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Business trends

Dalian attracts Honda and Nidec in push for Japan investment

Chinese port hub among six cities covered by Beijing initiative

Skilled personnel with Japanese proficiency is among the draws for businesses from Japan looking to establish a presence in Dalian. (Photo by Shin Watanabe)

DALIAN, China -- Japanese companies once again are pouring money into Dalian, responding to entreaties from Beijing as China seeks investment to combat its trade troubles with the U.S.

A Honda Motor joint venture with information technology giant Neusoft began operations here Wednesday to develop connected-car services. The 300 million yuan ($42.4 million) entity is the Japanese automaker's sole Chinese base dedicated to this field, and it is staffed with around 50 people for now.

Partnering with Neusoft, known for strong automotive systems development, will let Honda "tap talented personnel in China," a spokesperson said.

Nidec factory to produce traction motors for electric vehicles is under construction in a Dalian suburb. The roughly 100 billion yen ($928 million) plant set to open in 2022 will house 1,000 personnel for development, twice as many as the motor maker's current 500 or so.

The factory is expected to serve as a key development center comparable with Nidec's domestic site in Shiga Prefecture, near Kyoto.

Dalian welcomes the growing presence of businesses from Japan. E-commerce company Rakuten set up a development base in March 2019, while Orix, a leasing and financing services provider, is building a commercial complex.

"Skilled people with Japanese proficiency are available for lower pay here than in Shanghai or Shenzhen," an executive at a Japanese company said. He also likes that Dalian is a port city and called its proximity to Japan a plus.

The inflow of Japanese investments follows China's desperate efforts to halt the economic slowdown caused by the trade conflict with the U.S. as well as the coronavirus outbreak. Beijing in April designated six municipalities, including Dalian, as model cities for Sino-Japanese economic cooperation.

"Japan is one of the most important partners for Dalian, and we'll do all we can to address any issues you might have," Mayor Chen Shaowang told representatives of Japanese companies at a meeting in late May.

During its roughly four decades under Japanese rule through the end of World War II, Dalian attracted many companies from Japan. Starting in the 1980s, Japanese companies rushed to make the port city a manufacturing and export base using inexpensive labor.

But surging wages prompted many of them to move operations to Southeast Asia during the past decade. The number of Japanese companies with a location in Dalian had declined to 1,522 as of October 2018, down more than 10% from 2014, Japan's Ministry of Foreign Affairs said.

Dalian took 28th place in a 2019 ranking of Chinese urban competitiveness, falling from 14th two decades earlier amid a rise of cities in the south and other parts of the country, according to local reports.

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