Many U.S. firms in China eyeing relocation as trade war
bites: survey
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[October 29, 2018]
By Sue-Lin Wong
SHENZHEN (Reuters) - More than 70 percent
of U.S. firms operating in southern China are considering delaying
further investment there and moving some or all of their manufacturing
to other countries as the trade war bites into profits, a business
survey showed on Monday.
U.S. companies operating in China believe they are suffering more from
the trade dispute than firms from other countries, according to the poll
by the American Chamber of Commerce in South China, which surveyed 219
companies, one-third from the manufacturing sector.
Sixty-four percent of the companies said they were considering
relocating production lines to outside of China, but only 1 percent said
they had any plans to establish manufacturing bases in North America.
"While more than 70 pct of the U.S. companies are considering delaying
or cancelling investment in China, and relocation of some or all
manufacturing out of China, only half of their Chinese counterparts
share the same consideration," the AmCham report said.
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The trade war is shifting both supply chains and industrial clusters,
mostly towards Southeast Asia, the survey found.
U.S. companies reported facing increased competition from rivals in
Vietnam, Germany and Japan, while Chinese companies said they were
facing growing competition from Vietnam, India, the United States and
South Korea.
Customers are slowing down orders or not placing them at all, Harley
Seyedin, president of AmCham South China, told Reuters.
"It could very well be that people are holding back on placing orders
until times are more certain or it could very well be that they are
shifting to other competitors who are willing to offer cheaper products,
even sometimes at a loss, in order to get market share," he said.
"One of the most difficult things about market share is once you lose
it, it is very hard to get back."
Companies in the wholesale and retail sectors have suffered the most
from U.S. tariffs, while agriculture-related businesses have been most
hit by Chinese measures, the survey found.
The survey was conducted between Sept. 21 and Oct. 10, shortly after the
U.S. imposed tariffs on another $200 billion worth of Chinese goods.
That prompted Beijing to retaliate with additional tariffs on $60
billion of U.S. products, escalating a tariff war between the world's
two largest economies.
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Buildings are seen in Shenzhen, China September 18, 2018. Picture
taken September 18, 2018. REUTERS/Jason Lee
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The U.S. duties are set to rise sharply on Jan. 1.
Both Washington and Beijing appear to be digging in for a long battle, though
U.S. officials say President Donald Trump would go through with plans to meet
Chinese President Xi Jinping at the G20 summit next month if it looked like the
discussions would be positive.
Nearly 80 percent of the survey respondents said the tariffs have knocked their
businesses, with U.S. tariffs having slightly more impact than the Chinese ones.
Around 85 percent of U.S. companies said they have suffered from the combined
tariffs, compared with around 70 percent of their Chinese counterparts.
Companies from other countries also reported similar impacts as their American
counterparts.
The top concern of companies surveyed was the rising cost of goods sold, which
resulted in reduced profits. Other concerns included difficulties managing
procurement and reduced sales.
One-third of companies estimated the trade dispute had reduced business volumes
ranging from $1 million to $50 million, while nearly one in 10 manufacturers
reported high-volume business losses of $250 million or more.
Nearly half the companies surveyed also said there had been an increase in
non-tariff barriers, including increased bureaucratic oversight and slower
customs clearance. Analysts have warned of such a risk to U.S. firms as China is
increasingly unable to match U.S. measures on a dollar for dollar basis.
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The survey's findings add to evidence that export-reliant Chinese cities and
provinces are facing growing strains. Guangdong, China's biggest province by
gross domestic product, reported a drop in exports in the first eight months
from a year earlier.
(Reporting by Sue-Lin Wong; Editing by Kim Coghill)
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