China-Based US Firms Plans to Relocate, Survey Says

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Over 70 percent of US companies that have operations in southern China are planning of delaying further investments in there and  moving some or all of their manufacturing to other countries as the trade war starts to bite into profits, according to a business survey data shown on Monday.

[img desc: US Firms in China consider relocation due to trade war, according to survey]

Us firms that operate in China believe that they are suffering more from the trade dispute than firms from other countries, according to the survey conducted by American Chamber of Commerce in South China, which polled 219 companies, one-third from the manufacturing sector.

Sixty-four percent of the companies said that they were considering relocating production lines outside of China, but just 1 percent said they had any plans to establish manufacturing bases in North America.

“While more than 70 percent of the US 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 considerations,” said the AmCham report.

The trade war is moving both supply chains and industrial clusters, mostly towards Southeast Asia, according to the survey.

US companies reported facing tighter competition from rivals in Vietnam, Germany, and Japan, while Chinese companies stated that they were facing increased competition from Vietnam, india, and the United States and South Korea.

Customers are either slowing down orders or not placing them at all, said Harley
Seyedin, who is the president of AmCham South China.

“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,” said Seyedin. “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 US tariffs, while agriculture-related businesses have been most blown by Chinese measures, the survey data showed.

The survey was conducted between September 21 and October 10, shortly after the US slapped tariffs on another $200 billion worth of Chinese goods. That compelled Beijing to retaliate with additional tariffs on $60 billion of US products, worsening tariff war between the world’s two largest economies.

The US duties are due to rise on January 1.

Both Washington and Beijing seem to be digging in for a lengthy battle, though US officials say that US Donald Trump would go through with plans to meet Chinese President Xi Jinping at the G20 summit next month if it appeared that the discussions would be positive.

Almost 80 percent of the survey respondents said that the tariffs have hit their businesses, with US tariffs having a little more impact than the Chinese ones.

Around 85 percent of US companies said that 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 main concern of companies surveyed was the rising costs of goods sold, which resulted in lower profits. Other concerns included difficulties managing procurement and reduced sales.

One-third of the companies estimate that the trade dispute had lowered business volumes ranging from $1 million to $50 million, while almost one out of 10 manufacturers reported high-volume business losses of $250 million or more.

Almost half of the companies surveyed also said that there had been an increase in non-tariff barriers such as increased bureaucratic oversight and slower customs clearance. Analysts have warned of such risks to US firms as China is increasingly unable to math US measures on a dollar for dollar basis.

The poll’s results add to evidence that export-reliant Chinese cities and provinces are battling growing strains. Guangdong, which is China’s biggest province by gross domestic product, reported s drop in exports in the first eight months of the year earlier.