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  • Yomiuri: Nouveau riche Chinese buying up Japan, Niseko

    Posted by Dr. ARUDOU, Debito on June 6th, 2010

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    Hi Blog.  As a somewhat Sundayish Tangent, here we have the Yomiuri talking about Chinese investing in Japan, both as consumers and businesspeople.  Of note to me is the Yomiuri’s claim that the Chinese are displacing Australian investment in Niseko, Hokkaido.  Fine with me.  Hokkaido could use the investment.  Arudou Debito in Sapporo

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    Mega-China Changing Japan-China relations / A piste of the action: Chinese take to skiing and shops
    The Yomiuri Shimbun May. 25, 2010, Courtesy of Peach
    http://www.yomiuri.co.jp/dy/world/T100524003379.htm

    China’s rapid rise is causing ever-widening repercussions in its relationship with Japan. This is the second installment in a series of articles examining new currents in bilateral relations.

    At 9 a.m. most days, the majority of shops are yet to open in Akihabara, Tokyo’s electronics shopping district.

    Yet two sightseeing buses are parked in front of bulk electrical appliance chain Laox Co.’s flagship store. Emerging from the buses, about 100 Chinese stream into the shop. Laox is open for business.

    The electrical cooking appliance section on the fourth floor proves particularly popular. A Laox employee, a Chinese national flag sticker worn on his chest, begins explaining the products on display. Sun Renmei, 61, of Shanghai, points at a stack of boxes containing rice cookers. She buys four: for herself, her children and a friend.

    “I’ve been looking forward to buying high-tech Japanese rice cookers,” she says with a smile before hurriedly boarding one of the buses.

    At the height of its prosperity, Laox boasted 149 outlets nationwide. In summer last year, however, following years of poor performance amid intensified domestic competition, Laox was bought out by Suning Appliance Co., the owner of China’s largest bulk home electrical appliance chain.

    Its president now a Chinese, Laox has repositioned its customer base as international, an extension of previous measures taken to improve the company’s ability to deal with customers in foreign languages.

    The flagship store has been renovated as a duty-free mecca that sells not only electrical appliances but also daily goods and souvenirs from Japan. Information about each product is provided in three languages–Japanese, English and Chinese. Twenty-three languages are spoken in the duty-free shop, including Tagalog.

    While it usually opens at 10 a.m., management displays flexibility and moves forward opening hours on behalf of group tours, if their timetables so require.

    Today, overseas visitors account for 60 percent to 70 percent of the flagship duty-free store’s customer base, a 10 percent increase since the Suning Appliance capital tie-up. Proceeds from sales to foreign customers have increased 70 percent.

    In June, Laox is scheduled to open a variety store in Shanghai selling Japan-related products and services. This will be followed by an ambitious plan to increase the international Laox outlets to 100 over a three-year period.

    Once a rarity, Chinese-owned shops serving Chinese customers in Japan–or overseas–are increasingly common nowadays.

    China has also replaced Australia as the main foreign player in tourism and investment in and around Niseko, a southwestern Hokkaido town recently popular among foreign visitors as a ski resort.

    “Australia was once the chief player in tourism and investment here. Since the [global] financial crisis, however, there has been an increase in the number of Chinese companies [conducting such activities],” Tomokazu Aoki, a senior official of Niseko Promotion Board Co.’s secretariat, said.

    Founded in 1897, Niseko’s Yamada Onsen Hotel is renowned as the first resort to be built in the area. However, sold to a Chinese corporation this year, the hotel will reportedly be rebuilt as a villa-style accomodation.

    A relative newcomer, the Hanazono ski resort has also been acquired by a foreign buyer, a Hong Kong-based communications company.

    All this means progress and the go-ahead for further resort development in Niseko.

    In April, The Times, a British newspaper, carried an article that read: “Chinese visitors to Niseko used to take a simple view of apres-ski: head to the nearest izakaya and scoff as much Hokkaido crab as possible. Nowadays, after the last run of the day, they scramble for the nearest real estate agent…The Chinese who come to this resort generally have money, are hungry for luxury and find a Japan that, increasingly, is for sale at knockdown prices.”

    A local real estate agent said, “Most villas here are priced between 50 million yen and 100 million yen. Few Japanese can purchase such property, but there are Chinese paying cash to buy them.”

    The business-savvy Chinese view the resorts as moneymaking assets and rent the villas out to tourists except when they themselves wish to stay there. This can earn them annual profits equivalent to about 5 percent of the villas’ original purchase price.

    It is a trend that is set to continue. Teikoku Databank Ltd. estimates more than 300 Japanese corporations are currently funded by Chinese capital. Honma Golf Co., a major golf equipment manufacturer, is one of the latest–it became a Chinese subsidiary this year.
    ENDS

    11 Responses to “Yomiuri: Nouveau riche Chinese buying up Japan, Niseko”

    1. DR Says:

      Again, I’m thumbing through Dogs & Demons and I’m smiling to myself. When a Japanese journalist asked someone in Holland about foreigners buying land a while back, he was shocked to find out there were few if any restrictions. “But that means he could build a castle on the land?” he asked, shocked, and to the amusement of the Dutchman.

      So, can the Chinese now build castles in Niseko, I wonder? I’m imagining the reply; head tilting, and wind being reverse whistled through the teeth as no answer is forthcoming! Plus ca change!

    2. 播町 Says:

      This is definitely an interesting trend, but sound like
      it is still very much small scale, not to mention
      being kicked up like a cloud of dust in an alarmist fashion by
      the JP media:

      [dead link deleted]

    3. john k Says:

      I don’t know how buying property in Japan is seen as an investment. House prices have not risen above parity for over 10~15years; infact they have gone down, it is a net loss. Coupled with shocking quality of houses, sounds like a poor investment to me……since the resale value will be zip. Only investment is the money one can earn over the years of owing said property, nowt to do with the purchase as an investment. The ‘house’ is purely a financial ‘loss’ written off to the profits made by renting it, that’s all.

      There is no money in buying houses in Japan, period!

      Not to mention the taxes involved…that is another story…

    4. Andi Says:

      I’m finding it very difficult to be as triumphalist about this as the above poster. While I can understand Debito’s attitude that investment in the economy is to be welcomed, I distrust Chinese venture capitalists just as much as those from Australia. I certainly despair when a local economy becomes reliant on their excesses. How many affordable houses could be built for that 50-100 million yen that these villas go for, I wonder?

      Apologies for the irrelevance of this socialist rant. I just would rather see a sustainable economy built by and for the people, not as a playground for the nouveaux-riches.

    5. Justin Says:

      John K, it is true the house itself will depreciate. However, the land itself does not depreciate and in theory could increase in value. So you could make money on a house as an investment by (1) renting out the house, and (2) selling the land at a profit later on. (Of course, that would require real estate prices to rise, something which we haven’t seen a lot of in Japan for a while…)

    6. Justin Says:

      Andi, you could build a lot of affordable houses for those prices, but who would buy them or live in them? Not a lot of year-round jobs paying decent wages in Niseko, compared to Tokyo or Osaka, etc. It’s a resort town, and in a resort town you find vacation homes. Spending by the tourists who buy or rent these homes supports the less affluent locals. Unless you want to create a whole new industry centered in Niseko, that’s just the way it’s gonna be. And personally, I’d rather see Niseko reliant on tourism than have its beautiful scenery destroyed to make way for factories and office parks.

    7. (株)飛日空 Says:

      Nods to DR and Justin’s comments. My guess is that the rental properties are going to be targeted not at Japanese consumers but mainly at other tourists from overseas especially China. Like the Japanese have Guam and Saipan catering well to their holidays, the Chinese are probably looking to build something like that for their winter holidays; close to home, and cheap for a little getaway. With secured rental accommodations, you can start running quick-turnaround tour groups by the plane-load (a la Guam and Saipan).

      The Chinese are shrewd and will try to get as many advantages their way as possible with their investments knowing they have the cash to bargain with. Practically no one else comes and buys in full in cash. With those investments, demands for more access and freedom to use those investments will follow naturally (visa application leniency, leniency on taxes, Chinese-speaking or native Chinese staff meaning increased residency and employment for foreigners, etc.). Flout the Chinese and they’ll take their money elsewhere.
      But my guess is that the Japanese owners will get hooked on Chinese cash like a drug.

      With any luck, Niseko will start looking like a winter version of Saipan for the Chinese, complete with signs only in Chinese, a majority of staff in businesses being Chinese, and Chinese becoming a substantial portion of the population as well as being the richest, and the town’s atmosphere being one of catering to the Chinese a la Saipan and Guam to the Japanese. I can only imagine what the Japanese response to this will be. Will Japanese owners stubbornly adhere to the status quo or loosen up restrictions to get in on the cash train? It will be interesting to watch in light of similar examples in the past like greater Toronto and Vancouver. But it’ll be even more interesting to watch this time because it’ll be happening in foreigner-hostile Japan and not in “so-PC-it-hurts” Canada (disclaimer: I am Canadian).

    8. (株)飛日空 Says:

      In response to DR, I hope that there will be inquiries about whether they can build castles or the like while wads of cash are waved in front their noses if they agree. It will interesting to see the response.

      My guess is that it won’t be the sound of air sucked through teeth but in this economic climate it’ll be “I’ll see what I can do” said in a friendly manner using some of the worst katakana sounding Chinese you’ve ever heard. Word of this will get around to other Chinese and more demands to satisfy their whims will come up. Politically influential owners may even start lobbying for more concessions to accommodate their new honoured, cash-laden customers (ie. recent shopping visas for Chinese tourists).

      Why invade Japan when they can buy it? Let the sellout of Japan begin.

    9. Andrew Smallacombe Says:

      Ah, the days of the booming economy when Japanese corportations snatched up land in Hawaii, Northern Queensland, etc. Concerns by the locals about a foreign takeover were decried by the J-meda as “Japan bashing”. Now that the shoe is on the other foot…

    10. (株)飛日空 Says:

      @Andrew

      Only this time, the properties are not being bought using loans like pretty much everything was bought during the bubble. They’re being bought outright with cash. The Japanese bought and bought with credit and overextended themselves. The Chinese who bought have paid in full with no debt and even consider the houses a bargain. And the Chinese won’t tolerate something protectionist like a 50 year lease or whatever like the Chamurro natives in Saipan are doing with their property.

      And to think that the Japanese buying with loans and then wave off criticism of those purchases as Japan-bashing in comparison is laughable. I wonder just how many of those foreign properties bought on credit are still owned by Japanese corporations post-bubble and post-Lehmann.

      @Andi

      I would like to ask you why you don’t trust the Australian and Chinese investors. Although I am 100% for foreign investment, I am geniunely curious as to what reasons you have for opposing them.

      @Johnk

      Wikipedia entry on Niseko
      https://secure.wikimedia.org/wikipedia/en/wiki/Niseko

      Wikitravel entry on Niseko
      http://wikitravel.org/en/Niseko

      There is already foreign investment pouring in from real growing interest in the area and Chinese have only recently started to join in. The number of Chinese with disposable income wanting to go on vacation close to home and/or invest is only going to grow and with Niseko still in growth phase, property prices are still relatively cheap compared to other areas in Japan. But now there is good foreseeable demand with the Chinese coming in and paying in full with cash. This probably means that the real price of real estate is still too low and property values will likely rise even more as owners start to see the growing demand for their property. Hell if I had the money, I would invest in Niseko.

      Take a look at what happened to the real estate market in Vancouver from the 80s to the present for example. Asian investors from China and India came in and bought out tons of properties in cash making property values skyrocket through the 90s and into the present with no abatement in sight. Not-so-well-off locals suffer from being unable to afford housing because of these investors who then redevelop the properties into higher density housing to meet growing demand from outside the country and make even more money then wash, rinse, repeat. The recent Olympics only added even more insult to injury.

      I would start looking at areas like Niseko; not yet quite developed having little infrastructure (read: low property prices) but having some nice qualities (eg. Niseko gets deep, reliable powder snow fed from Siberia, great local Japanese cuisine, close to China etc.) that have the potential for becoming big in demand for the ever growing mass of foreign consumers, especially Chinese. Investors will come buy up land cheap, redevelop the area to suit consumer taste and make mint. To do so, they will want as little local and government interference as possible. They will also probably avoid the metropolitan areas where Japanese are already well established, prices are high, and become more visible to the hostile Japanese status quo. The more depressed areas in the countryside will likely be more welcoming to sell out and this is where the revolution will start.

      With any luck there will be little to no domestic media coverage on these developments and the Japanese hostile to foreign ownership and influence will do their 上から目線 “how cute, gaijin are buying stuff here” ostrich-head-in-the-sand routine and not do anything serious about it until its too late (ie. restrictions on foreigners are slowly and silently lifted lobbied by the few affluent owners that want to appease shrewd investor demands in order to cash in. This continues until foreigners can accumulate enough influence over the economy from their investments to start being able to remove the restrictions themselves).

      “We have contributed so much to the community here (read: bought up and redeveloped to suit own tastes)… I think its only fair if we are given the ability to affect municipal polices… and be able to vote for them etc. (read: the electorate majority is foreign or pro-foreign ownership since they are employed by them etc.) Don’t you agree?”

      Ozawa and other ministers who were advocating pro-foreigner policies were probably lobbied by those who stood to profit from foreign investment including themselves. I highly doubt they would risk angering the status quo to be doing it “in the name of human rights”.

    11. Glenski Says:

      There have been a few Chinese sniffing around Obihiro recently. Not sure exactly what it is they are interested in, but word is that they have bought up some farming land. One guy who grew turnips has sold up.

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