[blackwasp]

The first of the many avalanches has begun for China. The Shinzo Abe government of Japan has approved a stimulus package worth whopping 108.2 trillion yen (US$993 billion) – equal to 20 percent of Japan’s economic output – to cushion the impact of the epidemic on the world’s third-largest economy. Out of the total amount, it has earmarked US $2.2 billion to help its manufacturers shift production out of China.

220 billion yen ($2 billion) is pledged for Japanese companies shifting production back to Japan and the remaining 23.5 billion yen for those seeking to move production to other countries. The disruption in supply chains amidst the growing scare of the Wuhan virus and the damages incurred when the Coronavirus epidemic was at its peak in China has led Japan to take this radical step. China will lose a large number of jobs as a result of this move.

China is Japan’s biggest trading partner under normal circumstances, but imports from China slumped by almost half in February as the disease closed factories, in turn starving Japanese manufacturers of necessary components. To be precise, China exports $148 billion worth of goods to Japan and despite having such big numbers stacked against it, the Japanese are not taking the foot off the pedal and attacking China much like the rest of the world.

Japan’s fury towards China is understandable because of the postponement of the Tokyo Olympics. The country was keen on ensuring that the quadrennial multi-sports event goes on as planned but China and its irresponsible handling of the deadly virus caused a full-blown pandemic which in turn crippled the entire planet.

The Japanese Deputy PM Taro Aso has even gone on to say that the World Health Organisation might have to change its name to “Chinese Health Organisation”, during a speech in Japanese Parliament wherein he lent support to a petition terming Tedros Adhanom Ghebreyesus unfit for the role of the WHO chief.

While Japan has put the foot down and ordered its companies to pack their bags from China and hunt for new places to set their camp. India and many South-east nations like Vietnam and Bangladesh are eyeing this lucrative opportunity to lure Japan to their shores. India looks like the best bet for Japan given the cheap labour and a robust manufacturing ecosystem of which Japan already is a part.

Both the countries have had close civilizational ties for 1,400 years. There are 1,441 Japanese companies registered in India, up from 1,369 in 2017. These companies have 5,102 business establishments spread across states like Karnataka, Tamil Nadu, West Bengal, and Gujarat. The southern Indian state of Karnataka alone has around 530 Japanese companies working in it, up from around 200 five years ago.

Also, Japan has been a strong admirer and supporter of Prime Minister Narendra Modi’s Make in India, Skill India, and Clean India Mission initiatives. Therefore it makes sense for Japan to drop the anchor here in India.

Japan has given a rap on the knuckle to China and its high time the other countries follow the suit and make China pay for what it has done.

Source

[ashis89]

Originally Posted by Lobogris

These are completely illogical assumptions. The virus might have started in China but it has spread everywhere. Would people also have a bias against Italian, Spanish, American, Turkish, Brazilian and Iranian products?

More than bias, the concern is regarding lack of transparency, unethical practices and then some more.

Secondly, China is the only place that is now open and able to ship products. For many months most countries will be in shut down while China opens up more and more. No other country can try to take manufacturing away from China as forget about expanding capacity and opening new factories, most countries are shutting down their existing ones to contain the pandemic.

And it has already started! The thought came before COVID-19 spread, due to the trade wars between US and China. This virus pandemic is giving further momentum to the idea.

Some more discussions available on this topic:

As growth slows in the world’s second-largest economy, U.S. companies are looking for more reasons why they should stay and invest more.

Many members of the Beijing-based American Chamber of Commerce in China said they are earning less in the country, and that market access remains an issue in certain industries despite recent Chinese government efforts, according to a survey conducted late last year and released Tuesday.

Source

Global manufacturing consulting firm Kearney released its seventh annual Reshoring Index on Tuesday, showing what it called a “dramatic reversal” of a five-year trend as domestic U.S. manufacturing in 2019 commanded a significantly greater share versus 14 Asian exporters tracked in the study. Manufacturing imports from China were the hardest hit.

Last year saw companies actively rethinking their supply chain, either convincing their Chinese partners to relocate to southeast Asia to avoid tariffs, or by opting out of sourcing from China altogether.

Source

Maybe, the time has come to launch a campaign of "economic distancing" from China. Two countries are ready to do just that, the United States and Japan.

Both countries are badly hit by the coronavirus. They are learning their lessons and taking steps to bring their businesses back home.

Source


In the end, businesses are all about numbers and profit. If China gives cheaper products or services, companies will take their business to them. But businesses are also about people. If people sentiment changes drastically (against a nation), the businesses will be forced to change/adapt too.

Similarly, if there are policy changes (like US trade war or Japan's new move), businesses will be forced to make the move.

Edit: I have cross-posted from the Ways the Indian Auto Industry will change post-Covid 19 thread as I felt this should be discussed here.
MODs, please move or delete this post if inappropriate.

[avingodb]

The news content and the headline of this thread are telling two different stories. Moreover, this piece in Bloomberg on the same issue is much less celebratory that one in TFIPost.


this para from Bloomberg report is the crux and it is not going to be easy for Japan as it tries to battle another slowdown;

"Japan exports a far larger share of parts and partially finished goods to China than other major industrial nations, according to data compiled for the panel. A February survey by Tokyo Shoko Research Ltd. found 37% of the more than 2,600 companies that responded were diversifying procurement to places other than China amid the coronavirus crisis."

[SmartCat]

Japan actually had trade surplus with China till recently. Last 2 years however, there was a deficit but that's because of slowdown in Chinese manufacturing (probably related to trade tensions with USA). In the overall scheme of things, this $2 billion incentive seems to be a bit too tiny. Perhaps this is targeted at a few select critical industries.

India is proposing a similar incentive scheme for Indian pharma industry, to move raw material production back to India from China.

Department of Pharma proposes Rs 10,000-crore incentive scheme for promoting domestic API units
https://economictimes.indiatimes.com...w/74719408.cms

[ArjunPadmakumar]

From an economic viewpoint we have a lot to learn from our neighbor, China who despite all its failures have succeeded to built a formidable economy in a few decades.

This pandemic causing widespread chaos and anger throughout the world, especially in Europe, Australia, US and Japan has actually exposed the lack of commitment (in almost all nations) towards healthcare, its research and allied facilities as well as self reliance on at least on essential materials.

Also around the world, especially large countries like US, EU, Brazil and our own nation have realized not to be very dependent upon Manufacturing giants on both Nationalistic spirits as well as in bad times like what our planet and all of humanity is facing right now. I feel this is best lessons for countries and not to bluntly blame China for the calamity but instead conduct nation building in their own countries.

This pandemic will definitely bring a big boost to exercises like Make in India and Make America great again which from a strictly non political viewpoint, will bring good growth to Manufacturing and its allied industries as well as tertiary industries and subsidiary infrastructures like Railways, Roads and seaports. For these reason I believe and hope it turns out that after the inevitable recession for an year or two, our nation, politicians and industry stakeholders as well as the general public should focus on the factors and support an all out growth on competitive spirits to attract local as well as international entrepreneurs and provide them the support they need.

Our nation has already proved it in one sector, Pharmaceutical industry. And many nations from the USA to Brazil have approached our country for help, which we have and should provide. The Corona-virus chapter will turn out to be a important lesson for India, China and the world. Hope we take it in the right manner and learn from it.

[DicKy]

Guess Japan had this plan earlier, but since continuity is preferred for business, it was like why change/fix when it ain't broken.

Would have been stupid from a business POV, but this was a trigger for the Japanese government to act, for bringing back production of core industries.
Exiting chinese production or market is a pipe dream, given Japan's high production cost and dependence on exports.

Know that we are dependent more on the chinese market and our business men would defend viciously how chinese outsourcing and production are world class, and good for business. But unlike Japan, we are one of the few countries who could go for aggressive local production and actually sustain it with local consumption and exports.

This could also possibly explain why Japan and South Korea are hell bent on hydrogen energy and hydrogen fuel cell vehicles, because they know who would have the reins if the world shifts to BEVs.

[v1p3r]

Originally Posted by blackwasp

Source

Quoting TFIpost is a bit like quoting Kiran Bedi on the sounds of the universe. They're as authentic as Alex Jones.

The ease of doing business in China is incredible. An entire factory can be set up fast, the government will go out of its way to help in most matters related to trade, commerce, and manufacturing. Having seen this first hand, versus having set up and run a business in India, I can safely wager that no one will come here for an export-oriented business. Malaysia, Vietnam, Philippines are far better bets.

The Japanese companies who come here are focused on the Indian market, with some export manufacturing taking place. E.g. Suzuki, Toyota, Denso.

Wishful nationalistic thinking does not always gel with capital markets and shareholder interests, and in a clash it is always the latter that triumphs in the long run.

[Miyata]

This has been happening slowly over the last decade as a consequence of - trade wars; increasing cost of doing business in China; lack of reliability/transparency of the Chinese regime; etc. The coronavirus will only accelerate the process further and India has a chance to be a bit opportunistic and absorb some businesses its way - But sadly, I don't think we have the leadership to enable that.

> More than 50 companies reportedly pull production out of China due to trade war.

> Europe Joins U.S. Companies Moving Out Of China

>Japanese firms moving production sites to Southeast Asia as coronavirus outbreak disrupts supply chains

With the ruins piling up, China will surely retaliate! Will have to wait and watch what they do and how they do it.

[AZT]

Originally Posted by v1p3r

Quoting TFIpost is a bit like quoting Kiran Bedi on the sounds of the universe. They're as authentic as Alex Jones.

The ease of doing business in China is incredible....

Also one time incentives are just that, one time incentives. The cost of manufacturing depends on a lot of other factors. China's advantage is not just in cost, but also in supply chain and infrastructure built over 2 decades. The other question is how many firms would actually go for heavy CapEx with a recession expected.

[srishiva]

I think India should proactively start lobbying with US, Japan and EU to shift manufacturing here. This is a golden opportunity whatever the bad time it may be. We should not miss this now.

[aim120]

Originally Posted by srishiva

I think India should proactively start lobbying with US, Japan and EU to shift manufacturing here. This is a golden opportunity whatever the bad time it may be. We should not miss this now.

Trump has another plan to get back manufacturing back to US. Many developed countries are thinking the same, to get back manufacturing back to their respective countries.

[srishiva]

Originally Posted by aim120

Trump has another plan to get back manufacturing back to US. Many developed countries are thinking the same, to get back manufacturing back to their respective countries.

With the unemployment rate that was before this pandemic, I dont think US has so many people who can work at manufacturing. Maybe some high class manufacturing might happen but still that would depend on supply chain elsewhere.
Also, if you look at the final price of a product, manufacturing in US will not be advantageous to US consumers.

[Samurai]

Originally Posted by v1p3r

Quoting TFIpost is a bit like quoting Kiran Bedi on the sounds of the universe. They're as authentic as Alex Jones.

The news appears to be legit. Same news is on Japan's top English newspaper.

[vibbs]

Originally Posted by v1p3r

Having seen this first hand, versus having set up and run a business in India, I can safely wager that no one will come here for an export-oriented business. Malaysia, Vietnam, Philippines are far better bets.
.

Sir, you have hit the nail on head. Even with all the talk about make in India, we still have a long way to go before we can take over the mantle of world's factory. There are other countries who are better bets for export oriented business.

I can tell from my experience that China based manufacturing makes more sense economically than India. It's not that the quality from India is much better either!

[KMT]

Finally the first country to put its money where its mouth is.

If too many countries become are allowed to become overambitious super-powers, there will be no place left for citizens of middle and lower income countries.

In addition, too many industries have been driven by pure capitalistic interests to China.

It is time for geo-political strategy and good old protectionism to influence flow of capital and trade.

I am eagerly awaiting to see how other countries with huge investments in China react.