Cruel commercial warfare, businesses in China fled home ground.

Chinese companies are following foreign partners out of the country. The purpose is to search for alternative production facilities to mini...


Chinese companies are following foreign partners out of the country. The purpose is to search for alternative production facilities to minimize the impact of the prolonged trade war with the US.

Since June last year, 33 listed companies have informed two Chinese stock exchanges about their plans to set up or expand production abroad, according to data compiled by Nikkei Asian Review.

Like foreign manufacturers, many tariffs on Chinese goods by US President Donald Trump combined with rising wages and other costs. This is pushing Chinese companies to leave the country.

The favorite destinations of these businesses include: Cambodia, India, Malaysia, Mexico, Serbia, Thailand and Vietnam.

Massively relocated between commercial wars
Among those companies, Jinhua Chunguang, a rubber product manufacturer, announced an investment of $ 4.35 million on July 19. The purpose is to establish a production base outside China, besides three existing factories in Malaysia and China. The company is based in Zhejiang Province, near Shanghai.

The business said the investment was a response to "changes in the international environment", as well as part of a global expansion plan.



The US-China trade war has led many businesses to find places to invest in production other than China. Photo: Bloomberg.

Jinhua produces rubber hoses used in vacuum cleaners. That is the subject of President Donald Trump's third import tariff punishment for Chinese goods worth $ 200 billion in the second half of 2018. For reasons of unfair trade practices.

According to data from the International Labor Organization, China's official salary has increased 44% to 6,193 yuan per month in five years, as of 2017. That's a large number compared to the increase of points. to potential as 28% increase of Malaysia and 11% of Mexico in the same period.

Analysts said rising costs encouraged companies to move abroad even before the trade war. China has a relocation policy that encourages such moves since 2001. But very few companies feel it is necessary to pursue it due to the huge market in their home countries.

Darren Tay, a risk analyst at Fitch Solutions, said: "What the trade war between the US and China has done is to accelerate this trend in the short term. It has the potential to benefit countries. like Malaysia, Thailand ... "

Many factors attract investors.
Competitive salaries are not the only thing that attracts foreign investors to these countries. "A skilled, well-trained workforce, good infrastructure and a strong network of free trade agreements. Including being part of the ASEAN Free Trade Area and the EU-FTA. Vietnam "is also a contributing factor. According to Rajiv Biswas, economist at IHS Markit in Singapore.

While most countries welcome foreign direct investment from China as from any other country, they are wary of being abused to avoid Mr. Trump's punitive tariffs. The US president recently threatened to impose a 10% tax on the remaining 300 billion USD imports from China starting September 1.

In other countries, production and investment changes are being adopted after focusing on the Road and Road infrastructure infrastructure projects causes a backlash.


Malaysian Prime Minister Mahathir Mohamad (left) and Chinese Prime Minister Li Keqiang attended the welcome ceremony at the Great Hall of the People in Beijing, China, on August 20, 2018. Photo: AP.
Jiangsu Xinquan Automotive Trim announced in May that it is investing 64.4 million ringgit ($ 15 million) into Malaysia. This investment will support their main customer, Zhejiang Geely Holding. The car maker cooperates with national automaker Malaysia Proton Holdings to sell in Southeast Asia.

"Malaysia welcomes Chinese investment with technology transfer and the use of local talent. That is certainly not the mass migration of Chinese labor." An official of the commercial office said.

Malaysian Prime Minister Mahathir Mohamad strongly criticized Chinese investments approved by his predecessor. Mr. Mahathir told Chinese Prime Minister Li Keqiang in Beijing last August: Malaysia will not allow the new version of colonialism to be mentioned for expensive infrastructure projects, due to the Chinese company works in Malaysia.

These projects are part of China's Road and Belt Initiative. The program was criticized for making some developing countries deeply indebted to debt.

Some companies involved in projects in Malaysia have caused Mr. Mahathir to resent by importing equipment and labor from China instead of using local labor and resources.

The diversification of China's investment from focusing on resources and infrastructure to production will be welcomed by many developing countries, said IHS's Biswas.

"Many developing countries still depend on export of goods and their government places policy priorities in building production areas to diversify economies and create new jobs". He said.

According to Nikkei Asian Review
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High Tech Brain: Cruel commercial warfare, businesses in China fled home ground.
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