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Japan business leaders return to China seeking to bolster cooperation

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Japanese national flag is hoisted atop the headquarters of Bank of Japan in Tokyo, Japan September 20, 2023. REUTERS/Iss...

Japanese national flag is hoisted atop the headquarters of Bank of Japan in Tokyo, Japan September 20, 2023. REUTERS/Iss...

BEIJING, Jan 25 (Reuters) - A delegation of about 200 Japanese business leaders and CEOs returned to China this week in their first visit since 2019 as they sought to bolster economic relations in the face of geopolitical headwinds that have strained bilateral ties.

Japanese economic delegations had visited China every year since 1975, but those visits lapsed during the COVID-19 era when China largely shuttered its borders due to its stringent pandemic policies.

On Thursday, delegates from the powerful Keidanren, as the Japan Business Federation is known, and Japan-China Economic Association met Chinese Premier Li Qiang at the Great Hall of the People.

"Premier Li Qiang said China-Japan relations are currently in a critical period of inheriting the past and ushering in the future," Wang Wenbin, a Chinese foreign ministry spokesperson, told a regular news conference.

"It is hoped that the Japanese economic community will actively exert an influence on win-win cooperation between China and Japan."

Ties between Japan and China have become strained after the world's second- and third-largest economies clashed over issues from Japan's release of treated radioactive water into the ocean to detention of Japanese citizens on suspicion of espionage.

Japan's curbs on export of advanced chipmaking equipment to China have also fanned Chinese accusations that Japanese Prime Minister Fumio Kishida's government was following in the United States' footsteps in "containing" China's economic development.

But during a rare meeting between Kishida and Chinese President Xi Jinping in November, both men agreed their countries ought to pursue mutually beneficial relations.

Japan is heavily reliant on China, where Japanese companies have for years invested in building manufacturing supply chains and forged relationships with local partners.

China was both Japan's top export market, at $145 billion, and its single biggest source for imports, at $189 billion, in 2022.

But the number of Japanese firms planning to expand in China fell below 30% for the first time according to an annual survey published late last year, with some firms citing concerns about economic uncertainty and others highlighting geopolitical risks.

China last year arrested a Japanese executive, an employee of the drugmaker Astellas Pharma, on suspicion of espionage. The move has had a chilling effect on business, Japanese officials say.

"All of China's law enforcement and judicial activities are carried out based on facts and the law," said the Chinese spokesperson.

"As long as companies operate legally, there is no need to worry. We welcome companies from all countries, including Japanese companies."

A growing number of Japanese businesses are also grappling with slumping China sales due to rising local competition, China's uncertain economy and negative Japanese sentiment following the wastewater release from the Fukushima facility.

Japanese automakers from Toyota and Nissan are also battling a market share fall in China as they lag behind local rivals in EV offerings in the world's biggest auto market.

(Reporting by Ryan Woo in Beijing, Miyoung Kim in Singapore and David Dolan in Tokyo; Additional reporting by Eduardo Baptista in Beijing; Editing by Michael Perry and Raju Gopalakrishnan)