US and Japan Announce Their Firms to Relocate Out Of China - Has China Reached Parity?

Ed.'s note: Both Japan and the US announced their respective governments would foot the bill for Japan and American firms to return to their countries from China. In the two articles republished below, both countries are moving to have their firms relocated out of China as a result of fallout over coronavirus that is alleged to have started in Wuhan, China beginning on December 30, 2019. Many firms have been moving out of China since the US-China trade war started but now it seems the pace has been stepped up. Several previously published blog reports are keeping track of some of the events related to Japan and the US's decision to pull out of China and it looks to be all related to technology. This announcement follows increasing tensions between Taiwan and China. China relies on Taiwan for most of its technology especially in microprocessor technology.

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What most Americans do not realize is the depth of penetration by China into American institutions that is breathtaking. We have started looking at this fact in a previously published post when President Trump was confronted in the White House with a question by a young Chinese reporter who turned out to be connected to the CCP (Chinese Communist Party). It demonstrates how close a Chinese operative posing as a reporter can get to President Trump. That should be setting alarm bells all over the place. Considering all the firms that have already pulled out of China, it is possible the Chinese are reaching an economic point where it can manufacture on its own what these American and Japan firms have been manufacturing reaching parity.

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Source: Forbes

Kudlow: 'Pay The Moving Costs' Of American Companies Leaving China

Kenneth Rapoza, Senior Contributor | April 10, 2020

Economic adviser Larry Kudlow -- wheels are in motion to help U.S. companies leave China if they ... [+] AFP VIA GETTY IMAGES

Call the moving company, Washington's picking up the tab.

The same day Japan announced that it would spend upwards of $2.2 billion to get its corporations out of China and either back home or spread throughout southeast Asia, White House National Economic Council Director Larry Kudlow said the U.S. should "pay the moving costs" of every American company that wants out of China.

"I would say, 100 percent immediate expensing across the board for plant, equipment, intellectual property, structures, renovations... In other words, if we had 100 percent immediate expensing, we would literally — literally pay the moving costs of American companies," Kudlow said on the FOX Business Network's America Works Together Town Hall which aired on Thursday.

The Japanese government announced that it would provide direct loans 220 billion yen ($2 billion) for companies shifting production back to Japan and 23.5 billion yen for those seeking to move production to other countries, according to details of the plan posted online.

Kudlow told one of the people in attendance, who had asked about America’s over-reliance on China, what could be done to change the commercial relationship post-pandemic.

Kudlow said that one way was to provide them with moving cost payments, though he did not get into specifics.

Most U.S. companies that manufacturer in China do not have their own greenfield assembly line. For example, Apple AAPL has long used Foxconn, a Taiwanese multinational with massive assembly plants in mainland China. Other U.S. companies simple contract Chinese firms to do the work, whether they're making kitchen cabinets for Lowes or pots and pans for KitchenAid.

In other words, it is not a matter of putting widgets and office furniture in a pod and shipping it across the Pacific Ocean.

To bring the supply chain back to the United States would, in most cases, require hefty capital expenditures — entire new factories, or additions to existing ones. It means any profit companies are counting on due to lower costs in China would be erased as they shift gears out, spending millions of dollars more to do so. It's a headache. And it's one reason why businesses and Wall Street hated the trade war; it required them to redo the math. Nobody likes homework on the weekends.

Please go to Forbes to read the entire article.
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Source: Business & Politics

Japan reportedly paying companies to leave China; GOP Rep Tom Cotton says there'll be more of that coming

April 9, 2020 | Frieda Powers

China may begin to feel the after-effects of the coronavirus pandemic directly in its economy as Japan is reportedly paying its companies to leave the country.

Japan is apparently pulling production away from its biggest trading partner in a move allocating $2.2 billion from its economic stimulus package to help companies leave China due to the devastating effects of COVID-19.

The move may soon cause a strain on the relationship between the two nations as supply chains become disrupted. A state visit to Japan by Chinese President Xi Jinping set for this month as Prime Minister Shinzo Abe has sought to restore relations, was postponed and no new date set as the spreading virus disrupted business in the countries.

Now Japan's new record stimulus budget includes 220 billion yen ($2 billion in US funds) to get companies to move their production back to Japan. Another 23.5 billion yen was allotted for businesses to move out of China and relocate to another country, according to South China Morning Post.

"There will be something of a shift," Shinichi Seki, an economist at the Japan Research Institute, said. "Having this in the budget will definitely provide an impetus."

Though many in Japan blamed China for mishandling the outbreak initially, the leaders of the two nations reached across the divide in the crisis, with Japan at one point even providing masks and protective gear. But with a major part of Japan's regular exports going to China, the move to shift companies away from production in the communist nation could jeopardize relations.

"We are doing our best to resume economic development," Foreign Ministry spokesman Zhao Lijian said Wednesday at a briefing in Beijing. “In this process, we hope other countries will act like China and take proper measures to ensure the world economy will be impacted as little as possible and to ensure that supply chains are impacted as little as possible."

Please go to Business & Politics to read the entire article.
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Companies pulling out of China has been going on since a trade war erupted between the US and China with more pullouts expected:

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

Japan To Prepare Over $2 Billion To Help Its Companies Move Out Of China

South Korean companies shift production out of China