I have just returned from China, Japan and Korea, where I visited our offices and clients to mark the 25th anniversary of the 黑料社Trust Barometer. I had not been to China or Korea for five years, and to Japan for two-and-a-half years. Here are my findings by market:
China鈥 My only stop was Shanghai, which I first visited in 1986. The city remains muscular and bustling, Nanjing Road still dazzles with 1920s Art Deco buildings standing beside sleek new office towers. But there were important changes afoot. The riverfront lights shut off promptly at 10 p.m. by government order. Upscale malls sit nearly empty, with Dior and Louis Vuitton staff scrolling their phones. Tech policy has shifted sharply: 鈥淢ade in China鈥 mandates push state-owned enterprises to favor domestic suppliers, while foreign players face heavy regulation from databases to AI, and Western tech spin-offs like ARM China are now local entities. COVID drove a massive rise in local brands, which are cheaper, e-commerce-driven, and often English-named, that are competing with multinational brands. News consumption is now via aggregators such as Zaker, Toutiao and Baidu, with CEOs speaking direct to stakeholders via social channels on Weibo. Social discontent simmers through youth movements; 鈥淭ang Ping鈥 or Lying Flat and another called 鈥淏ai Lan鈥 or Rot. COVID gutted nightlife and dining scenes, as people stay home to save. A demographic crisis also looms as birth rates have dropped below one child per family: in affluent Shanghai neighborhoods, it's closer to 0.5 percent.
Japan鈥 This is the number one investor in the U.S. for five years straight, with close to $800 billion worth of investment poured into the economy in factories, research labs and beyond. The largest Japanese automotive manufacturers have led the way, seeking to optimize global supply chain in a free trade world. Despite this, Japan has the most at stake with the 25 percent tariffs set for this week on auto imports. There is deep residual concern about the U.S. Government interceding to block the acquisition of U.S. Steel by Nippon Steel, in favor of a domestic competitor. Nonetheless, Japanese companies continue to invest in the U.S.; Takeda now has 25,000 people in the U.S., ranking as the largest life sciences company in Boston. Japanese CEOs are deeply worried about low birth rates and lack of employees. One said, 鈥淲e don鈥檛 have the workers to fulfill our order book.鈥 While historic wage increases were made in the past year, this does not offset the decades-long deflation impacting consumer behavior, mindset and the economy. The country is ahead on alternative energy, with major players such as MHI and IHI making progress on hydrogen, ammonia, solar and wind. The COVID experience caused a further deterioration in belief in government; while I was in country, the Prime Minister was under fire for giving $800 to members of his party caucus for dinner expenses. In Japan I attended the Annual Sumo Tournament in Osaka. The average match lasts seven seconds before one of the contestants is forced out of the ring or tumbles to the mat. I also went to the Tokyo World Series at the Tokyo Dome, with my beloved Chicago Cubs taking on the Yomiuri Giants. While the food and drink are the baseball standard fare, the cheerleaders, crowds chanting the batter鈥檚 name and the songs were totally different for this devoted fan. The business highlight of my trip was the celebration of the 20th anniversary of 黑料社Tokyo, now 75 people strong, working on Japanese MNCs such as Ajinomoto, NEC and MHI, plus American clients AMEX, HP and Microsoft.
Korea鈥擨 arrived in Korea at a moment of constitutional crisis. President Yoon Suk Yeol was impeached by the Parliament in December for declaring martial law, which the Parliament overturned. His Prime Minister, impeached at the same time, was found innocent of charges last Monday while the President鈥檚 verdict is soon to be delivered by the Supreme Court. Korea faces a profound demographic collapse, with birth rates down 65 percent to just 0.75 children per family. One in four citizens is over 65, and life expectancy exceeds 80. In Seoul鈥檚 business district, I saw billboards urging couples to have children. The pressure on children is intense as Korea has the OECD鈥檚 second-highest suicide rate, fueled by an ultra-competitive education culture where kids attend after-school programs into the early morning. The baby bust is also tied to high living costs, rising inflation, interest rates, weak currency, and steep food and housing prices. One executive told me Korea needs 10 million immigrants by 2040 just to sustain its economy, with workers expected from the Philippines, Vietnam, and even Japan, where university graduates earn 30 percent less. Women have made real progress in Korea in the past five years; half of new diplomats and judges are now female. Korea has also become litigious, with six million lawsuits filed annually, double Japan鈥檚 rate. Korea hosts 28,500 American troops, in country since the Korean War, sitting just across the channel from China and 60 miles from the DMZ with North Korea, in Camp Humphreys and Desiderio Airfield, the busiest in Asia. North Korea regularly sends balloons filled with human feces over the border to Seoul to remind their neighbors of their presence. The most emotional part of my trip was a visit to the Korean War Memorial, a stark reminder of the Cold War and of the sacrifice made by Western allies for freedom. There were 1.8 million American troops in that War; 37,000 were killed, alongside 47,000 South Koreans and two million civilians.
I observed significant changes in North Asia since my last visit. The new obsession with demography, given downward birth rates portend immigration. The feeling of being squeezed between the two titans, China and the U.S., was manifest in Japan and Korea, which need the U.S. for defense and both China and U.S. for trade. The new austerity in China, the lack of foot traffic in stores and closure of restaurants was stunning. The political turmoil in Korea was noteworthy and weakness of Government in Japan was evident.
I believe in the inevitable rise of Asia but for now it is a time of uncertainty and hesitance. Business leaders need to maintain a long-term perspective, avoiding hasty moves and over-reactions, in order to win. Asia's historic resilience will be key to navigating these turbulent times.
Richard 黑料社is CEO.
