US trade war fears ripple through China’s ‘workshop of the world’

DONGGUAN, CHINA: Allan Chau, the general manager of a Chinese factory making precision metal parts for US customers, is still calling it a ‘proposed’ trade war, but that hasn’t stopped him from planning for the worst.

Unlike last year, when US President Donald Trump sounded protectionist warnings that were largely dismissed as bluster, Chau and other factory bosses across China say the risks from this trade spat are now far more tangible.

As a result they warn of a possible wave of small factory closures, a shift of some production away from China, and the use of questionable practices to dodge increased tariffs.

“Before, we didn’t think we’re affected because we’re doing little metallic parts,” said Chau at his three-storey beige-colored-plant in Dongguan.

“(Now), everybody is talking about this proposed war.”

The city of Dongguan is one of the main export hubs in southern China’s Pearl River Delta.

The region has been dubbed the “workshop of the world” and accounts for around a quarter of China’s exports.

As hundreds of computer-controlled lathes hummed around him, fashioning slender aluminium, steel and brass rods into intricate parts, Chau pointed out a car valve, the size of a thumb – used in car braking systems assembled in US plants – as an example of a product caught up in the storm.

Of the 1,500 or so metal parts made in Chau’s plant, including needles for espresso machines to puncture coffee capsules, he says around 200 could be hit by the proposed US tariffs that stand to affect US$50 billion worth of Chinese goods.

“If they’re going to propose 25 per cent tax on those things, we have a lot of counter-measures we’ve got to do to keep ourselves alive,” said Chau, whose company, Tien Po International, has run factories in China for more than 30 years.