The pandemic — along with Beijing’s increasingly combative behavior during it — has driven home the risks of overreliance on China for the production of a broad range of goods.
In Japan, policymakers are powering up incentives for companies to expand manufacturing at home and in other countries after years of stop-and-go efforts. More than 1,600 companies have applied for $2.3 billion in related subsidies.
But the government’s challenge is vast — like tossing pennies to hold back economic tides.
The allure of China remains strong for companies dependent on its enormous market, cheap but well-trained labor and efficient infrastructure. When the Trump administration tried to overcome these advantages by raising tariffs on Chinese products, few if any U.S. companies moved production home.
In Japan, the world’s third-largest economy, growth has been fueled by a booming China. Chinese factories have scooped up Japanese machine tools, high-tech components and know-how. And Chinese tourists eager to take advantage of their newfound prosperity have flooded Japanese stores, hotels and restaurants, adding to Japan’s wealth.
In that sense, the idea of an economic “decoupling” is a nonstarter for Japanese policymakers and companies alike.
For Tokyo, “it’s more about how you manage the risk of that relationship than whether you can orchestrate an economic divorce of sorts,” said Mireya Solís, a co-director of the Center for East Asia Policy Studies at the Brookings Institution in Washington.