Many US companies in China consider relocation as a trade war bites: survey


SHENZHEN (Reuters) – More than 70 percent of southern China's US companies are considering delaying further investment and relocating some or all of their production to other countries as the trade war turns into profits.

Buildings are seen through dense haze in the central business district in Guangzhou, Guangdong province on February 17, 2014. REUTERS / Alex Lee

US companies operating in China believe that they are suffering more from the trade dispute than companies from other countries, according to a survey by the US Chamber of Commerce in southern China, which surveyed 219 companies and a third from the manufacturing sector.

Sixty-four percent of companies said they would consider relocating production lines outside of China, but only one percent said they had plans to build production facilities in North America.

"While more than 70 percent of US companies are considering postponing or eliminating investment in China and relocating some or all Chinese manufacturing, only half of their Chinese counterparts share the same idea," the AmCham report said.

The trade war shifts both supply chains and industrial clusters, especially to Southeast Asia, according to the survey.

US companies reported that they faced increased competition from competitors in Vietnam, Germany and Japan, while Chinese companies said they were facing growing competition from Vietnam, India, the United States and South Korea.

According to Harley Seyedin, President of AmCham South China, customers demanded that orders be slowed down or not placed at all.

"It can be very good that people are holding back to place orders until times are safer, or that they are relocating to other competitors who are willing to offer cheaper products, sometimes even at a loss to get market share." , he said.

"One of the toughest things in terms of market share is, once you lose it, it's very hard to come back."

Wholesalers and retailers have suffered the most from US tariffs, while agricultural companies have been hardest hit by Chinese measures.

The survey was conducted between 21 September and 10 October, shortly after the US imposed tariffs on Chinese goods worth $ 200 billion. This prompted Beijing to take additional tolls on American products worth US $ 60 billion and escalate a tariff war between the two largest economies in the world.

US tariffs will rise sharply on 1 January.

Both Washington and Beijing appear to be engaged in a long struggle, although US officials say that President Donald Trump would go over plans with Chinese President Xi Jinping at the G20 summit next month if the discussions were positive.

Nearly 80 percent of survey respondents said tariffs have overturned their businesses, with US tariffs having slightly more influence than Chinese ones.

About 85 percent of US companies said they had suffered from the combined tariffs, compared with around 70 percent of their Chinese counterparts. Companies from other countries reported similar effects as their American counterparts.

The main problem of the surveyed companies was the rising cost of goods sold, which led to lower profits. Other concerns included difficulties in managing procurement and reduced sales.

A third of companies estimate that the trade dispute reduced business volume from $ 1 million to $ 50 million, while nearly one in ten manufacturers reported heavy losses of $ 250 million or more.

Almost half of the companies surveyed also stated that non-tariff barriers had increased, including increased bureaucratic control and slower customs clearance. Analysts have warned against such a risk for US companies, as China is increasingly unable to adjust US measures on a dollar-by-dollar basis.

The findings of the study help increase the burden on export-dependent Chinese cities and provinces. Guangdong, China's largest province after gross domestic product, recorded a decline in exports over the previous year for the first eight months.

Reporting by Sue-Lin Wong; Editing by Kim Coghill

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