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The director of Panasonic urges the Chinese to move the risk of infringement of intellectual property

OSAKA – Panasonic's vice-president, one of China's oldest industrial allies, has been plagued by violations of intellectual property rights in the country, and warned that he too could soon become a victim of such violations.

There have been cases in China where technology transfers "were not done by ordinary methods," said Masayuki Matsushita, who has consolidated ties with Chinese manufacturing industry for over forty years.

"As China gradually accumulates intellectual property rights and starts selling them abroad," he said in a rare interview with the Nikkei Asian Review, "they will understand the pain of stealing them". Although he did not offer a quick solution to the situation.

Panasonic is under pressure from emerging Chinese competitors and the company is losing the dominant status that has defined one of the first global brands to enter the country.

"It's hard for [foreign companies like] To recover high market shares when the government favors state-owned enterprises and local companies, "Panasonic refrigerators now have only a market share of around 5%, while air-conditioning units only have about 2%.

The ongoing conflict between the US and China poses a critical risk to Japanese electronics, as it is preparing to intensify its focus on both markets, and Matsushita stressed the importance of free trade with the conglomerate .

"There is no doubt that free trade brings wealth to people all over the world and eventually leads to global peace," he said, while representatives from the United States and China gathered in Beijing.

The tense times in progress could not be worse for Panasonic. In the 2017 fiscal year, ending in March 2018, the company realized 53% of its 8 trillion yen ($ 74 billion) of overseas revenues, with more than half, $ 12 billion, coming from the Americas and $ 9 , 1 billion from China. It is also planned to set up internal companies in both markets this April.

It is believed that Panasonic has made significant long-term contributions to the country, and Matsushita is in a better position than most to offer a vision of the Chinese perspective. "In the course of history, there were conflicts between those who have and those who do not have the technology," he said.

The grandson of the founder of the company, Konosuke Matsushita, has spent a considerable part of his career in China, and has seen the transition from an economic reserve to an economic giant. Last month he was invited to a ceremony in Beijing's Great Hall of the People, in which his grandfather was one of only 10 foreigners to be rewarded for his outstanding contribution to the reform of the country and the opening efforts launched 40 years ago.

He also studied at the Wharton School of the University of Pennsylvania and served at the company's US subsidiary. It has always represented the company's bridge to the world.

Matsushita first visited Beijing in 1980, accompanying his grandfather on his second journey, which paved the way for exports, technology transfers and direct investment in the country in the following decades.

It was "a fantastic place", where the few cars on the road had to pass in front of bicycles and ox-carts, he recalled. At that time, he could never have imagined the company that installed a cathode ray tube factory along the same road only nine years later. "Helping China to develop is great, but I knew it would be a difficult undertaking".

Matsushita, the only member of the founding family on the company's board of directors, has made over 50 trips to the country, including one as Panasonic's laundry washing machine leader in the early 1980s to grant the technical assistance to a state-owned factory in Yingkou in the northern province of Liaoning.

More symbolic was when four of the company's factories were attacked by crowds in response to the Japanese nationalization of the Senkaku islands in 2012. China claims sovereignty over the islands of the East China Sea and calls them Diaoyu Islands.

Masayuki Matsushita, then 38 years old and manager of the washing machine industry, explains a product to the founder and his 89-year-old grandfather, Konosuke Matsushita, at an exhibition in Kyoto on February 2, 1984. (Photo provided by Panasonic)

The event was a shock for many in Japan, given Panasonic's relationship with China. "Chinese leaders are well aware of this," Matsushita said. "It's disappointing, but that knowledge has not been widely shared by the general public."

The vice president stated that the company now intends to face the Chinese market with a return to the basics of localization. "There should be no problem if we sell products that we develop within the country," he said.

"China is a big enough market to stand alone," he added in reference to the commercial war. "We have to do what fits the lifestyles of local people".

This may be easier said than done. Assembly competition is even cutting areas with high-tech content, such as electric vehicle batteries.

UBS analyst Kenji Yasui said the investor community is "largely skeptical that Panasonic can compete with Chinese and South Korean rivals and achieve substantial profitability from global customers."

He also raised the possibility that Midea Group, Haier and other Chinese companies would launch an offensive in the Japanese home appliance market. Yasui cut its target price by 16% to 1,100 yen at the end of November, but the real price fell to 1.042.5 yen as of January 15th.

On December 7th, Credit Suisse Securities withdrew Panasonic from its 14-member focus on Japan and recommended its filing Sony. Even though the securities company has maintained an "overperforming" rating for the company, it has downgraded its order of preference in the sector due to the lack of catalysts close to the team and the likely stagnation of growth in operating profits in the year to to come.

After seeing the grandfather honored by the Chinese authorities as "the forerunner of an internationally recognized company engaged in our reform and opening", Matsushita believes that Panasonic "is once again appreciated in China".

"We must continue to work hard to meet the expectations of the Chinese," he said.

Staff writers Nikkei Shizuka Tanabe and Yohei Kawai contributed to this relationship.

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