By Synnove Vandal
More than 70 percent of U.S. firms operating in southern China are considering delaying further investment and moving their manufacturing outside China, according to a report released earlier this month.
Researchers surveyed 219 Chinese and foreign businesses, one-third of which were from the manufacturing sector.
The survey was released by the American Chamber of Commerce (AmCham) in South China. It’s part of an annual report called the “White Paper” on the Business Environment in China.
This year, many of the questions focused on the impacts of the trade war. And the answers revealed an industry rattled by politics and uncertainty.
By the looks of this survey, it’s no longer a question of if companies will move out of China. It’s a question of when.
U.S. companies say they’re suffering more than Chinese counterparts
The survey took place soon after the U.S. imposed tariffs on an additional $200 billion worth of Chinese goods in September.
But according to the survey, U.S. companies feel they are hurting more than their Chinese counterparts.
Eighty-five percent of U.S. companies surveyed said they have suffered from the combined tariffs. Only 70 percent of Chinese respondents felt the same.
U.S. companies also said they were facing increased competition from rivals in Vietnam, Germany and Japan.
But the number one concern for companies across the board was the rising cost of goods sold. Companies were also concerned about:
- Procurement difficulties
- Reduced sales
- Reduced profits
U.S. companies may feel they’re suffering most from the combined tariffs, but the survey alludes to a tense environment for everyone operating in China.
Few manufacturers plan to relocate to the U.S.
People have been questioning whether companies will leave China since the trade war began in early July.
The White Paper doesn’t reveal any manufacturers’ specific relocation plans. But it does show their relocation plans don’t necessarily involve moving back to the U.S.
While 64 percent of companies indicated they were considering moving production outside of China, only 1 percent said they had plans to establish manufacturing bases in North America.
Zhou Hao, a senior economist at Commerzbank in Singapore, told South China Morning Post he’s not surprised firms want to leave China.
It’s reasonable and practical for them to relocate factories to other countries which will have stable and normal trading relations in the near future.
Will the benefits of relocation outweigh the advantages of staying in China?
Follow the link below to learn more about the White Paper survey.
Synnove Vandal is a Client Manager at InTouch Manufacturing Services, a QC firm that performs product inspections and factory audits in Asia for clients in the US, EU and Australia.