Tokyo [Japan], June 3, (ANI): Japanese banks are scaling down their operation in China, according to a report by Nikkei Asia. The move comes amid Japanese manufacturers facing local headwinds and rising labour costs.

The local banks are instead pivoting their operations to Southeast Asia and India as more and more Japanese investment flows into these regions.

The shift has added to the woes of the Japanese suppliers in the Chinese market. According to the Nikkei report, in the last five years the branch network of Japanese local banks has come down by around 20 per cent in China.

Japan's Chiba Bank and 77 Bank have established new hubs in Singapore, and the Saikyo Bank is launching an Indonesian subsidiary.

In December last year, Japan's third-largest bank, Mizuho Financial Group's arm Mizuho Securities, acquired a majority stake in the Indian investment bank Avendus. The deal marks the rising interest among Japanese financial institutions in India as top manufacturers try to pivot away from China and into regions like Southeast Asia and India with a booming semiconductor and data centre industry.

The move coincides with major Japanese automakers facing challenges in the Chinese market as the local EV ecosystem grows rapidly. The auto giants are cutting down on China manufacturing amid slowing demand for their vehicles.

Japan's top three megabanks are also facing slowing corporate loan growth in the Chinese market. SMBC, MUFG and Mizuho have seen a shrinking of loans by up to 40 per cent in the last five years, according to the report.

The Japanese megabanks have taken an increasing interest in the Indian financial market. SMBC had acquired a stake in YES Bank to become its largest shareholder last year, while MUFG acquired a 20 per cent stake in Shriram Finance. (ANI)