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Japan's game plan - to pay companies to move out of China

Japan is planning to pay 57 companies $536 million in subsidies to move out of China. Another 30 companies have also been identified under the program but the compensation for these firms has not been disclosed

twitter-logoBusinessToday.In | July 19, 2020 | Updated 10:51 IST
Japan’s game plan - to pay companies to move out of China
Japan to pay companies to move out of China

Japan government would now pay companies to move factories out of China and establish them back at home or in other Southeast Asian countries. This move is part of a new programme to reduce dependence of manufacturing on China and to secure supply chains.

According to a report in Bloomberg, 57 companies including facemask-maker Iris Ohyama Inc and Sharp Corp would receive 57.4 billion yen or $536 million in subsidies from the government. Thirty other firms would receive money to move factories to Vietnam, Myanmar, Thailand and other Southeast Asian countries, stated the Ministry of Economy, Trade and Industry. It has not provided information on the compensation that would be extended to these companies.

The Japanese government will spend 70 billion yen in this round. The payments would come from the 243.5 billion yen that was earmarked to reduce dependency on Chinese supply chains.

Japan is not the only country to take such a decision. As US-China relations deteriorate, there have been discussions in the US and elsewhere to reduce dependency on China. Even Taiwan is aiming to bring back investment from China. Chinese companies in India have also faced backlash after the India-China border tensions. The government banned 59 Chinese apps, including TikTok, UC Browser, Shein and more. The government has also rescinded several contracts to Chinese firms over security concerns.

This move is also significant for Japan-China relations, as the latter is Japan's biggest trading partner. Japanese companies have massive investments in China. The coronavirus pandemic has soured ties between the two countries.

Recently, Japan's annual defence review accused China of pushing its territorial claims amid the pandemic. It suspects Beijing of spreading propaganda and disinformation as it provides medical aid to nations battling the disease. China "is continuing to attempt to alter the status quo in the East China Sea and the South China Sea," Japan said in the defence white paper, approved by Prime Minister Shinzo Abe's government.

Also read: 'India engages China on more equal terms': Foreign Minister Jaishankar hits back at Rahul Gandhi

Also read: US firms losing confidence in China, India rising as big competitor: Top WH official

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