Japan government help manufacturer move from China to ASEAN
The Japanese government will launch a subsidy program to encourage Japanese manufacturers to transfer their overseas production bases from mainland China to the ASEAN region (ASEAN) because the COVID-19 pandemic has greatly disrupted the supply chain and exposed heavy dependence on China The problem of mainland production.
The Japan Times reported on May 5 that this 23.5 billion yen (220 million US dollars) subsidy program has been included in the Japanese government’s emergency economic stimulus plan. The plan is used to alleviate the declining economy. It will financially support Japanese companies to study the possibility of relocating to Southeast Asian countries, build factories and supporting facilities, and ultimately realize the diversification of the supply chain.
After the outbreak of the Chinese Communist virus plague in Wuhan, China at the end of last year, many Japanese automakers and other manufacturers were unable to obtain enough parts from mainland China and stopped production. An official from the Ministry of Economy, Trade, and Industry of Japan said: "Even before the outbreak of the plague, Japanese companies are increasingly inclined to establish production bases in Southeast Asia." "The (subsidy program) will also help our country build a more friendly relationship with ASEAN countries. "
In order to avoid the various risks associated with heavy reliance on production in mainland China, such as anti-Japanese demonstrations in China, rising wages, and tariff wars with the United States, Japanese companies have begun trying to establish another set of spare parts supply in ASEAN countries chain. ASEAN members include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
In order to strengthen the stability and security of the supply chain, the Japanese government will also spend 220 billion yen to promote domestic production and produce products imported in large quantities from some foreign regions. Incentives also include funding Japanese companies to move their overseas production bases back to China. The plan will also target manufacturers of products that are essential for the Japanese to "live a healthy life" during the outbreak, including masks and alcohol disinfectants. You can get subsidies when you open a new factory in Japan or increase its existing production capacity in Japan.
The Ministry of Economy, Trade, and Industry stated that for large companies that produce "essential" products, these subsidies can account for up to two-thirds of investment, while for small and medium-sized enterprises, subsidies can account for up to three-quarters of investment.
According to data from the Japan Hygiene Products Industry Association, in 2018, about 80% of masks in Japan were imported, mainly from China. Since the outbreak of the Chinese Communist virus plague, such masks have become scarce, prompting Prime Minister Shinzo Abe to launch a plan to distribute masks in the country. The expenditure of the two subsidy programs has been included in the 25.69 trillion yen bailout budget for the fiscal year 2020, which was approved by the Japanese Diet.
According to trade data from the Ministry of Finance of Japan, auto parts from China accounted for 36.9% of Japan's total auto parts imports in 2019, and telephones accounted for 85.5% of Japan's total imports. In the long run, subsidy programs are "reasonable to a certain extent," because they will encourage Japanese manufacturers to balance production better than Japan, China, and ASEAN countries.