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Panasonic pursues tie-up strategy for China reboot

Ranks of local partners expand beyond Alibaba and

Panasonic is developing temporary housing for construction workers with its two local partners. Shown above is a model home in Xi'an. (Photo by Shiko Ueda)

XI'AN, China -- Panasonic, once a foreign pioneer in cultivating the Chinese market, is pushing for a revival by joining forces with local partners.

The Japanese electronics powerhouse has seen Chinese sales tumble 30% from their peak amid the rise of South Korean and Chinese rivals. Hoping to restore its former glory, it is also promoting local personnel to oversee Chinese operations.

Panasonic will launch urban development projects with construction software developer Glodon and Beijing Linkdata Technologies, a battery-focused energy management company, in five cities, including Xi'an, in the province of Shaanxi, and Kunming, in Yunnan Province. The trio will work with local governments, forming a joint venture for each city with a government-backed investment arm and other partners.

Such alliances are important because connections with authorities play a major role in determining the outcome of applications for urban development projects. Those projects typically cost the equivalent of billions of dollars each.

The companies will also develop temporary housing for construction workers.

"It's impossible to grow the Chinese business without collaboration," managing executive officer Daizo Ito told a news conference Thursday in Xi'an.

For its home appliance business in China, Panasonic has teamed up with e-commerce leader Alibaba Group Holding and second-ranked

Panasonic has a special relationship with China that dates back to 1978, when then-Vice Premier Deng Xiaoping visited Japan as part of a push to open up his country's economy. Deng met with Panasonic founder Konosuke Matsushita and asked him to help modernize China. Panasonic set up a picture tube factory in Beijing with a partner in 1987 -- the country's first foreign-affiliated plant in the years since World War II.

The electronics multinational continued to enjoy preferential treatment by authorities, forming 33 production companies in the 1990s. In 1994, it became the first foreign enterprise cleared to set up an oversight company that engages in such activities as R&D and personnel development.

But Panasonic's strategy of importing high-quality Japanese-made goods and selling them on its own stopped working around 2000, when cost-competitive peers from South Korea and within China began to emerge. The Japanese company shut down its TV-manufacturing business in China in 2015. It apparently was slow to do so, as any decisions about jobs and other aspects threatening a regional economy are hard to make for foreign companies. Its lack of easy access to local governments hurt in this case.

Today, Panasonic's market shares in China are estimated at a mere 5% for refrigerators and about 10% for washing machines, keeping the company out of the top three for either category. Even Panasonic's former name, Matsushita -- rendered as "Songxia" in China -- is "no longer known among young people," a company official in China says.

Panasonic is working on bolstering demand, tying up with Alibaba and Their collaboration includes offering one-day sales on Panasonic home appliances.

The company also promoted local personnel to head its Chinese operations, tapping Zhao Bingdi, formerly with Siemens, as president of its oversight company in China to serve as a bridge with government officials.

Panasonic's Chinese sales plunged from 1.17 trillion yen ($10.5 billion) in fiscal 2010 to around 800 billion yen for fiscal 2017.

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