[Inside China Business] Chinese manufacturers will probably scale back their plans for foreign factory expansion
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Some Chinese industrial giants have ambitious plans for overseas factory builds, particularly to avoid tariffs in developed world markets.
But recent events argue against that strategy. Chinese exports continue to boom, hitting record highs despite high tariffs and trade restrictions. And the experiences of many Chinese companies in Vietnam showcase the challenges of opening assembly plants in areas where costs are climbing, and where local government policies are unclear, and even changing.
Chinese companies can also look to top German industrial firms, who are making billion-dollar investments in Mainland China, while shuttering plants in Europe, and forgoing investments in developing world markets.
The key problem for manufacturing firms setting up outside China is the lack of access to supply chains and to deep capital and labor pools. Companies are concluding that it is far preferable to set up in China and pass along high tariff rates to buyers, rather than establish new operations in economies where raw materials are harder to come by, operating costs are rising, and the regulatory environments are uncertain.
Resources and links:
Reuters, China’s exports up solidly but slowing imports dim trade outlook
China’s August exports grow a robust 8.7%, beating forecasts while imports soften
SCMP, Is Vietnam losing its appeal for China’s manufacturers bypassing US tariffs?
BMW to Invest $2.8 billion in China for its Shenyang Plant
German chemicals giant BASF to shut plants at home while investing billions in China
More job cuts on the way as German economy struggles to recover
Reuters, Volkswagen warns time running out as it clashes with workers over cuts
Reuters, Volkswagen scraps decades-old job guarantees, paving way for lay-offs
Reuters, Volkswagen to invest $2.7 billion in Chinese production site
New York Times, China Reaches Record Trade Surplus, Raising Alarm Abroad
Closing scene, Qinghai
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