January 10, 2023
BEIJING – The post-Cold War global structure has collapsed amid the confrontation between the United States and China, not to mention Russia’s invasion of Ukraine. What will become of the world order long led by the United States? What strategies should Japan take in response? The following is the second installment in a series of articles looking into the struggle for mastery among global powers in the economic arena.
The Chinese government’s tightening of its regulations targeting cosmetics is causing a stir.
According to several sources, the authorities require cosmetic companies to register all the raw ingredients used in cosmetic products by the end of April. If the registration is not completed by then, they will no longer be able to sell their products in China. This is perceived as Beijing’s attempt to target foreign manufacturers over full disclosure of the chemical composition of cosmetics.
In 2020, the Chinese government revised its cosmetic regulations for the first time in about 30 years and put into effect supervisory provisions based on the new regulations. The provisions require cosmetics manufacturers to submit a dossier of compounding tables that stipulate the names and blending ratios of base ingredients used in the product, and also require ingredient suppliers to disclose the ratio of raw ingredients. The latest tightening of the rules is a call for the full implementation of these regulations.
The compositions of cosmetics are trade secrets that manufacturers have cultivated over many years. If disclosed, the information will be passed on to Chinese companies, and there is a high likelihood that cosmetics of the same quality will be produced at a lower cost. Major manufacturers in Japan, the United States, France and other countries have voiced their opposition to Beijing’s move, saying that it is a “plausible excuse for technology transfer by dint of the massive size of the Chinese market.”
The Chinese cosmetics market has been expanding rapidly in line with the country’s economic growth. According to data from the National Institute of Technology and Evaluation (NITE), in 2019 the Chinese market was worth approximately $57.2 billion (about ¥ 6.3 trillion at the time), making it the second-largest in the world after the United States.
Many foreign manufacturers are seeking to expand their sales channels in the Chinese market. A senior official of a Japanese-owned cosmetics company said, “We don’t want to register all the ingredients, but if we don’t, we won’t be able to enter the market.”
China has also embarked on adopting regulations for office equipment such as multi-function devices, requiring all processes including design and development to be carried out in China. Japan has also had its highly advanced technologies, such as those related to bullet trains and photovoltaic panels, taken by China. Japan’s cosmetics industry association, in cooperation with their U.S. and European counterparts, is poised to ask the Chinese authorities to reconsider the regulations.
Russia’s economic decline
China is trying to dominate the global cosmetics market because its strong economy is the source of its national strength. On the other hand, Russia, another authoritarian country, has seen its economic power decline, including its manufacturing industry, and this has become a weak point. Due to economic sanctions imposed by the United States, Europe, Japan and other countries in response to its invasion of Ukraine last February, Russia has become unable to import parts and high-tech products, prompting a widespread decline in its production activities and consumption. Passenger car production in the January-October period of last year plummeted to just over 30% of what it was during the same period of the previous year.
In St. Petersburg, the hometown of Russia’s President Vladimir Putin that is on the western edge of the country, there is a manufacturing plant on its outskirts that Toyota Motor Corp. decided to close because of difficulties in procuring parts and components and distributing its products in Russia. When I visited the plant in mid-December last year, there were traces of the “TOYOTA” signboard having been removed from the exterior wall.
According to the factory’s labor union, employees were fired in November, except for those who are to manage the facility and complete other tasks until it is completely closed. A 38-year-old man who had worked at the plant for about 15 years, said: “We enjoyed good welfare and social services and our jobs were very stable. Until the very day we were dismissed, everyone was hoping that the decision to pull out would be reversed.”
After the collapse of the Soviet Union, Russia tried to shift toward the market economy system. Foreign automakers being invited to set up their plants in Russia was a demonstration of Putin’s strong desire for this. However, following Russia’s invasion of Ukraine, Nissan Motor Co. was also forced to withdraw its Russian operations. Keiko Ito, a professor of international economics at Chiba University, said: “Many Japanese companies have continued making an overseas investment that prioritizes profitability even when the international situation has become unstable due to deteriorating relations between the United States and China, for instance. We are at a turning point where they should reconsider this attitude.”