Japan is paying manufacturers to move production outside China
As the spread of coronavirus continues to wreck economies, Japan is trying to revive its disrupted manufacturing sector - by encouraging companies to leave China. The government of the country has set aside a multi-billion dollar fund to help COVID-19-hit manufacturers relocate their production units back home or to some other nation. Here's all about it.
COVID-19 pandemic disrupted Japan's trade with China
The COVID-19 pandemic, which has killed over 88,000 people in the last four months, originated in China, forcing the country to enforce lockdown in affected regions and shut down factories and other public places. Now, given that China is Japan's biggest trading partner, the action reduced the latter's imports by nearly 50%, hitting the Japanese businesses and economy as a whole.
Hence, the country wants its manufacturers to relocate
In light of the economic crisis, Japan has set aside a $2.2 billion fund to help its manufacturers leave China, Bloomberg reported. The fund, taken out from the economic package announced by Japan to offset the impact of the pandemic, includes $2 billion for companies willing to move their production back to Japan and $0.2 billion for those looking to move to other countries.
Companies considering to move now have an impetus
With the financial backing of the government, many Japanese firms operating in China could move their manufacturing units outside of the country. It is worth noting that the monetary support from the Japanese government comes just a month after high-level panel discussing future investments mulled moving the production of high-value goods back to Japan and other products to other Southeast Asian countries.
There will be some shift, says Japanese economist Shinichi Seki
"There will be something of a shift," Shinichi Seki, an economist at the Japan Research Institute, said while adding that "having this in the budget will definitely provide an impetus" to Japanese companies that were already considering moving their manufacturing out of China.
What China says about Japan's move
"We are doing our best to resume economic development," China's Foreign Ministry spokesman Zhao Lijian said on Wednesday when questioned about Japan's move. He added, "In this process, we hope other countries will act like China and take proper measures to ensure the world economy will be impacted as little as possible and to ensure that supply chains are impacted as little as possible."
