China
hand seen behind vast buy-up of Japanese
shares By Hussain Khan
TOKYO - China, which over the past months
has emerged as a top shareholder in leading
Japanese companies, is not buying such large
stakes aimlessly. Its targets are Japan's biggest
trading and financial groups and leaders in
specific technological fields, in line with
Beijing's own long-term plans.
China's
style of development, though it has become more
open to capitalism over the past three decades, is
different from that of capitalist countries. It
has allowed free enterprise, but it has maintained
its socialist pattern of controlling and
developing its economy through five-year plans.
During the past 60 years, it has attained the
goals set in each of its five-year plans and now aims
to achieve the goals set out
in the 12th, which runs from 2011 to 2015.
Beijing aims to develop "strategic
emerging industries" in a wide variety of fields,
including biotechnology, information and
environmental technologies, machinery, energy,
materials and autos, according to a Nikkei report.
Under its 12th five-year plan, Chinese investors
favor Japanese companies for their technologies in
such fields, according to Naoki Tashiro, president
of TS China Research, while investments by China's
sovereign wealth fund are "closely linked" to the
plan.
The Nikkei report highlights the
close relationship between Chinese adaptation of
foreign technologies and their original
developers, pointing to China applying in the US
and other countries for patents on high-speed
bullet trains it has developed based on Kawasaki
Heavy Industries Ltd's technology for
shinkansen bullet trains, claiming the
technology as its own.
While China
considers it more efficient to introduce
cutting-edge technologies from foreign companies
than to develop them by itself, Japanese companies
have such technologies but are often unable to
profit from them. As a result, given their low
stock prices, Japanese companies "may appear
undervalued" to China, Tashiro said in the Nikkei
report.
Mitsubishi Corp, in which an
investor in the name of OD05 Omnibus is the
sixth-largest shareholder, has operations in water
purification and desalination, wind power and rare
earth elements. The same investment fund is the
sixth-largest shareholder in Nippon Telegraph and
Telephone Corp, which has developed technology in
telemedicine. [1] Toray Industries Inc, in which
OD05 Omnibus is the seventh-largest shareholder,
possesses carbon fiber technology used in midsize
passenger jets.
OD05 Omnibus is the
fifth-largest shareholder of Sony Corp and the
pioneering Takeda Pharmaceutical Co. Sony had been
always a leader in developing electronic products,
while Takeda is considered the top developer of
new medicines in the country, as well as the
biggest. It is reported that Takeda is employing 500 PHDs for research on developing new medicines.
Less clear is the reason for OD05
Omnibus becoming the third-largest shareholder of
Mitsubishi UFJ Financial Group Inc, Sumitomo
Mitsui Financial Group Inc and Mizuho Financial
Group Inc - Japan's top banking groups. The scale
of such stakes in such big banks is a very
significant, and the Japanese are wondering as to
what may be the Chinese motive behind it.
Of similar concern is that the same entity
is the fourth-largest shareholder of Mitsui &
Co and sixth-largest shareholder of Mitsubishi
Corp - the biggest trading groups in Japan for
over 100 years. It is the seventh-largest
shareholder of Softbank Corp, a world-leading
innovator in mobile phone development including
mobile reception of TV, and motion control
sensing.
Omnibus stands out among the
otherwise predictable list of names, such as
custodian Japan Trustee Services Bank Ltd, that
make up the biggest investors in Japan Inc.
OD05 Omnibus has its head office in
Sydney, Australia, but such huge investments in
Japan and other countries by this investor
indicate that such a job can be done only by a big
sovereign fund. Tatsuya Imade, managing executive
officer at Japan Shareholder Services Ltd, says
that OD05 Omnibus is "very likely a Chinese
sovereign fund".
Several factors lie
behind that assumption, including its full name -
the SSBT OD05 Omnibus China Treaty fund - and that
a Chinese investor has business ties with one
custodian's Sydney office. The Nikkei Veritas has
found evidence supporting this view from a
shareholder research service provider.
Eiichi Sekine, chief representative of the
Beijing office of the Nomura Institute of Capital
Markets Research, also endorses the hypothesis.
"[Omnibus] seems to be managing assets of China
Investment Corp [CIC], among others," said Sekine
referring to China's main sovereign wealth fund.
CIC added $35.7 billion in new investment
in 2010, and made a net profit of $51.5 billion,
China Daily reported on July 27, citing the fund's
annual report released this week. The fund ended
the year with a net asset value of $374 billion.
In the six months to the end of September
2010, OD05 Omnibus bought an estimated 1 trillion
yen (US$12.8 billion) in Japanese shares.
During that period it concentrated on
banking shares, increasing its holdings in Mizuho
Financial Group Inc by as much as 90% from six
months earlier to about 330 million shares at the
end of September, equivalent to 1.47% of the
megabank's outstanding stock.
The fund
also became a major shareholder of Canon Inc at
the end of September. It is the ninth-largest
shareholder of Canon, noted for its innovations in
fields such as medical imaging and optics.
The SSBT OD05 Omnibus China Treaty fund
owns the 11th-largest aggregate stake by value in
90 listed Japanese firms, at nearly 1.8 trillion
yen, according to a survey based on securities
reports filed by listed firms and other disclosure
documents.
The Nikkei report says that at
the end of March 2011, OD05 Omnibus held shares
worth a total of 2.5 trillion yen, nearly 2% of
the firms' combined market value. It is also
believed to have bought shares in companies that
are not subject to disclosure requirements.
Assuming a similar stake of 2% in those firms,
that would increase the size of the fund's
holdings by several times.
There was a
time in the past during the bubble economy of
Japan in the 1980s, when the world was afraid of
Japan for its buying binge of assets in America
and Europe. The entire Rockefeller Center of New
York was bought by Mitsubishi Estate in 1989.
On November 8, 1989, Sony Corp acquired
the American film and television production
company Columbia Pictures Entertainment, Inc (its
stable included Columbia Pictures, Tri-Star
Pictures and others) from The Coca-Cola Co for
$3.4 billion. Sony also acquired the Guber-Peters
Entertainment Co for $200 million (formerly Barris
Industries, Inc), and hired Peter Guber and Jon
Peters to head its Columbia Pictures Entertainment
acquisition.
The company was renamed Sony
Pictures Entertainment on August 7, 1991. Sony's
financial position has now deteriorated so much it is
facing losses in its balance sheet, but in the
1980s it helped to created a Japanophobia in the
West.
Bill Emmot, editor of The Economist
in Great Britain at that time, wrote a book with
that title - Japanophobia. Replying to a
question by C-Span founder and chief executive
Brian Lamb, "Why do you say there's the 'myth of
the invincible Japanese'?", Emmot said,
Because I think in the 1980s, in
particular, perceptions of Japan, particularly
in the United States, but also in Europe, too,
came to be characterized by the idea that
Japanese companies had, I don't know, found the
elixir of eternal strength. They were going to
beat the world; they were going to take over the
world; Japanese hegemony was predicted and
feared by a lot of people.
There was an
idea that Japan and Japanese companies had
discovered something that Americans haven't
discovered, and that this was going to lead them
on and on and on, and beat off American
competition, make Americans more impoverished,
make Europeans even more backward than they
actually are, and so on.
Now China is
replacing Japan and someone may start writing a
book on China-ophobia on similar lines.
Note 1. Telemedicine -
the use of audiovisual media for examinations and
medical procedures.
Hussain Khan
holds a master's degree in economics from Tokyo
University and has worked in Japan as an equities
analyst. He is an independent Tokyo-based analyst
on current affairs and economic issues for various
newspapers and magazines and he is a specialist on
the Japanese economy. He can be contacted at
cj@ourquran.com.
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