Trade War Casualties: Factories Shifting Out Of China

Trade War Casualties: Factories Shifting Out Of China

Jul 30, 2018

By Kenneth Rapoza, Contributor, Forbes Supply chains starting to shift at a faster pace as companies look to avoid tariffs.  China-based manufacturers were already in the process of moving to lower-cost Southeast Asia. Now that trade tariffs have been enacted on at least $50 billion worth of goods, and another $200 billion likely by summer’s end, they are shifting their supply chain. It’s happening. “With recent tariff battles, companies aren’t as eager to have production in China,” says Nathan Resnick, CEO of startup company Sourcify. The business-to-business manufacturing platform has offices in San Diego and Guangzhou. “We run production runs in India, Bangladesh, Vietnam, Philippines, and Mexico right now. Labor costs are actually more affordable outside of China, so for products like apparel where there is a lot of cut-and-sew labor, most companies are moving out of China anyway,” he says. Sourcify raised $2.5 million through Y Combinator this winter. “I’ve been going back and forth to China for years, and it is getting more expensive. With all these tariffs coming, why not run some of your production runs elsewhere? Companies are saying that the scare of these tariffs has decreased the incentives to manufacture in China.” Sourcify is small, but Kerry Logistics Network, a Hong Kong-listed firm owned by Malaysia’s billionaire Kuok family, is not. The South China Morning Post reported that Kerry shifted part of its production lines from mainland China to its corporate home further south in order to avoid tariffs. “Our clients have been shifting part of their production lines as early as March from China to other Asian countries where they already have manufacturing plants,” William Ma Wing-kai, Kerry’s managing director, was quoted saying in the Hong Kong daily. “This is a reallocation of global production bases,” Ma said. For the last couple of years, China has been moving to a more automated assembly line, pushing lower-cost manufacturing to Vietnam and elsewhere. China is now one of the world’s largest producers of robotics used in manufacturing assembly lines. As the country moves up the value chain, old-school labor like stitch-and-sew apparel manufacturing is leaving the country. Now that the tariffs are in place, with more promised, companies that were...

China really is to blame for millions of lost U.S. …

China really is to blame for millions of lost U.S. …

May 15, 2018

“China really is to blame for millions of lost U.S. manufacturing jobs, new study finds” By Jeffry Bartash, MarketWatch Millions of Americans who lost manufacturing jobs during the 2000s have long ”known” China was to blame, not robots. And many helped elect Donald Trump as president because of his insistence that China was at fault. Evidently many academics who’ve studied the issue are finally drawing the same conclusion. For years economists have viewed the increased role of automation in the computer age as the chief culprit for some 6 million lost jobs from 1999 to 2010 — one-third of all U.S. manufacturing employment. Firms adopted new technologies to boost production, the thinking goes, and put workers out of the job in the process. Plants could make more stuff with fewer people. In the past several years fresh thinking by economists such as David Autor of MIT has challenged that view. The latest research to poke holes in the theory of automation-is-to-blame is from Susan Houseman of the Upjohn Institute. Academic research tends to be dry and complicated, but Houseman’s findings boil down to this: The government for decades has vastly overestimated the growth of productivity in the American manufacturing sector. It’s been growing no faster, really, than the rest of the economy. What that means is, the adoption of technology is not the chief reason why millions of working-class Americans lost their jobs in a vast region stretching from the mouth of the Mississippi river to the shores of the Great Lakes. Nor was it inevitable. Autor and now Houseman contend the introduction of China into the global trading system is root cause of the job losses. Put another way, President Bill Clinton and political leaders who succeeded him accepted the risk that the U.S. would suffer short-term economic harm from opening the U.S. to Chinese exports in hopes of long-run gains of a more stable China. No longer needing to worry about U.S. tariffs, the Chinese took full advantage. Low Chinese wages and a cheap Chinese currency CNYUSD, -0.6037%   — at a time when the dollar DXY, +0.48%  was strong — gave China several huge advantages. Companies shuttered operations in the U.S., moved to China and eventually set up...

China Lists $50B of US Goods it Might Hit With 25 Percent…

China Lists $50B of US Goods it Might Hit With 25 Percent…

Apr 5, 2018

“China Lists $50B of US Goods it Might Hit With 25 Percent Tariff” By Joe McDonald, Associated Press Featured on Manufacturing.net China on Wednesday issued a $50 billion list of U.S. goods including soybeans and small aircraft for possible tariff hikes in an escalating and potentially damaging technology dispute with Washington. The country’s tax agency gave no date for the 25 percent increase to take effect and said that will depend on what President Donald Trump does about U.S. plans to raise duties on a similar amount of Chinese goods. Beijing’s list of 106 products included the biggest U.S. exports to China, reflecting its intense sensitivity to the dispute over American complaints that it pressures foreign companies to hand over technology. The clash reflects the tension between Trump’s promises to narrow a U.S. trade deficit with China that stood at $375.2 billion last year and the ruling Communist Party’s development ambitions. Regulators use access to China’s vast market as leverage to press foreign automakers and other companies to help create or improve industries and technology. A list the U.S. issued Tuesday of products subject to tariff hikes included aerospace, telecoms and machinery, striking at high-tech industries seen by China’s leaders as the key to its economic future. China said it would immediately challenge the U.S. move in the World Trade Organization. “It must be said, we have been forced into taking this action,” a deputy commerce minister, Wang Shouwen, said at a news conference. “Our action is restrained.” A deputy finance minister, Zhu Guangyao, appealed to Washington to “work in a constructive manner” and avoid hurting both countries. Zhu warned against expecting Beijing to back down. “Pressure from the outside will only urge and encourage the Chinese people to work even harder,” said Zhu at the news conference. Companies and economists have expressed concern improved global economic activity might sputter if other governments are prompted to raise their own import barriers. The dispute “may compel countries to pick sides,” said Weiliang Chang of Mizuho Bank in a report. “U.S. companies at this point would like to see robust communication between the US government and the Chinese government and serious negotiation on both sides, hopefully...

Why China won’t own next-generation manufacturing

Why China won’t own next-generation manufacturing

Aug 29, 2016

By Vivek Wadhwa, The Washington Post After three decades of dramatic growth, China’s manufacturing engine has largely stalled. With rising salaries, labor unrest, environmental devastation and intellectual property theft, China is no longer an attractive place for Western companies to move their manufacturing. Technology has also eliminated the labor cost advantage, so companies are looking for ways to bring their high-value manufacturing back to the United States and Europe. China is well aware that it has lost its advantage, and its leaders want to use the same technologies that have leveled the playing field to give the country a new strategic edge. In May 2015, China launched a 10-year plan, called Made in China 2025, to modernize its factories with advanced manufacturing technologies, such as robotics, 3-D printing and the Industrial Internet. And then, in July 2015, it launched another national plan, called Internet Plus, “to integrate mobile Internet, cloud computing, big data and the Internet of Things with modern manufacturing.” China has made this a national priority and is making massive investments. Just one province, Guangdong, committed to spending $150 billion to equip its factories with industrial robots and create two centers dedicated to advanced automation. But no matter how much money it spends, China simply can’t win with next-generation manufacturing. It built its dominance in manufacturing by offering massive subsidies, cheap labor and lax regulations. With technologies such as robotics and 3-D printing, it has no edge. After all, American robots work as hard as Chinese robots. And they also don’t complain or join labor unions. They all consume the same electricity and do exactly what they are told. It doesn’t make economic sense for American industry to ship raw materials and electronics components across the globe to have Chinese robots assemble them into finished goods that are then shipped back. That manufacturing could be done locally for almost the same cost. And with shipping eliminated, what once took weeks could be done in days and we could reduce pollution at the same time. Most Chinese robots are also not made in China. An analysis by Dieter Ernst of the East-West Center showed that 75 percent of all robots used in China are purchased from foreign firms (some with assembly...

U.S. Manufacturing Competitiveness Rising, Set to Take No. 1…

U.S. Manufacturing Competitiveness Rising, Set to Take No. 1…

Jul 18, 2016

“U.S. Manufacturing Competitiveness Rising, Set to Take No. 1 Spot from China by 2020” By Michelle Drew Rodriquez, Manufacturing Leader, Center for Industry Insights at Deliotte In a study I recently coauthored and conducted in collaboration with the U.S. Council on Competitiveness, executives indicated the United States is expected to be the most competitive manufacturing nation, moving China into the number two position by 2020. The study – 2016 Global Manufacturing Competitiveness Index – by Deloitte Touche Tohmatsu Limited (Deloitte Global) and the Council on Competitiveness (Council) – follows earlier studies we released in 2010 and 2013. The findings are based on an in-depth analysis of survey responses from more than 500 chief executive officers and senior leaders at manufacturing companies around the world, ranking nations in terms of current and future manufacturing competitiveness as well as the global drivers at the heart of manufacturing competitiveness. A number of interesting findings arose this year. For instance, the 2016 study finds the United States is expected to be the most competitive manufacturing nation by 2020, and consistent with prior reports, talent is identified as the number one driver of manufacturing competitiveness. To take a look at the many aspects of the study, and slice and dice the data through interactive drill-downs of rankings and drivers, be sure tovisit the GMCI Interactive Website. The following summarizes key findings related to country level competitiveness and key drivers of manufacturing competitiveness: Rankings: The United States is projected to take number one spot by end of decadeimproving its ranking from 4th in 2010 to 2nd in this year’s study, and is expected to reach No.1 by 2020. As the U.S. invests heavily in talent and technology, it ranks highest as an advanced manufacturing economy. The “Mighty Five” (MITI-V) is starting to show face as manufacturing power group. Made up of the five-Asia Pacific nations of Malaysia, India, Thailand, Indonesia and Vietnam, the MITI-V or “Mighty Five” could represent a “New China” and enter the top 15 rankings of global manufacturing competitiveness over the next five years. The study also indicates BRIC crumbles as member nations’ individual ratings shuffle. Among the BRIC countries, only China is viewed as a top manufacturing nation in 2016. The other three – Brazil, Russia and India –...