EDITORIAL: Closer Japan-China ties

Chinese companies are increasingly eyeing mergers and acquisitions (M&As) with Japanese companies. High-end clothing maker Renown Inc. becoming an affiliate of a large Chinese textiles company is but one example. These moves symbolize the coming of an era of increased business management fusion between China and Japan.

Renown, which is now restructuring its management, will hold an extraordinary shareholders' meeting to decide whether to accept a 40-percent injection of capital investment from Shandong Ruyi Science and Technology Group.

Renown has been suffering under the onslaught of new competition, unable to move out of its old business model that relied on department store sales. Renown has famous brand products and the company has strong management skills. Shangdon Ruyi, on the other hand, is strong in high-end wool textiles, courtesy of its unique spinning technology. But it is still weak in terms of merchandising and brand-development strategies.

The heads of the two companies said they will try to nurture a cooperative relationship "like brothers" and become a shining example of a new kind of M&A between Japan and China, where each company complements the other. This will help to advance both the development of the Chinese market and business innovation in Japan.

Previously, it was a one-way street with Japanese companies buying Chinese businesses. The collapse of Lehman Brothers in fall 2008 changed the tide. Chinese enterprises, which continue to grow, have begun buying Japanese companies even though they have particular skills and business know-how. More management fusion between Japan and China via M&As should occur.

Some people fear there will be an outflow of Japanese technology. But if this is in a specific area that Japan simply cannot let go, then there are ways to prevent a skills drain, with the cooperation of business partners and, if necessary, government support.

Rather, in order to open up a path whereby Japanese companies can better utilize their accumulated skills and know-how, perhaps they should approach M&A proposals more aggressively. To help blend into the Chinese market, Japanese companies should consider how to get more people in China to understand Japanese business practices. M&As are one way of removing national barriers within management. It would be the quickest way to enhance Chinese appreciation of Japanese technology and tastes and demonstrate that these qualities will work to increase China's prosperity.

In the case of golf club maker Honma Golf Co., which was absorbed by a conglomerate of Chinese retailers, it was the Chinese who admired Honma's high-grade artisan club sets, which cost millions of yen. Now, they are planning to market the clubs to China's new rich class.

The winds of fusion are bringing change to Japanese enterprises, too. The business style of Japanese electronics retailer Laox Co. changed markedly during the past year or so after Suning Appliance Co. of Nanjing took over. Its flagship shop in Akihabara, Tokyo, is at the forefront of international retail. Of the 116 sales clerks, 60 percent are not Japanese, but Chinese, Russian, Brazilian and so on. Staff can handle inquiries in 23 languages. This turned the tide, which had been constantly on the decline.

Japanese companies that have entered into business ventures in China are also appointing more Chinese to top executive positions, so fusion is progressing.

In the Chinese classic "Yi Jing," there is a passage that goes as follows: "When hard-pressed, things will change; when things change, a path will open; when a path opens, it will last." Thus, in order to adapt to change and open up a vision for the future, it is important to pursue the path of fusion that utilizes each other's strong points.

--The Asahi Shimbun, July 19