The count is also 29.7% below the 2012 peak of 14,394 and the lowest since Teikoku began the series in 2010. The credit research firm counts Japanese companies with local subsidiaries, affiliates, representative offices and other operating presences in mainland China, excluding Hong Kong and Macao.
Over the same two-year period, Teikoku recorded 1,221 new entrants and a record 4,137 businesses in a combined category covering companies that withdrew or whose whereabouts could no longer be confirmed. That distinction matters: the entire 4,137 figure should not be treated as confirmed exits. The difference between those figures produced the net decline of 2,916 companies.
The decline reaches China's business core
Manufacturing remains the largest sector, with 4,206 Japanese companies, followed by wholesale with 3,320 and services with 1,213. Together, the three sectors account for about 86% of the total, but all contracted sharply between 2024 and 2026. Manufacturing lost 933 companies, wholesale lost 898 and services lost 590.
Shanghai still hosts the largest concentration, at 3,961 companies. That was 1,085 fewer than in 2024, a 21.5% decline that Teikoku linked in part to consolidation of local entities and corporate management functions.
Teikoku said the data show a clear shift from expansion to restructuring. Its report points to China's property-led slowdown, higher labor costs, tighter regulation, pressure from local competitors and geopolitical risks. CNBC also reported that tariff uncertainty and strained Japan-China relations are pushing companies to reassess their exposure.
Diversification, not a complete departure
Tariff concerns are especially acute for manufacturers. In an earlier Teikoku survey of roughly 450 Japanese companies operating in China, 47.1% expected tariff negotiations to reduce their fiscal 2025 earnings. The share rose to 58.4% among manufacturers, compared with 33.4% across all respondents.
Even so, China remains central to many Japanese companies. Among surveyed firms, 43.7% still named China as their most important production location and 31.3% named it their most important sales market. Those shares have fallen from 49% and 47.7%, respectively, in 2019, as more companies have shifted attention toward Southeast Asia, India and the United States.
Teikoku's conclusion is more measured than a wholesale exodus: many Japanese companies are keeping operations in China while reducing their dependence on the country. China's manufacturing infrastructure, supplier networks and consumer market remain difficult to replace, even as the balance of costs and risks changes.
