Japanese banks are reducing their operations in China as local manufacturers face rising labor costs and increasing competition from the domestic electric vehicle (EV) industry, according to a report by Nikkei Asia. The financial institutions are instead redirecting their focus toward Southeast Asia and India, where Japanese investments are growing.
Branch Network Shrinks in China
Over the past five years, the branch network of Japanese regional banks in China has contracted by approximately 20 percent, the report said. This downsizing reflects the challenges faced by Japanese suppliers in the Chinese market.
New Hubs in Southeast Asia
Several Japanese banks have established new bases in the region. Chiba Bank and 77 Bank have set up hubs in Singapore, while Saikyo Bank is launching a subsidiary in Indonesia. These moves align with the broader shift of Japanese manufacturers away from China.
Growing Interest in India
Japanese financial institutions are increasingly active in India. In December last year, Mizuho Securities, an arm of Japan's third-largest bank Mizuho Financial Group, acquired a majority stake in Indian investment bank Avendus. This acquisition underscores the rising interest in India's booming semiconductor and data center industries.
Major Deals in Indian Banking
Sumitomo Mitsui Banking Corporation (SMBC) acquired a stake in YES Bank last year, becoming its largest shareholder. Meanwhile, Mitsubishi UFJ Financial Group (MUFG) purchased a 20 percent stake in Shriram Finance. These investments highlight the strategic pivot of Japanese megabanks toward India.
Challenges for Japanese Automakers in China
The shift coincides with difficulties faced by major Japanese automakers in China, where the rapid growth of the local EV ecosystem has reduced demand for their vehicles. Automakers are cutting production in China, further dampening the outlook for Japanese banks.
Slowing Loan Growth
Japan's top three megabanks—SMBC, MUFG, and Mizuho—have experienced a decline in corporate loan growth in China. Their loan portfolios have shrunk by up to 40 percent over the last five years, according to the Nikkei report.
