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Chinese Businesses Target Vietnam and Mexico as Trade Tensions with US Rise.
Investment increases in countries that offer alternative supply chain route to US Chinese Manufacturers Diversify Overseas Amid Tariff Pressures.In the wake of President Joe Biden’s announcement of fresh tariffs on Chinese goods, Chinese manufacturers are strategically diversifying their investments overseas. One notable example is the up to $2 billion Mexican plant announced by the local subsidiary of Shanghai Automotive Industry Corporation, a state-owned enterprise.
The imposition of tariffs has prompted even smaller Chinese manufacturers to explore opportunities for expansion beyond China. With limited funds at their disposal, these businesses are seeking to establish overseas operations to mitigate the impact of tariffs and tap into new markets.
As the United States increasingly looks beyond China for imports, Chinese businesses are adjusting their export strategies accordingly. The total value of Chinese exports to countries such as Mexico and Thailand has more than doubled between 2017 and 2023, reaching $158.7 billion, according to China’s customs data. This growth contrasts with the more modest 49 percent increase in China’s overall exports to $3.4 trillion over the same period.
Notably, Chinese exports of computer parts to Vietnam have surged, more than tripling to $1.7 billion between 2017 and 2023, as reported by China’s General Administration of Customs. However, analysts caution that Vietnam’s increasing trade surplus with the United States is not solely due to a shift in production from China. Chinese companies are also rerouting their products through Vietnam, exploiting indirect routes to maintain their access to U.S. markets.
Davin Chor, an economics professor at Dartmouth College, observes, “Direct importing [from China] may be down. But one only has to look at indirect routes through which the US continues to be plugged into Chinese supply chains.” This highlights the resilience and adaptability of Chinese businesses in navigating trade disruptions and finding alternative routes to maintain their presence in key markets.
For some manufacturers like Summit Enterprise, which has operated out of a single factory in southern China’s Guangdong province for 26 years, diversification is now a strategic imperative. Audrey Liang, a sales representative at Summit Enterprise, reveals plans to establish a second site in Vietnam, anticipating operational readiness by the end of next year. This move underscores the proactive measures undertaken by Chinese manufacturers to ensure their competitiveness amidst evolving trade dynamics and geopolitical tensions.
In conclusion, the shifting landscape of global trade, marked by tariff pressures and geopolitical uncertainties, is compelling Chinese manufacturers to explore new horizons beyond their traditional stronghold. By strategically diversifying their investments overseas, these businesses are adapting to changing market dynamics and positioning themselves for sustained growth in a rapidly evolving global economy.
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