, simply no longer possible.

The reason is the overwhelming gap in capital power.

Most Japanese companies lack the capital, the stamina, and the human resources to invest in new large-scale production lines.

Still, the pandemic made many people aware of the danger of over-relying on other countries for supply chains, especially for goods essential to daily life.

And conveniently, Japan is no longer a developed country in the old sense.

Wages are not particularly high, and after years of deflation, price growth has stagnated, so the cost of living isn’t especially high either.

So it’s fair to say the rationale for running manufacturing operations in Japan has strengthened in recent years.

This is very good news.

At a moment when many people are starting to question the neoliberal global economy — precisely a moment of transformation — I personally think it’s a good thing for Japan to pursue manufacturing with a new vision.

That said, the gap in capital power and resources I mentioned earlier can’t be denied.

Which means competing in a mass-production, mass-consumption market is inevitably not the wise choice.

There are areas where the logic of capital doesn’t dominate as strongly.

That doesn’t necessarily mean luxury goods.

In some cases it might be luxury goods, but the key point is that these are things that take effort.

Things that take effort are, by their nature, resistant to the logic of capital: hard to streamline, hard to automate.

I think manufacturing in such areas holds real opportunity, not just for Japan but for many local companies elsewhere.

I also see this as a turning point for the era in which China could serve as the “world’s factory.”

Manufacturing that can be divided into separate tasks — work that can be formalized — brings many capital-efficiency benefits, from automation to outsourcing.

But that’s exactly equivalent to saying “anyone else could do it too.”

So naturally, the “world’s factory” has kept shifting throughout history.

In that sense, China probably has little motivation to artificially hold back that flow, and in practice it has no means to stop it anyway.

A country like Japan doesn’t need to take anything back from China.

It’s enough to keep in mind a vision where, when creating something new and high-value, you manufacture it in collaboration with local companies as much as possible, growing together with partner companies rather than alone.

Originally published in Japanese at https://clazytech.com/2021/08/527/. Translated with LLM assistance and reviewed before publication.