Tokyo, June 3 -- 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-lar...