Cold Thinking on the Development Prospect of LED Industry under the "Friction" of Sino-Japanese Relations

Around the Japanese government's "purchase" of the Diaoyu Islands incident, Sino-Japanese relations have been pushed to the forefront. The political circles, the military, and the private sector have been intensively stating that the Sino-Japanese relationship may have fallen to the deep valley this time for 40 years since the normalization of diplomatic relations between China and Japan.

Under domestic political and social pressures, China’s counter-measures are inevitable. The Sino-Japanese friction is due to the Diaoyu Islands issue, and the core of the future will be carried out around the actual control of the Diaoyu Islands. If counter-measures can make Japan’s so-called “actual control” on the Diaoyu Islands, it will be a major achievement for China. More likely, the two sides entered the "cold phase" and "cold confrontation" status in the Diaoyu Islands waters. The two sides "light muscles" with each other by sea surveillance vessels, and even "physical contact" such as collisions with sea surveillance vessels, but not too much. It may develop into a military conflict.

If military conflict is temporarily impossible, the more likely countermeasures are economic sanctions, which are more feasible, more influential and more lasting than military conflicts. Sakaguchi Kiyoshi, head of research at the Japan Global Strategy Institute, said frankly: The most worrying thing is that the Chinese government is considering introducing a (economic) restrictions on Japan. If China really begins to impose sanctions on the Japanese economy, what impact will it have? How much impact will it have on China's LED industry?

First of all, the Sino-Japanese trade conference will be greatly affected. China has been Japan's largest trading nation since 2007. Today, China still maintains Japan's largest trading partner, largest export market and import source country. According to the statistics of the Japan External Trade Organization (JETRO), the total trade volume between China and Japan reached 344.9 billion U.S. dollars in 2011, of which 188.4 billion U.S. dollars were imported from China and 161.4 billion U.S. dollars were exported to China. In 2011, Japan’s trade with China accounted for Japan’s total foreign trade. At 20.6%. In the first half of this year, Japan imported 91.3 billion U.S. dollars from China, a record high. The total import and export volume was 165 billion U.S. dollars, a year-on-year increase of 1.1%. Japan-China trade accounted for 19.3% of Japan's total foreign trade, down 1.3 percentage points year-on-year. During the same period, Japan’s trade deficit with China increased by 2.6 times compared with the same period of last year, reaching 1.401 trillion yen, and total exports to China decreased by 5.7% year-on-year.

Second, China holds a large amount of Japanese government bonds. According to the balance of payments statistics released by the Japanese Ministry of Finance and the Central Bank of Japan, the amount of Japanese government bonds held by China is rapidly expanding. As of the end of 2011, the holdings reached a record high of 18 trillion yen, an increase of 71% over the previous year. China’s holdings have grown rapidly since 2009, surpassing the United States and Britain in 2010 to become the largest holder of Japanese government bonds. In addition, at the end of 2012, Japan’s central and local governments’ long-term debt-to-GDP ratio will reach 195%, surpassing Italy’s (128.1%) deep debt crisis, ranking first among developed countries and the world’s most heavily indebted country. . The government debt factor makes it necessary for Japan to take into account China’s actions and avoid China’s sharp sell-off.

Third, China’s travel to Japan may be greatly reduced. According to the Japan Government Tourist Office (JNTO), the number of Chinese tourists to Japan in 2011 was 1,043,500, a significant decrease of 26.1% over the previous year (subject to the earthquake in Japan). From January to July this year, the number increased significantly to 947,600 compared with the same period of last year, an increase of 72.3%. In July, the number of tourists more than doubled year-on-year, and the number of tourists in a single month exceeded 200,000 for the first time.

Fourth, China is one of Japan's important investment destinations. In 2011, Japan’s actual investment in China reached US$6.33 billion, a year-on-year increase of 55.1%. As of the end of June this year, the cumulative actual amount of Japanese investment in China was 83.97 billion US dollars, ranking among the top foreign-funded countries in China. If economic sanctions hit Sino-Japanese investment, it will be a big loss for both sides.

Fifth, strategic resources are also an "economic card" that can effectively balance Japan. Taking rare earths as an example, strategic resources such as rare earths are essential raw materials for the development of high-end manufacturing and production of high-end industrial materials. China's rare earth reserves account for about 23% of the world's total reserves, and bear more than 90% of the world's market supply. Japan's high-end manufacturing rare metals are mostly imported from China. If economic sanctions begin, Japanese companies will be eager to find alternatives.

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