Is Canons factory closure tied to strains in China-Japan ties?

The sudden closure of Canon’s long‑standing printer plant in Zhongshan, Guangdong, has cast a fresh spotlight on the fragile diplomatic relations between China and Japan.

The facility, which had operated for nearly a quarter‑century and employed about 1,600 workers, announced on November 24 that it would close down on November 28, due to “years of mounting cost pressures and rapidly shifting market conditions.” The factory at its peak employed more than 10,000 people.

The factory was established in 2001, the same year China joined the World Trade Organization (WTO). It had been shut down since November 21 as management and the labor union negotiated severance arrangements. Canon said it is committed to providing compensation in line with legal requirements, along with additional payments beyond statutory norms.

The announcement was made against the backdrop of rising political tensions between China and Japan.

Sino-Japanese relations have worsened as Beijing was upset by the remarks made by Japanese Prime MinisterSanae Takaichi, who said on November 7 that any armed conflict or use of force in the Taiwan Strait could constitute a “survival-threatening situation” for Japan, thereby enabling the activation of the Self-Defense Forces.

In response to Takaichi’s remarks, Beijing halted seafood imports from Japan and discouraged travel there. On November 14, China’s Ministry of Education issued a study-abroad alert, warning of a worsening security environment and higher risks for Chinese students. It urged those already in Japan, and prospective students, to monitor local developments, strengthen personal safety awareness and review their plans with caution.

“Taiwan is Chinese territory. How to resolve the Taiwan question is a matter for the Chinese ourselves, and brooks no external interference,” Chinese Foreign Ministry spokesperson Lin Jian said in a media briefing on Tuesday. “Yet Takaichi linked Japan’s ‘survival-threatening situation’ with a ‘Taiwan contingency,’ implying the use of force against China.”

He said it is the Japanese side, not others, that has been “engaged in the prolonged expansion of military capabilities,” taking “coercive measures” and attempting “unilateral changes to the status quo despite opposition from neighboring countries.”

The Japanese side has avoided entering a public confrontation with Beijing, yet companies and individuals are quietly bracing for the possibility of further deterioration. Although it remains difficult to distinguish cost-driven restructuring from geopolitical caution, Chinese media and analysts widely contend that a growing number of Japanese firms and individuals are pulling back from the mainland.

Planned exchange programs have also come to an abrupt halt. Senior executives from 20 major Japanese new energy and semiconductor companies, including Toyota and Sony, reportedly postponed a November 25 business trip to China, derailing what had been expected to be a significant round of commercial talks. A well-scheduled event to celebrate Japan-China friendship for 3,000 people was also cancelled.

“Japanese companies in China are accelerating their withdrawal, with Shandong province seeing the most significant decline,” says a Jiangxi-based commentator writing under the pen name “Jiunian.” “In Shanghai, 164 Japanese companies exited this year, while Shandong recorded 229 departures. The scale of theexodus is striking.”

“Japanese firms’ departure has already influenced other foreign investors,” she says.“Companies from the United States, the United Kingdom and Singapore are also pushing ahead with relocating their operations, directing new investment toward Indonesia, Vietnam, the Philippines and Bangladesh.”

“Some Chinese suppliers are also following suit. In Guangrao County, Shandong, more than a dozen Chinese companies have built factories in Vietnam and Indonesia over the past three years, mainly in rubber and tire manufacturing,” she adds.

Chinese commentators’ mixed reactions

Some Chinese pundits have welcomed the retreat of Japanese firms as a sign of domestic industrial strength.

“Who initiated the first attack? It was Japan’s Prime Minister Sanae Takaichi,” says a Tianjin-based writer. “Since 1945, no Japanese leader has openly provoked China like this. Takaichi is playing with fire and pushing the situation to the edge. China is no longer in a position to be pushed around.”

“With domestic semiconductor capacity rising and breakthroughs from Chinese suppliers, we can afford to say ‘no’ to unreliable partners,” he says. “If Japan keeps creating disputes over Taiwan, it will only shut itself out of future cooperation with China and damage its own economy.”

“Recent news of Japanese firms leaving, from Toshiba to Canon, reflects both rising labor costs in China and Japanese companies’ strategy to look for cheaper production bases,” says a Guangdong-based columnist writing under the name “Fortune Cat.”

“The use of Japanese components in products like Huawei smartphones is falling quickly, showing that Chinese firms are breaking through technical barriers,” he says. “China’s market space left behind by departing Japanese companies gives domestic manufacturers room to grow.”

Other commentators warn that a broad exodus could pressure China’s job market.

A Hunan-based columnist says many workers were stunned by the sudden shutdown, noting that some younger employees had recently taken on heavy mortgages and now faced acute financial strain. He also says older workers have little prospect of finding comparable jobs.

“Netizens cheering for foreign companies to leave should think twice. The day you shout the loudest may be the day your own parents get sacked,” he says.

He adds that current job offers in the same area are about 3,500 yuan (US$495) a month, only half of what Canon workers previously earned.

While the public has seen a steady stream of Japanese firms exiting China in recentyears, official data offer a more complex picture. In early November, without providing a detailed breakdown, China’s Commerce Ministry said foreign direct investment from Japan rose 55% year-on-year in the first three quarters of this year.

Chinese media noted that the increase could be due to a low comparison base in the same period of 2024. According to Japan’s Ministry of Finance, Japanese companies’ investment in China fell 62% to 23.1 billion yuan last year from 61.2 billion yuan in 2023.

Observers pointed out that the FDI figures for the first nine months of this year had not yet reflected the escalating political tensions between China and Japan in November.They said Japanese companies are still interested in expanding their production of new energy and high-precision equipment and auto parts in mainland China, but they don’t need a large number of workers.

Read: Rumored Japan photoresist ban sparks China’s worst fears

Follow Jeff Pao on Twitter at@jeffpao3