Japan is offering financial incentives to its companies willing to divest from China. Tokyo has “offered a group of 87 companies subsidies totaling US$653 million to expand production at home and in Southeast Asia,” Hong Kong newspaper the South China Morning Post reported on Wednesday. China is getting increasingly worried “as Japan bankrolls exodus of firms,” the daily added. 

The move is significant since Japan is China’s second biggest trading partner after the United States, importing $169 billion worth of Chinese goods in 2019. 

The Japanese initiative comes amid incursions by Chinese navy near a group of Japan-controlled islands in recent weeks. “The repeated activities are extremely serious,” a Japanese government spokesman said on July 22. “We will respond to the Chinese side calmly based on our resolute stance.” Beijing has undertaken several such armed incursions against its Asian neighbors in recent months.

Besides blatant military aggression, China has weaponized its growing economic clout, threatening countries with sanctions and boycotts in the wake of the Wuhan coronavirus pandemic. 

The South China Morning Post reported Tokyo’s initiative to decouple its economy from China: 

Japan’s decision to offer an initial group of 87 companies subsidies totaling US$653 million to expand production at home and in Southeast Asia has sparked debate whether the world’s third largest economy is trying to gradually decouple from China.

The coronavirus pandemic has wreaked havoc on global supply chains, with the crisis underlining what many companies and countries have known for some time: they are too reliant on China.

China is Japan’s largest trading partner, and Japan is China’s second largest trading partner, and while not all of the enterprises involved in the initial wave have operations in China, the move by the Japanese government has sparked concerns in China. (…)

Using the subsidy, 57 of the companies will open more factories in Japan, while the remaining 30 plan to expand production in Southeast Asian countries, including Vietnam, Myanmar and Thailand.

Around 70 per cent of the companies are small and medium-sized enterprises, with over two thirds involved in medical supply manufacturing.

A second list of companies to be offered subsidies is also being drawn up, with a similar composition to the first, according to Japanese officials.

A survey by Teikoku Databank, a leading Japanese credit research house, showed that there were 13,685 Japanese firms in China at the end of May 2019, 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.

Given its geographic proximity, Japan is well aware of the threat posed by Communist China. Japan was among the first countries, besides the U.S., to ban Huawei and other Chinese companies from its 5G network, the next generation of mobile technology. The U.S. has repeatedly warned its allies against compromising their security by allowing Chinese state-owned players in their 5G roll-out in light of its application in defense systems and mobile communications. 
 
Japanese companies is positioning themselves to challenge China’s dominance in 5G, the next generation of wireless and mobile networks, Asian news outlets report. The United Kingdom has already sought Japan’s help after banning Huawei and other Chinese companies from its 5G roll-out. 
 
The moves towards decoupling the Japanese economy from Communist China coincide with similar developments in the United States. President Donald Trump has suggested decoupling the U.S. economy from China in the wake of the Wuhan coronavirus pandemic. Washington “certainly does maintain a policy option, under various conditions, of a complete decoupling from China,” he tweeted in June. 
 
The U.S. Commerce Department has suggested strategies including tax incentives and re-shoring subsidies to bring back American companies home, news reports say. The Trump administration is also encouraging U.S. allies to remove China’s involvement in their critical infrastructure and technologies. 
 
‘Secretary Pompeo Urges Cutting Ties With Chinese Tech Companies’

 

 

 
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