Japan Plans to Pull Biz Out of China

In an unprecedented move due to and during the Coronavirus, Japan has announced in its stimulus package that it has also allocated funds for Japanese companies that want to move production out of China.
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Crux of the Matter

Japan Ditches China
Japan was one of the earliest countries outside of Mainland China to see the virus spread and experts predicted it to be ‘second Wuhan’ after looking at PM Shinzo Abe’s lax measures. Nonetheless, it did cancel schools, and large gatherings very early on. Early on, the Japanese cruise ship ‘Diamond Princess’ saw a number of cases. However, Coronavirus has not spread at a deadly rate there as it has in Italy, and the US. Maybe the credit also goes to the habit of washing hands frequently and greeting practices that do not include handshakes or hugs.

Japan that has only more than 5,000 cases and nearly 100 deaths has announced a stimulus package of $992 billion to combat the pandemic Coronavirus. In a historic move, it has also allocated $2.2 billion for firms that are placed in China and that want to move production out of China. The move comes in the backdrop of disrupted supply chains due to the pandemic. Of the $2.2 billion, $2 billion will be provided to companies that want to shift production back to Japan, and the rest to the firms that want to establish manufacturing elsewhere.

This move comes at a time when China’s President could have visited PM Shinzo Abe in a rare event in a decade to establish fresher ties with the neighbor. However, China’s biggest trade partner Japan is now mulling over reducing reliance on China as a manufacturing base and shifting it back to the country and spreading it across Southeast Asia.

Historic ‘Ties’
Japan also exports large amounts of machinery, parts, and partially finished goods to China than any other key industrial nation. As much as Japanese industries are dependent on China for selling high-end Japanese machinery, China is also dependent on Japan for procuring these at a reasonable rate. China’s manufacturing depends, to an extent, on Japan-imported high-end machinery.

Japan and China have been hostile to each other since World War II as the Japanese invasion of China killed anywhere between 15 to 22 million Chinese. However, the ties between the nations were reestablished by Chinese politician Deng Xiaoping towards the end of the Cold War. He famously said “It doesn’t matter if a cat is black or white, so long as it catches mice” and that has shaped China’s diplomacy since the pre-liberalisation period of China. Manufacturing machinery of the quality that Japan produced was hard to procure from anywhere else in the world, and producing them at home for China was difficult. Deng’s diplomatic philosophy helped procure high-end machinery from Japan, and we all know where China is today in terms of manufacturing after the paradigm shift in its diplomacy.

  • Japan exports more than $136 Billion worth of goods and services to China.
  • Closest countries to the “Land of the rising sun” are China, South Korea, the Philippines, North Korea, Taiwan, and Russia by sea.
  • One of the earliest cargo ships to ever come to Japan consisted of Chinese goods like silk and porcelain only. Although the ships belonged to the Portuguese.