Mass Exodus of Manufacturing from China

Posted by Ed 3 yrs ago
Yes, manufacturing really is leaving China - and authorities are scrambling to slow down the exodus
The economic powerhouse faces an unprecedented set of challenges in a post-coronavirus era
China is experiencing an exodus of foreign firms despite surveys and published opinions from commerce lobby groups and business consultants in the country which suggest otherwise. Moreover, the pace of companies leaving China is accelerating, causing a “ripple effect” that threatens Covid-19 economic recovery.
The exit also presents a challenge to President Xi Jinping’s “dual circulation” plans, which aim to reduce China’s dependence on foreign markets by increasing domestic consumption. Consequently, Chinese officials are scrambling to slow it down. 

In January, the Financial Times released an astounding write-up on “[h]undreds of thousands of Taiwanese enterprises” who were leaving China due to “rising costs and trade tensions between Washington and Beijing.” According to FT analysts, the unexpected turn “reverses decades of investment” by Taiwanese firms.

Last month, Delta Electronics, a major Taiwanese producer of electronic components for Apple and Tesla, told FT it planned to reduce its Chinese labor force “by 90 percent,” and that “even without the US-China conflict, China is no longer a good place for manufacturing.”
Company executives cited growing wages and a high staff “turnover rate” as primary reasons.In December 2020, Asia Times said Japanese manufacturers, too, were “beat[ing] a path out of China” in a “[t]rend” that had accelerated after Tokyo gave incentives to encourage firms to leave. National security concerns about over-dependence on China in Japan’s supply chains had emerged during the coronavirus pandemic when production was disrupted by lockdowns and shortages. Billions of yen (JP¥) in subsidies have been set aside for Japanese firms who are willing to leave China for places, like, Bangladesh and South East Asia.

A June 2019 report from Nikkei Asian Review also revealed that “South Korean corporate giants . . . [were] moving production out of China” in a “Samsung-led exodus.” One source told Nikkei that the companies had “held out [that] long to avoid giving the Chinese government a bad impression, but …they [couldn’t] take it anymore.”

Finally, in February 2020, Bank of America announced the results of its survey of “equity analysts covering more than 3,000 companies globally,” which found that “[c]ompanies in two-thirds of global sectors in North America have either implemented or announced plans to pull at least a portion of their supply chains out of China, while companies in 50 percent of country-sectors in the Asia Pacific (ex-China) region [were] doing likewise.” 

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