Tags: China | Japan | supply chain | subsidy | relocate | trade

China Fearful of 'Losing Face' as Japan Pays to Relocate Companies

woman works in a manufacturing plant wearing gloves and a mask
An employee checks transport ventilators at the end of the manufacturing process in the Kohken plant of Fukushima-shi, Fukushima prefecture on April 23, 2020. (Charly Triballeau/Getty Images)

By    |   Wednesday, 05 August 2020 02:07 PM

China is concerned it is losing one of its largest trading partners after Japan agreed to spend $653 million to help 87 companies expand production at home and throughout Southeast Asia to decrease reliance on China.

The South China Morning Post reports that Japan’s recent decision to bankroll companies to expand operations outside of China has caused China to worry.

The companies involved in the subsidy deal are estimated to be less than 1% of Japan’s investment in China, the newspaper reports.

But Japan has been moving out of China for several years, according to a survey conducted by Teikoku Databank, a leading Japanese credit research house.

At the end of May 2019, the survey indicates there were 13,685 Japanese firms in China, which was down from 13,934 in the previous survey conducted in 2016. At the peak in 2012, there were 14,394 Japanese firms with operations in China.

Of the recent companies moving operations, 57 have plans to open factories in Japan. The other 30 will expand production in Vietnam, Myanmar and Thailand, according to the newspaper.

About 70% of the companies are small or medium-sized and more than two-thirds are involved in manufacturing medical supplies.

Japanese officials report that a second of list of companies taking government subsidies is forthcoming.

Unrelated to the government’s subsidy program, Japanese printer giants including Brother, Kyocera and Fuji Xerox are relocating from China to Vietnam.

According to Chinese magazine Caijing, Sharp is moving its multi-function printer production lines from Jiangsu province to Thailand.

Liu Zhibiao, a professor of industrial economics at Nanjing University in Jiangsu, said local governments are becoming increasingly worried about Japanese companies leaving. They are concerned that they will “lose face” if foreign enterprises move.

“In Jiangsu, we haven’t seen a trend of the mass exodus of Japanese firms. We understand the Japanese government’s move, particularly given what has happened since the COVID-19 pandemic,” said Liu, who is also a government adviser. “The Jiangsu government is confident about its infrastructure and government efficiency, so they are not that worried about the exodus. So at the end of the day, the only way for local governments to keep foreign enterprises is to help lower their costs and provide a safe investment environment for them.”

In the Shandong province, which houses 1,300 Japanese manufacturers, the local government is trying to attract more investment from Japan. To do so, there is an event going on with Chinese and Japanese trade-promoting organizations, the newspaper reports.

Japan’s subsidies aren’t meant to withdraw from China. Rather, they are geared toward boosting the country’s supply chains and making them more resilient, according to Hideo Kawabuchi, deputy director general of Japan External Trade Organization Beijing, a government-related organization that promotes trade and investment to and from Japan.

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China is concerned it is losing one of its largest trading partners after Japan agreed to spend $653 million to help 87 companies expand production at home and throughout Southeast Asia to decrease reliance on China. The South China Morning Post reports that Japan's recent...
Japan, supply chain, subsidy, relocate, trade
460
2020-07-05
Wednesday, 05 August 2020 02:07 PM
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