Chinese companies flee overseas to avoid US tariffs

‘Reduce and evade’

12 September 2018 | Sakenuus
Ryan McMorrow - A growing number of Chinese companies are adopting a crafty way to evade US President Donald Trump's tariffs: Remove the "Made in China" label by shifting production to countries such as Vietnam, Serbia and Mexico.

The world's two largest economies have been locked in a months-long trade fight after Trump imposed 25% customs duties on US$50 billion worth of Chinese goods this summer, triggering a swift tit-for-tat response from Beijing.

Chinese factories making everything from bikes to tyres, plastics and textiles are moving assembly lines abroad to skirt higher customs taxes on their exports to the United States and elsewhere, according to public filings.

Hl Corp, a Shenzhen-listed bike parts maker, made clear to investors last month that tariffs were in mind when it decided to move production to Vietnam.

The factory will "reduce and evade" the impact of tariffs, management wrote, noting Trump hit e-bikes in August, with new border taxes planned for bicycles and their parts.

Trump warned last week those tariffs - targeting US$200 billion in Chinese imports - could come "very soon".

"It's inevitable that the new duties will lead companies to review their supply chains globally - overnight they will become 25% less competitive than they were," said Christopher Rogers, a supply chain expert at trade data firm Panjiva.

Supply chains

Supply chains have already begun relocating out of China in recent years as its rising labour and environmental protection costs have made the country less attractive.

Tariffs are adding fuel to the fire, experts and companies say.

"China-US trade frictions are accelerating the trend of the global value chain changing shape," said Cui Fan, research director at the China Society of WTO Studies, a think tank affiliated with the commerce ministry.

"The shifting abroad of labour-intensive assembly could bring unemployment problems and this needs to be closely watched," Cui said, adding the shift would not help the US's overall trade deficit.

Growing list

The growing list of foreign firms moving supply chains away from China - toy company Hasbro, camera maker Olympus, shoe brands Deckers and Steve Madden, among many others - already has Beijing worried.

Less discussed are the Chinese factories doing the same.

Zhejiang Hailide New Material ships much of its industrial yarns, tyre cord fabric, and printing materials from its plant in eastern Zhejiang province to the US and other countries.

Trump's first wave of tariffs on US$50 billion in goods this summer hit some of its exports; the next round of US$200 billion looks like it will hit several more.

"Currently all of our company's production is in China. To better evade the risks of anti-dumping cases and tariff hikes, our company has after lengthy investigation decided to set up a factory in Vietnam," executives told investors last month.

"We hope to speed up its construction, and hope in the future it can handle production for the American market," a company vice president said of the US$155 million investment that will ramp up production by 50%.

Other moves abroad spurred on by tariff risks include a garment maker going to Myanmar, a mattress company opening a plant in Thailand and an electronic motor producer acquiring a Mexico-based factory, according to public filings from the firms.

Linglong Tyre is relying mostly on low cost credit to build a US$994 million plant in Serbia.

The entire tyre industry faces a "grim trade friction situation", Linglong told investors last month, citing "one after another" anti-dumping cases against China.

"Building a factory abroad allows 'indirect growth,' by evading international trade barriers."

China's bike industry faces a similar pivotal moment. The centre of manufacturing will shift away from China in the future, bike part maker H1 Corp told investors when announcing its Vietnam factory.

Some of Hl's customers started moving production - especially of e-bikes - to Vietnam, said Alex Lee, in charge of global sales at Hl Corp.

"First of all there is no anti-dumping tax on Vietnam," Lee said, adding labour costs were lower there as well.

China's growing e-bike industry faces duties not only from the US but also the European Union, which slapped provisional anti-dumping tariffs of 22 to 84% on Chinese-made e-bikes in July, alleging Chinese companies benefited from cut-rate aluminium and other state subsidies.

State support

The state support Chinese companies receive is key to the Trump administration's case in taxing Chinese goods, but Hl shows how companies may continue to benefit even after shifting some of their production overseas.

Government subsidies, including millions of yuan to "enhance company competitiveness", eclipsed H1's profit during the first six months of the year, its filings show.

Still the company went ahead and bought an operating factory in Vietnam.

Lee noted they had transferred mass production of aluminium forks and steering parts to the new plant from their factory in Tianjin.

He did not know if it would lead to job cuts in China. – Nampa/AFP

Soortgelyk

 

Kraam buite kliniek - verpleegsters geskors

11 ure gelede | Ministeries

Henriette Lamprecht – Twee verpleegsters wat ‘n hoogswanger vrou by die Okuryangava-kliniek glo weggewys het, is in opdrag van die minister van gesondheid en maatskaplike...

Lewenslank vir Suide-verkragters

11 ure gelede | Howe

Elvira Hattingh en Ronelle Rademeyer - Twee mans wat vroue op Mariental en Tses verkrag en vermoor het, is gister in twee afsonderlike sake vonnisse...

Schlettwein sê oor TIPEEG, FOCAC

11 ure gelede | Regering

Denver Kisting – In die eerste plek is Namibië se ekonomie besig om aan te pas by ’n nuwe pad van groei nadat dit een...

Weer vir 19 September

11 ure gelede | Weer

BINNELAND: Gedeeltelik bewolk en warm in die Suide met enkele buie in die verre Suide. Elders sal baie tot bloedig warm in die Noorde wees.KUS:...

TransNamib op soek na nuwe direksie

11 ure gelede | Vervoer

Catherine Sasman Die ministerie van werke en vervoer het in 'n openbare kennisgewing aangekondig dat nuwe direksielede vir TransNamib gesoek word. Die huidige direksie se...

Esau: Visvangkwotas kan nie verkoop word

11 ure gelede | Ministeries

Leandrea Louw Die minister van visserye en mariene hulpbronne, mnr. Bernard Esau, het gewaarsku visvangkwotas kan nie verkoop word “om vinnig geld te maak nie”....

Help soek na vermistes

11 ure gelede | Misdaad

Tanja BauseDie Namibiese polisie vra die publiek se hulp in die opsporing van twee vermiste mense. Die 14-jarige Niita Fillemon word sedert 19:00 verlede Woensdag...

Grond: Wit boere wíl praat

11 ure gelede | Ministeries

Elvira HattinghDie president van die Namibië Landbou-unie (NLU), mnr. Ryno van der Merwe, sê dit is onwaar dat wit kommersiële boere nie in gesprek tree...

Vrou haal die byt uit veghond

11 ure gelede | Omgewing

Die naam Amerikaanse veghond (pit bull terrier) het al ‘n vloekwoord geword en boesem vrees by die meeste mense in. Geen ander honderas het in...