How Japan helps businesses rely less on China
More Japanese companies are expected to leave China to take advantage of the incentives
/NOVOSTIVL/ Japan is offering at least $2,2 billion in subsidies to lure its companies home from China. By July, 87 Japanese firms had answered the call.
$2,2 billion: how much the Japanese government is spending on incentives for companies to move production lines out of China.
The coronavirus pandemic has been a catalyst for Japan to become less reliant on producing in China. In April, the government set aside more than $2 billion from its $1,1 trillion economic relief package to attract companies back to Japan or to set up in countries outside China.
Japanese Prime Minister Shinzo Abe had said Japan needed to reform its supply chain to produce high-value products and essential goods at home, while diversifying its production bases and becoming less reliant on a single country – which often means its near neighbor.
The government incentives could accelerate the adoption of a China-plus-one strategy, which has become more attractive due to rising labor costs in the country and geopolitical uncertainties stemming from US-China tensions.
American research company Gartner found in February and March that 33% of 260 surveyed global supply chain leaders had moved manufacturing out of China or had plans to do so by 2023.
In mid-July, 87 Japanese companies that had already moved operations out of China received a total of $653 million in government subsidies, in industries including medicine, medical equipment, paper-making and chemical products.
More Japanese companies are expected to leave China to take advantage of the incentives.
Among the initial group of 87 firms, 57 moved to Japan and 30 relocated to Southeast Asian countries such as Vietnam, Thailand and the Philippines.
Iris Ohyama, a household goods maker and face mask producer, is moving back to Japan, closing its Chinese plants in the northern city of Dalian and the eastern city of Suzhou.
Aero Edge, the aircraft parts maker, will also move back to Japan, while hard-drive parts producer Hoya will move to Vietnam and Laos. Sumitomo Rubber Industries, a rubber product maker, will head to Malaysia.
However, larger Japanese brands with a significant Chinese consumer base have not answered the call to leave China. In February, Toyota, a top-five auto seller in China, said it plans to invest $1,2 billion in an electric vehicle plant in the northern Chinese city of Tianjin.