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Will Chinese firms move to Asia to dodge US tariffs?

Will Chinese firms move to Asia to dodge US tariffs?

Sunday 20, 10 2019
Southeast Asian countries could be new markets for Chinese enterprises to consider relocating their factories in the context of trade war between China and United States.
Southeast Asian countries could be new markets for Chinese enterprises to consider relocating their factories in the context of trade war between China and United States.

Arccording to CNBC Channel, US President Donald Trump said that the United States will impose a $500 billion tax on goods from China if both countries can not negotiate and resolve a large trade deficit of America.

The United States is in the process of consultations before imposing taxes on USD200 billion of Chinese goods, which may be applied as early as September.
One of the most common backstories of the US trade war launched against China in the past month has been the suggestion that manufacturers currently exporting from the Chinese mainland may be forced to shift production to other parts of Asia – or, if Donald Trump has his way, back to the US.

However, the transfer of production from China to other Southeast Asian countries also took several years. China firms may be at risk because of US trade war being solved, or Trump extends tariffs with other countries, like Vietnam, to prevent China from taxing.

According to the Financial Times, some factories in Guangdong and Hong Kong (China) have started to shift production to Southeast Asia due to strictly manage from US to some of good imported from China

In addition, rising in labor costs are also a reason for manufacturers to diversify from China, but the process will not be easy because of the quality and environmental requirements. If there were indeed manufacturers looking to shift to other countries, there are no countries with the size or the workforce to accommodate them. Ignorance and distance make it difficult for many in the US or Europe to get their heads around the simple size of China, and the implications of this size.

The bigger challenge is that consumer demand is changing rapidly. Existing factories in China have advantage of decades of experience and long-standing relationships with US retailers.

On the business side, "We do not think this trade war is just a short-term crisis," said Joe Chau, a manager of a children's clothing store in Guangdong. He is also the president of the small and medium business division at the Hong Kong Chamber of Commerce. "We have to find the best Asian countries for our customers, to offset the risk from China," Chau said.
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