One Trump Victory: Global Companies Rethink China – NYT

The trade war is nearing a possible truce, but companies are nevertheless moving to reduce their dependence on Chinese factories to make the world’s goods.


BEIJING — Whatever deal Washington and Beijing reach over the trade war, President Trump has already scored a big victory: Companies are rethinking their reliance on China.

China world's factory merlin_152764191_b9d4dc96-d7af-4a03-be6e-ed6b378253aa-superJumbo
Companies around the world are trying to reduce their dependence on Chinese factories. (Reuters)

The two sides are nearing an agreement, with Mr. Trump saying on Thursday that an “epic” trade pact could be weeks away and that he may soon meet with President Xi Jinping, China’s top leader. But already, spurred by tariffs and trade tensions, global companies are beginning to shift their supply chains away from China, just as some Trump administration officials had wanted.

The move, known as decoupling, is a major goal of those who believe the world has grown far too dependent on China as a manufacturing giant. As Beijing builds up its military and extends its geopolitical influence, some officials fear that America’s dependence on Chinese factories makes it strategically vulnerable.

Now companies in a number of industries are reducing their exposure to China. GoPro, the mobile camera maker, and Universal Electronics, which makes sensors and remote controls, are shifting some work to Mexico. Hasbro is moving its toy making to the United States, Mexico, Vietnam and India. Aten International, a Taiwanese computer equipment company, brought work back to Taiwan. Danfoss, a Danish conglomerate, is changing the production of heating and hydraulic equipment to the United States.

Mr. Trump’s victory in this department is not unalloyed. Despite his promises to bring jobs back to the United States, most of the work is shifting to other countries with lower costs. Reshaping global supply chains also takes time, and China will remain a vital manufacturing hub for decades to come.

China emerged as a manufacturing powerhouse over the past two decades. The work force was low cost and relatively skilled. The Communist Party prevented the emergence of independent labor unions. Subcontractors abounded, meaning companies could strongly negotiate for lower supply costs. China built an extensive network of highways and rail lines. It has a vast and growing local customer base, meaning companies don’t have to go far to sell their products.

Businesses flocked there. China accounted for one-quarter of the world’s manufacturing by value last year, up from 8 percent in 2000, according to the United Nations Industrial Development Organization.

China world's factory

The value created in China by manufacturing last year was bigger than in the United States, Germany and South Korea combined.

 

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https://www.nytimes.com/2019/04/05/business/china-trade-trump-jobs-decoupling


 

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