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China: Japan's economic wake-up call
From Rebecca MacKinnon
TOKYO, Japan (CNN) -- As Japanese companies struggle to survive amidst deflation and a decade-long economic slump, they are increasingly turning to China -- not only as a source of cheap labor, but also as a growing consumer market. The trend has caused some economists to warn that Japanese industry is "hollowing out" as it gets sucked into China. Some fear China could one day eclipse Japan as an Asian economic powerhouse. But others see the rise of China as the kick-in-the-pants Japan needs to undertake the drastic reforms to make its economy healthy again. Take factory owner, Masahito Sasaki, who is struggling to keep his machine tool parts business from going under. "The biggest customer, they don't have a lot of jobs. So we have to find another customer to get the jobs," says Sasaki. It doesn't help that a skilled worker in Japan makes about 12 times the salary of workers in nearby China. Sasaki's small factory is at the very bottom of an economic chain reaction. It makes parts for customers that make machine tools for factories that wind up making things like cars, bulldozers and printing machines. So every time a Japanese manufacturer moves some of its production to China, the impact is felt all the way down the line. Lackluster consumptionWith lackluster consumption at home, Japanese companies are also hungry to tap China's growing market. So is China's rapidly-growing economy threatening to eclipse Japan's stagnating one? Most economists believe it won't happen any time soon. But Nissan's Carlos Ghosn -- who just inked a billion dollar deal to produce cars for the China market -- believes China is Japan's wake-up call. "The main threat to Japan is Japan itself. That means, is Japan willing to really take on the challenge and make the transformation needed in order to unleash its full potential?" asks Ghosn. "China coming into the picture is just a reminder that if the Japanese economy continues to stagnate as it has stagnated during the 1990s, Japan cannot aspire any more to be one of the leading economies in the world," he adds. Throughout last decade, Washington tried to pressure Japan to open up and deregulate its economy. But fear of China's growing economic clout may be more effective, as the communist country now begins to build trade alliances with countries around the region. Japan needs some sort of foreign pressure to deregulate. The pressure from China is not necessarily political, but if Japan wants to be included in the new economic networks Beijing is creating, it will need to lower its protectionist barriers.
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