According to a report in Japanese news source Nikkei Net, Unicharm is seeking to recapture Chinese business by exporting diapers from Japan rather than selling ones manufactured locally. As one of the early entrants into China”s diaper market, Unicharm currently operates five factories in the country but its business has wavered during the last two years.

Executives are blamining its misperception of the Chinese consumer needs for the company’s troubles.

One misstep was the positioning of itsaffordable MamyPoko diapers as its main brand in China rather than the high-end Moony. The company also used large supermarkets and other conventional venues as sales channels. This game plan worked well until consumers sought higher-quality versions and turned to the online market.

“Signs of a market change started emerging around 2013,” president and CEO Takahisa Takahara recalls. “We should have responded a little sooner.”

Unicharm’s Asian business enjoyed operating margins of 13-15% through 2013. But the number started tumbling in 2014, sinking to just 6.9% for the first half of 2016 amid the Chinese diaper slump — weighing on the companywide figure of 10.2%. Inventory swelled, reducing shipments and lifting costs. It is expected to take until year-end before the company can rein in inventories.

Rather than  locally made products, Chinese consumers prefer Japanese-made diapers for their safety and reliability.

In response to these problems, Unicharm is ramping up exports of Japanese-made diapers to China. This will be in part achieved through an energy-efficient, smart factory in the Fukuoka Prefecture town of Kanda, which slated to be completed by 2018. The plant is expected to drastically increase the company’s capacity to export Moony diapers not only to China but to other Asian markets as well.

Unicharm will also increase sales of pant-style diapers, which are now made in China and Japan, to meet the shift in demand and bolstering e-commerce efforts by boosting spending on related marketing. The Chinese diaper business is seen turning a profit in 2017.

Kao’s rival has been producing its Chinese-bound diapers in Japan for four years.