Govt dis­misses con­cerns over fac­tory ex­o­dus

Global Times US Edition - - FRONT PAGE - By Chu Daye and Wang Yi

China’s top eco­nomic plan­ning agency Tues­day dis­missed con­cerns over the sup­ply chain re­lo­ca­tion away from the coun­try, dubbed the world’s fac­tory, say­ing the scale of the man­u­fac­tur­ing sec­tor re­lo­ca­tion out of China is lim­ited and its im­pact un­der con­trol.

The state­ment came days af­ter the Min­istry of Com­merce (MOFCOM) an­nounced on July 11 that there were no largescale with­drawals of for­eign in­vest­ment from China.

The two of­fi­cial clar­i­fi­ca­tions, is­sued by two min­istries in close con­junc­tion and cov­er­ing for­eign-in­vested and do­mes­tic firms, gave an au­thor­i­ta­tive foot­note on some­thing that is dif­fi­cult for or­di­nary peo­ple to un­der­stand.

In the past two years, there has been a ris­ing cho­rus in the West­ern me­dia on how out­bound in­dus­trial re­lo­ca­tion added woes to the Chi­nese econ­omy – al­ready fac­ing down­ward pres­sure from its re

struc­tur­ing and in­dus­trial up­grade.

US Pres­i­dent Don­ald Trump tweeted Mon­day that tar­iffs placed by his ad­min­is­tra­tion are “hav­ing a ma­jor ef­fect on com­pa­nies want­ing to leave China” for non-tariff coun­tries.

“Thou­sands of com­pa­nies are leav­ing,” Trump tweeted, link­ing the trend with the on­go­ing trade ne­go­ti­a­tions be­tween the two coun­tries.

“In the past two years, some com­pa­nies that moved their pro­duc­tion fa­cil­i­ties abroad have moved back, be­cause they find the place they moved to does not fit their busi­ness,” said Na­tional De­vel­op­ment and Re­form Com­mis­sion (NDRC) spokesper­son Meng Wei at a reg­u­lar press con­fer­ence on Tues­day.

China mag­net

“Com­pa­nies are mov­ing out of China for a num­ber of rea­sons rang­ing from cost sen­si­tive­ness to the need to be near their tar­get mar­ket, but only a very few com­pa­nies did this to evade US tar­iffs on China,” Meng said.

“But let’s be clear about one thing – mov­ing out is no easy job,” Meng said, not­ing that the scale of the man­u­fac­tur­ing ex­o­dus is lim­ited and its im­pact on China’s growth, in­dus­trial up­grade and job mar­ket was “con­trol­lable.”

A pro­duc­tion line man­ager at a Dong­guan­based elec­tron­ics de­vice com­pany sur­named Wu told Global Times that his com­pany moved two head­set pro­duc­tion lines to Cam­bo­dia in 2016, only to have them move back af­ter just two years.

“The coun­try’s un­de­vel­oped port in­fra­struc­ture, trans­port and lo­gis­tics and, most im­por­tantly, cul­tural dif­fer­ences, prompted the de­ci­sion. Lo­cal work­ers are not as ded­i­cated as the Chi­nese,” said Wu.

The ma­jor rea­son for the leave-then-re­turn trend was fast ris­ing la­bor costs and pol­icy un­cer­tainty, said a well-in­formed shoe man­u­fac­tur­ing busi­ness owner sur­named Wang in Gaobu town­ship, Dongguan.

Gaobu used to have a clus­ter of fac­to­ries that pro­duce shoes for in­ter­na­tional brands like Nike and Adidas.

“Some have re­treated from South­east Asian coun­tries like Viet­nam. Every com­pany has dif­fer­ent problems in funds, part­ner­ship or op­er­a­tions. But the ma­jor com­mon rea­son is that lo­cal la­bor re­quire­ments for wel­fare are ris­ing so fast that it is beyond their ex­pec­ta­tions,” said Wang. “Newly emerged poli­cies on ar­eas such as en­vi­ron­men­tal pro­tec­tion and for­eign in­vest­ment man­age­ment are adding re­stric­tions to Chi­nese com­pa­nies.”

Another key rea­son was that com­pa­nies can­not leave China with­out com­pro­mis­ing the qual­ity stan­dards of their prod­ucts, said Wang. “The qual­ity Dongguan ac­cu­mu­lated in 30 years can­not be matched by new over­seas venues which just have a few years of de­vel­op­ment.”

Made in USA

Since Trump be­came as pres­i­dent, one of his key agen­das has been push­ing Amer­i­can firms to re­turn to the US and build man­u­fac­tur­ing fa­cil­i­ties.

To this end, the Trump ad­min­is­tra­tion des­ig­nated July 15 as Made in Amer­ica Day and this week Made in Amer­ica Week. How­ever, me­dia re­ports have shown that bring­ing fac­to­ries back to the US is no easy job and the US is feel­ing daunt­ing chal­lenges when it comes to sup­ply chain re­lo­ca­tion.

In 2018, Us-based mo­tor­cy­cle maker Har­ley­david­son Inc said it would move some pro­duc­tion ca­pac­ity out of the US to Europe to avoid the im­pact of Trump’s tariff war.

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