Chinese regulators conducted an off-site investigation into a Japanese cosmetics maker's production processes and halted imports of the firm's products, citing compliance concerns, sources familiar with the matter said Thursday.
It is rare for Chinese authorities to directly target an overseas manufacturing base and the move is believed to be part of Beijing's efforts to increase scrutiny of foreign businesses that sell products in China.
The probe of the Aichi Prefecture hair-coloring product plant of Nagoya-based Hoyu Co. was conducted online, though it is unclear exactly how the regulators went about their inquiries.
China's National Medical Products Administration said on Nov. 16 it suspects the company violated the country's law on production control after carrying out the investigation into the central Japan plant, the sources said.
The watchdog said the manufacturing processes for hair-coloring products at the Hoyu plant in the city of Seto failed to meet Chinese technical regulations, they added.
The regulatory body also pointed out the manufacturing process at the plant was different from what the company had disclosed to Chinese authorities.
Hoyu decided to not push back against the Chinese authorities' wishes to investigate as it hopes to continue conducting business in the country.
Hoyu told Kyodo News it will "respond to the matter in accordance with guidance from (Chinese) authorities."
A Japanese government source said tighter scrutiny of foreign businesses operating in China could curb exports to the country and benefit Chinese producers. The rare investigation was conducted against the backdrop of Beijing's promotion of domestic production in various sectors, the source added.
Amid that trend, foreign businesses have been generally wary of possible technology leakage to China.
Japanese businesses have recently faced headwinds in the Chinese market with Japanese products widely boycotted in the wake of the release of treated radioactive water from the crippled Fukushima nuclear power plant, starting in August, and the detention of Japanese nationals over spying allegations.
Ichiro Korogi, professor and an expert in modern China at Kanda University of International Studies, said he believes the probe was an attempt by China to obtain Hoyu's technology.
"This was meant to pressure (Hoyu) into disclosing technology related to its production process in exchange for allowing the company to do business in China's gigantic market," Korogi said.
He added China's tactic of targeting a specific company was intended to serve as a warning to the whole industry.
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