At the end of August, the Academy of International Business and Economics under the Ministry of Commerce released the "Multinational Corporations in China" series research report for the fifth consecutive year. The report indicates that the development of multinational corporations in China is an important part of the Chinese modernization process and also a direct beneficiary of it. Currently, Suzhou, located in the Yangtze River Delta region, has become one of the main investment hubs for Japanese companies in China. This year, several Japanese companies have celebrated their 30th anniversary of investment in Suzhou. Hitachi Industrial Systems' subsidiary, Sullair China, has witnessed the changes in China's manufacturing industry over the past 30 years. Hideharu Tanaka, the Executive Director of the company, told Yicai at the 30th-anniversary celebration of Sullair China that the company maintained continuous growth for 5 to 8 years before the pandemic; compared to the low point in 2020 due to the pandemic and other impacts, the current growth rate exceeds 15%, and the fiscal year of 2024 is expected to be roughly on par with the previous year. Hitachi Group's senior management chose to visit China immediately at the beginning of last year, demonstrating their emphasis on the Chinese market and their determination to continue to deepen their presence in China. Last year, the group proposed the policy of "In China, For China," which is also a commitment to increase investment in the Chinese market, especially in research and development and service inputs. The aforementioned report believes that China is accelerating the green transformation of its development model, bringing broad cooperation opportunities for multinational corporations—traditional industries' green and low-carbon transformation and upgrading contain huge opportunities, and the rapid development of emerging industries also harbors a vast market. In recent years, emerging industries such as new-generation information technology, new energy vehicles, clean energy, new materials, high-end equipment, and environmental protection equipment have developed rapidly.

From Shenzhen to Suzhou

Starting in Shenzhen, China, 30 years ago, Sullair China has since witnessed the rapid growth of the entire East China region, including the Suzhou Industrial Park, and realized the need to migrate some business segments to the East China region. In 2007, Sullair China settled in the Suzhou Industrial Park. In 2017, Sullair was acquired as a wholly-owned subsidiary of Hitachi Group, and Suzhou Sullair was renamed Hitachi Compressor (Suzhou) Co., Ltd. Currently, the Suzhou factory has become the main base for Sullair's global production, research and development, sales, and administration in China.

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Over the past 30 years, Suzhou Industrial Park, Suzhou High-tech Zone, and Kunshan City have all become one of the main areas for Japanese investment in China. Currently, there are more than 6,800 Japanese companies in Jiangsu, and Suzhou has introduced more than 3,000 Japanese companies, most of which are manufacturing enterprises. Data from the Suzhou Municipal Bureau of Statistics shows that, as of the end of 2023, a total of 175 Fortune Global 500 companies have invested in Suzhou, with 47 from Japan, the most from any country or region. At the same time, 768 Japanese companies have settled in the Suzhou High-tech Zone, accounting for about 1/4 of the city's Japanese companies and 8% of the entire Yangtze River Delta region.

Information provided by the High-end Manufacturing and International Trade Zone of Suzhou Industrial Park shows that Hitachi Compressor (Suzhou) factory has more than ten high-efficiency production lines, meeting the production and testing needs of all the company's products, including fixed-screw compressors, mobile-screw compressors, screw vacuum pumps, etc. The products are sold nationwide, in Southeast Asia, and other regions. Currently, Hitachi Compressor has become one of the important enterprises in the high-end equipment manufacturing industry of Suzhou Industrial Park.

At the meeting, Tachibana Yoshihiko, General Manager of Hitachi Compressor (Suzhou) Co., Ltd., told Yicai that currently, in terms of business form, the main focus is on the Chinese market, with overseas business accounting for about 20% to 30%, and most of it still serves the entire Chinese market. To achieve stable growth in the regional market, it is necessary to continuously promote the localization of the supply chain to transform based on market changes. Among them, Sullair China's supply chain has also achieved about 98% localization. At the same time, they have also increased investment in China in the field of research and development.

Optimistic about these opportunities in the Chinese market

From aerospace to automobiles and construction, compressors are considered the driving force of the factory's power system. John Randall, Global President and CEO of Hitachi Global Air Power, believes that the biggest change in recent years is the rapid development of the industry's digitalization, including electronics, chips, and data centers, which are some of the points of high-speed growth in the application industry. "Industries such as the battery industry for electric vehicles, including the new energy industry, are areas where we now see a significant increase in demand for compressors, especially high-end compressors, compared to 10 or 20 years ago, or we can see a very large potential industry."

John also mentioned that, in terms of the Chinese market, the company has had long-term cooperation with a leading enterprise in the new energy industry since its early days. He said that from the booming electric vehicle industry in the Chinese market, he has felt the strong demand for lithium batteries.

Tachibana Yoshihiko also said, "Perhaps 10 years ago, the Japanese automobile manufacturing industry in China was very strong, but in the past two years, due to the rise of local Chinese brands, the production capacity of old Japanese automobile brands has probably shrunk by 30-50%. A compressor is the source of power for a factory's power system, and a decrease in demand means that there are shortcomings in the areas that were originally competitive, which also forces us to adjust our direction and focus most on industries with greater or more popular market demand." Therefore, he said that in recent years, we can see the rapid development of China's semiconductor industry and the high growth in demand.Regarding the large-scale equipment renewal and consumer product exchange for old goods that the Chinese government is currently vigorously promoting, Hideharu Tanaka stated that, from an engineering design perspective, the general lifespan of a compressor is 10-15 years, but it also depends on the condition of the customer or user's utilization. "There is no unified standard yet, but as far as we understand, the compressors mainly used in China are screw compressors, and there will be a market size of over 500,000 units for those with a lifespan of more than 10 years. This is a significant business opportunity."

On August 30th, the Japan Chamber of Commerce in China released the results of a survey on the business climate and understanding of the business environment among its member companies. More than half of the Japanese enterprises in China will "increase or maintain" their investments, and the satisfaction with the business environment has improved for the fourth consecutive time in the survey. The Vice Chairman of the Japan Chamber of Commerce in China, Masami Miyashita, stated that the willingness of enterprises to invest remains positive, mainly based on the perception of the Chinese market by Japanese companies. Japanese companies consider the Chinese market to be very important globally, and to continue their economic activities, they must make continuous investments.