Japan to pay subsidies for firms to leave China

Fifty-seven firms will receive subsidies from the govt and another 30 firms will receive money to move manufacturing to other SE Asian nations

(pic: Bloomberg)

BEIJING • Japan’s government will start paying its companies to move factories out of China and back home or to South-East Asia, part of a new programme to secure supply chains and reduce dependence on manufacturing in China.

Fifty-seven companies including privately-held face mask-maker Iris Ohyama Inc and Sharp Corp will receive a total of ¥57.4 billion (RM2.3 billion) in subsidies from the government, the Ministry of Economy, Trade and Industry said last Friday. Another 30 firms will receive money to move manufacturing to Vietnam, Myanmar, Thailand and other South-East Asian nations, according to a separate announcement, which didn’t provide details on the amount of compensation.

The government will pay a total of ¥70 billion in this round, the Nikkei newspaper reported. The payments come from ¥243.5 billion that the government earmarked in

April to reduce reliance on Chinese supply chains, with the money aimed at helping companies shift factories back home or to other nations.

As US-China relations deteriorate and the trade war worsens, there’s been increasing discussions in the US and elsewhere about how to “decouple” economies and firms from China. Japan’s decision is similar to a Taiwanese policy in 2019, which was aimed at bringing investment back home from China. So far, no other country has enacted a concrete policy to encourage the shift.

China is Japan’s biggest trading partner under normal circumstances and Japanese companies have massive investments there. The outbreak of the Covid-19 pandemic has damaged those economic ties, as well as China’s image in Japan. The government of Prime Minister Shinzo Abe (picture) has been trying for years to improve relations with China after anti- Japan riots in 2012, but the fallout from the pandemic and the ongoing territorial dispute over islands and gas fields in the East China Sea have undercut those efforts. — Bloomberg