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US firms seek relocation from China as trade war bites

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Buildings in Shenzhen, China. Reuters

SHENZHEN (Reuters) – More than 70 percent of US firms operating in southern China are considering delaying further investment there and moving some or all of their manufacturing to other countries as the trade war bites into profits, a business survey showed yesterday.

US companies operating in China believe they are suffering more from the trade dispute than firms from other countries, according to the poll by the American Chamber of Commerce in South China, which surveyed 219 companies, one-third from the manufacturing sector.

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

“While more than 70 pct 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 consideration,” the AmCham report said.

The trade war is shifting both supply chains and industrial clusters, mostly towards Southeast Asia, the survey found.

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

Customers are slowing down orders or not placing them at all, Harley Seyedin, president of AmCham South China, told Reuters.

“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.

“One of the most difficult things about market share is once you lose it, it is very hard to get back,” he said.

Companies in the wholesale and retail sectors have suffered the most from US tariffs, while agriculture-related businesses have been most hit by Chinese measures, the survey found.

The survey was conducted between Sept 21 and Oct 10, shortly after the US imposed tariffs on another $200 billion worth of Chinese goods. That prompted Beijing to retaliate with additional tariffs on $60 billion of US products, escalating a tariff war between the world’s two largest economies.

The US duties are set to rise sharply on Jan. 1.

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

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

Around 85 percent of US companies said 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.

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