Japanese Prime Minister Shinzo Abe (left) and Chinese Premier Li Keqiang (second from left) visit a Toyota Motor factory in Tomakomai, Japan, on May 11, 2018. Photo: Kyodo
Opinion
Opinion
by Rupakjyoti Borah
Opinion
by Rupakjyoti Borah
How the coronavirus pandemic could cool China-Japan ties as the US takes a hardline stance
Japan’s announcement of funding for companies that shift production lines back home marks a step away from its earlier strategy of trying to improve relations with China
Instead, Japanese Prime Minister Shinzo Abe seems to be anticipating a world in which Japan’s biggest ally, the US, will come down hard on China
As part of a record economic stimulus of 108 trillion yen (US$989 billion), unveiled in the wake of the coronavirus pandemic, Japan has earmarked 220 billion yen for companies that shift production away from China back to the country and 23.5 billion yen for those seeking to move production lines to other countries.
This comes even as a nationwide state of emergency has been declared, bringing into sharp focus the growing number of coronavirus cases. Earlier, the government had declared a state of emergency in Tokyo and six other prefectures, but that failed to stem the rising tide.
In January, Japan’s exports to China fell 6.4 per cent year on year, as demand for chemicals, car parts and electronic components originating in Japan declined sharply. In addition, Japanese firms in China have been hit by the US-China trade war, after Washington imposed tariffs on Chinese imports.
Why is the earmarking of 220 billion yen for Japanese companies significant?
It marks a change in the Abe government’s strategy, which until earlier this year had been trying to improve ties with China, with Chinese President Xi Jinping expected to visit Japan in April. It may also jeopardise the China-led Regional Comprehensive Economic Partnership, which Japan has been aggressively promoting.
In the initial days of the coronavirus threat, Tokyo took a relaxed approach to visitors from China, restricting tourists only from Hubei province. Mainland China is now Japan’s top source of tourists: in 2018, around 8.38 million Chinese visited Japan and spent more than 1.5 trillion yen, nearly 34 per cent of all expenditure by foreign tourists.
The 220 billion yen will help revive some industries in Japan that had moved to China and increase employment opportunities for people in Japan, at a time when the economy is experiencing deep strain due to the coronavirus pandemic.
Shifting production lines back to Japan reduces the danger of the country’s economy becoming too dependent on China. Already, Japanese companies have suffered after production lines were scuppered following the coronavirus outbreak in China. Moreover, Japanese companies had already been scouting for alternative investment destinations, given that wages in China have been rising.
Two men work on a Honda vehicle in a car factory in Wuhan, China, on March 23. Photo: TPG via ZUMA Press
However, this move is also likely to have ramifications on the political front. It will surely take relations between the two countries down a couple of notches. In October 2018, Prime Minister Shinzo Abe paid a historic visit to China, to commemorate the 40th anniversary of the conclusion of the Treaty of Peace and Friendship between Japan and China. All this seems to be consigned to the past now.
Nevertheless, Tokyo needs Beijing’s help on North Korea. While North Korean leader Kim Jong-un has begun talks with South Korea, he has taken a very strong stand against Tokyo in the past, firing missiles over Japan.
Where are Japanese companies likely to move? Association of Southeast Asian Nations states could benefit the most. Japanese companies now seem to be getting ready to adopt a “China plus one” strategy, with firms looking to shift production lines to another country besides China.
Abe has been remarkably fleet-footed when it comes to international diplomacy. Tokyo’s decision to encourage Japanese firms to move away from China may have been influenced by the hardline stance taken by its biggest ally, the United States, towards China on the coronavirus issue. Trump is desperate to restart the US economy even though the country has recorded the highest number of Covid-19 cases in the world.
All eyes are now on Beijing’s reaction to Tokyo’s move, since it may also lead to similar large-scale exits by firms from other countries.
The pandemic will certainly affect China-Japan ties in the long term, both economically and politically. It is clear that Japan, under Abe, is bracing for a the post-pandemic world in which the Trump administration comes down hard on China. As the US’ closest ally in the region, Japan seems to have already set this process in motion.
Dr Rupakjyoti Borah is a senior research fellow with the Japan Forum for Strategic Studies, Tokyo. The views expressed here are the author’s own
This article appeared in the South China Morning Post print edition as: Japan shift over China plants may hurt ties
