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Aug 17, 2020 / 16:35

1,400 Japan firms to shift focus to Vietnam on US–China trade war: JETRO

The escalating tension between the US and China is diverting Japanese investment to Southeast Asia, with Vietnam being one of the favorite destinations.

Over 40% of 3,500 Japanese enterprises participating in a survey by the Japan External Trade Organization (JETRO) conducted at the end of 2019 said they are considering expanding operation in Vietnam in the next three years, up 5.5 percentage points from a year earlier, Kyodo News reported.

Japanese firms are looking to expand business in Vietnam to avoid negative impacts from the US - China trade war.  

The move came as a growing number of Japanese companies are preparing to expand their businesses in Southeast Asia and scaling down operations in China due to the escalating tensions between the US and China, stated the JETRO.

Meanwhile, 36.3% of respondents said they were expecting to move to Thailand, up 1.5 percentage points, and 48.1% planned to boost business in China, down 7.3 percentage points.

According to the JETRO, an intensified confrontation between the US and China since 2018 has diverted Japanese companies’ investment into the Southeast Asian region.

As a result, the gap between the amount of Japanese investment in ASEAN and in China expanded to US$191 million in 2019 from US$95.8 million in 2017.

The JETRO in earlier July released a list of 30 Japanese firms that are poised to receive subsidies from its government to move production facilities out of China, of them 15 eye Vietnam as a favorite destination.

JETRO said the financial support would range from US$900,000 – US$46.5 million to partly cover the required expenses of Japanese firms in expanding operations.

Japanese firms are required to complete the construction of facilities before March 2025, and for those producing medical equipment before March 2023.

The Japanese government has earmarked around US$2 billion in the fiscal year 2020 supplementary budget to create a subsidy program to encourage companies to move plants to Japan. Of that amount, US$219 million was set aside to promote the diversification of production sites from China to Southeast Asia.