As of 2025, China had 29 cities entering the “trillion GDP club”. From a spatial perspective, these include major cities such as Shanghai, Shenzhen, Guangzhou, Suzhou, Wuxi, Ningbo, Qingdao, and Dalian. Cities with GDPs exceeding RMB 1 trillion are not only the engines of China’s regional economy, industrial upgrading, and open economic system, but also key pillars supporting the country’s overall economic development and stability. In this regard, there is a crucial role played by Japanese enterprises within the internal structure of these “trillion GDP club” cities.
According to an analytical commentary by the China–Japan research unit (from an ANBOUND lab discussion group), these 29 “trillion GDP” cities in China have, in practice, developed a highly interconnected and mutually reinforcing relationship with Japanese companies. Unlike other foreign enterprises, Japanese firms are highly concentrated in these “trillion-level” cities and their surrounding areas, forming a significant component of foreign investment within this group. The investment, technology, industrial supply chain integration, and export momentum brought by Japanese enterprises have directly supported these cities in surpassing the trillion-yuan threshold, while continuing to strengthen the foundations of China’s manufacturing sector and foreign trade.
The relationship between Japanese enterprises and the development of China’s “trillion GDP cities” has not come easily. It is closely tied not only to China’s reform and opening-up and its active integration into the global market, but also to the building of a unified domestic market and the future development of the two countries’ relations. In particular, the direction of future China–Japan ties will, to a large extent, determine whether the cooperative relationship between Chinese and Japanese enterprises in these cities can continue to exist. Yet, judging from various geopolitical signals, the outlook is indeed far from optimistic.
There appears to be a clear but insufficiently prudent tendency， that whenever China’s relations with another country encounter friction, conflict, or deterioration, the first instinct is often to resort to sanctions, export restrictions, or blockades. What was once a highly cautious geopolitical strategy at the highest levels is now being applied more broadly, almost as if China has adopted the same widely criticized geopolitical playbook associated with the United States. On the surface, international relations may seem like a dynamic exchange of moves and countermeasures; in reality, however, the same approach is repeatedly used. From the United States and Japan to South Korea, Australia, France, the Netherlands, and even Panama, this tactic has lost its effectiveness once overplayed (ANBOUND, 2025). Not only does it yield limited results, but it may also produce serious side effects, one of which is the potential threat it poses to the economies of China’s “trillion GDP cities.”
Sanctions, blockades, and embargoes are all economic measures; any economic measure inevitably comes at a cost to the economy and to industry. As a major power, China would be expected to pursue a diplomatic strategy befitting its stature. In fact, China invests enormous resources each year in its diplomatic efforts, all aimed at building and maintaining relationships. Yet when problems arise, these efforts often recede into the background, and what comes to the forefront are measures involving rare earths, industrial leverage, and enterprises. This actually brings negative consequences to both sides.
Looking back at an earlier period in China’s diplomatic history, the country’s economy was underdeveloped and marked by scarcity. There were few competitive goods to speak of, and there were no meaningful interdependent economic relationships. As a result, diplomacy at that time was purely diplomatic in nature. It emphasized the skillful management of international relations and relied heavily on diplomatic means, i.e., negotiations conducted by diplomats, the use of institutional and party-to-party connections, the balancing of state-to-state relations, and the application of concepts and theories related to social movements. Different social groups, blocs, and classes each had structured positions on what to support and what to oppose, all within a discernible framework.
All those corresponding departments and institutions still exist, and substantial funds are spent on them each year, yet they are largely ineffective. At the first sign of tension, the response is often to impose rare earth export bans, sever trade ties, and halt industrial cooperation. This is basically cutting off economic relationships that have been built over decades. If this continues, the importance of economic and trade authorities will far surpass that of diplomatic institutions.
Therefore, China should not treat its long-established external economic ties as policy tools that can be easily severed at will. What must be recognized is that, in today’s deeply interconnected era of globalization, economic relationships are no longer merely arrangements of trade and investment. They have become an integral part of a country’s external relations system, a strategic asset for stabilizing expectations, sustaining cooperation, and preserving room for maneuver.
Taking the relationship between Japanese-funded enterprises and China’s “trillion GDP cities” as an example, its formation is not the result of short-term capital flows, but rather the cumulative outcome of decades of institutional alignment, industrial coordination, local governance, and market opening. Japanese companies are deeply embedded in China’s high-end manufacturing, R&D support systems, and export networks. They have not only helped a number of cities cross key development thresholds, but have also, to a significant extent, enhanced the efficiency, resilience, and global connectivity of China’s manufacturing system. Once such a relationship is disrupted, the loss goes far beyond any single project or individual investment. What is at stake includes the local industrial ecosystem, market confidence, and the future space for economic upgrading.
The crux of the issue lies in the fact that many countries today, such as the U.S., are increasingly inclined to weaponize economic relationships when facing friction, resorting to measures like sanctions, embargoes, and decoupling to manage disputes. On the surface, such approaches may appear swift and decisive. However, in reality, they trade the long-term foundations of cooperation for short-term, symbolic gains in strategic maneuvering. If handled poorly, they often undermine the stability of a country’s own system and may ultimately spill over into its political base, affecting the solidity of its political standing.
Recognizing this, China should adopt an especially cautious approach on this issue. Although China is a global manufacturing hub and a major market, it does not possess the same level of global consumption absorption capacity as the United States. One of the fundamental reasons the U.S. has stronger tools for sanctions and decoupling within the global system lies in its vast consumer market, the dollar system, and the support of its financial networks. These allow it, to some extent, to redistribute external shocks through market absorption, rule-setting, and capital allocation.
China’s strengths lie more in the completeness of its industrial chains, manufacturing efficiency, and market potential, rather than in serving as the ultimate absorber of global goods. One is fundamentally a consumption-driven economy, the other an industrial one； the difference is quite pronounced. This means China has greater reason to value and preserve its existing international economic linkages. The stable functioning of China’s economy depends not only on its “internal circulation”, but also to a considerable extent on “external circulation”, that is, external markets, technological collaboration, capital expectations, and industrial support systems. Cutting off economic ties lightly may not effectively pressure others, and could instead first erode China’s own openness dividends and developmental resilience.
At a deeper level, if economic measures become the primary response whenever friction arises, it may in fact indicate a rapid weakening in the capacity to manage relationships through non-economic means. A truly mature external engagement framework should rely on multiple channels operating in parallel, such as diplomacy, local-level cooperation, industrial communication, people-to-people exchanges, and sectoral mechanisms, so that even when relationships fluctuate, there remain buffers, avenues for mediation, and space for repair.
Therefore, what China needs to emphasize is not the abandonment of necessary countermeasures, but the avoidance of hastily pushing economic ties to the forefront of confrontation. The more hard-won and deeply embedded a cooperative relationship is, the more carefully it should be handled. High-level external relations are not defined by the readiness to sever ties, but by the ability to preserve connections, stabilize expectations, and retain room for maneuver in a complex environment. Only in this way can the long-accumulated gains from openness truly be transformed into strategic national resilience.
Now, the relations between the Chinese and Japanese industrial sectors have already begun to trend negatively. Japan’s industrial priorities have shifted from “efficiency first” to “security first”, particularly as the United States’ role in the Asia-Pacific evolves. Industry and technology have been fully incorporated into the national security framework. Japan’s Economic Security Promotion Act, enacted in 2022, has already partially removed key industries from the pure market system and placed them under national security oversight. As a result, the behavior of Japanese enterprises is no longer driven solely by market logic, but is instead subject to strict constraints imposed by national strategy.
However, according to the assessment and projections of ANBOUND’s founder Kung Chan, as long as China’s economy maintains stable growth, industrial relations between China and Japan are likely to recover after a period of downturn. The main reasons are twofold. First, the value and utility of China’s vast domestic market, coupled with the relative exclusion of Japanese industry from the large markets in the Americas. Second, Japan’s pursuit of a more independent and conservative policy orientation may lead to a gradual shift away from reliance on the U.S. and toward greater engagement with Asia and Africa.
Therefore, the current difficulties facing China–Japan industrial relations are likely to be temporary. At the same time, it is evident that China’s adoption of a cautious approach in managing strategic economic assets and preserving room for policy flexibility is also a clear geopolitical necessity. Such prudence will ultimately contribute to the stability and long-term development of China’s economy.
Final analysis conclusion:
The deeply embedded industrial interdependence between China’s “trillion GDP cities” and Japanese enterprises has, in essence, become a strategic asset within the national economic system. Its stability is directly linked to China’s manufacturing upgrading and the foundational strength of its foreign trade sector. The current tendency in foreign policy to instrumentalize economic relations and frequently resort to sanctions and decoupling risks undermining China’s long-term dividends from openness and its industrial resilience. A more sustainable approach would be to adopt a cautious strategy to safeguard existing international economic ties, preserving space for cooperation and strategic flexibility within a complex geopolitical environment.
