Exiting China: Japan to offer sops to its firms that move to India

Exiting China: Japan to offer sops to its firms that move to India

Japan will extend subsidy to its companies under a 23.5-billion yen (about $221 million) plan for moving their factories from China to India and a few others, in the latest sign of deepening engagement between Tokyo and New Delhi to bolster supply chain amid Beijing’s growing belligerence in the region.

According to a report in the Nikkei newspaper, Japan will add India and Bangladesh to the list of “relocation destinations”. In April, following the Covid-19 pandemic, Tokyo had announced a large subsidy programme of 220 billion yen (about $2 billion) for its companies shifting production back to Japan and set aside another 23.5 billion yen for those seeking to move facilities to Asean member states.

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By expanding the scope of the subsidy programme now to include India and Bangladesh, Japan aims to reduce its dependence on a particular region (China) and build a system which is able to provide a stable supply of medical materials and electronic components even in an emergency, according to Nikkei.

In July, Japan’s ministry of economy, trade and industry said as many as 57 companies, including facemask-maker Iris Ohyama and Sharp Corp, will receive a total of 57.4 billion yen ($536 million) in subsidies. At the same time, another 30 companies would get funds to move manufacturing to Vietnam, Myanmar, Thailand and other Southeast Asian nations. The second round of applications for availing of subsidy started from Thursday.

Japan is the latest in a growing list of countries that are actively looking for ways to decouple economies and firms from China. In 2019, Taiwan adopted a formal policy that aimed at bringing investment back home from China.

Earlier this week, trade ministers of India, Japan and Australia decided to launch an initiate later this year to achieve supply chain resilience in the Indo-Pacific region, a move seen as countering China’s dominance on world trade. Already, India, Japan and Australia make up the Quadrilateral Security Dialogue, or Quad, along with the US, to strengthen national security consultation.

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