Trade disputes with US drive Chinese investments to Vietnam and Mexico

Mon, 17 Jun 2024 15:55:00  |  Print  |  Email   Share:

As trade tensions escalate between Western governments and Beijing, Chinese companies are showing a growing preference for investing in countries such as Vietnam and Mexico. From the data provided by FDI Markets, it is evident that a significant number of Chinese manufacturing and logistics projects have been planned for these countries. Specifically, Mexico has been announced as the location for at least 41 projects, while Vietnam is set to host at least 39 projects in the year leading up to March.

Since FDI Intelligence started monitoring foreign investment news and company announcements in 2003, there has been a significant surge in Chinese manufacturing and logistics projects in Mexico and Vietnam. These two nations have now surpassed the US as the preferred destinations for such projects. The past year until March also saw an unprecedented influx of Chinese projects in Thailand, Malaysia, Hungary, and Egypt, marking a shift in Chinese investment patterns.

These developments underscore the shift in strategy by Western multinationals and policymakers, who are striving to reduce their longstanding reliance on Chinese factories and curtail China's influence in the supply of crucial products. In response, Chinese manufacturers are expanding their footprint abroad. A notable example is the announcement of a substantial investment of up to $2 billion in a Mexican plant by the local subsidiary of the state-owned Shanghai Automotive Industry Corporation.

With President Joe Biden recently imposing new tariffs on $18 billion worth of Chinese goods, even small Chinese manufacturers are now considering investing their limited funds in expanding overseas. As the United States increases its imports from countries other than China, Chinese businesses are also ramping up their exports to these nations.

China's customs data reveals that the total value of Chinese exports to Mexico and Thailand experienced a significant increase, more than doubling to reach $158.7 billion from 2017 to 2023. In comparison, China's overall exports grew by only 49 percent, reaching $3.4 trillion during the same period. Additionally, China's General Administration of Customs reports that Chinese exports of computer parts to Vietnam more than tripled, reaching $1.7 billion between 2017 and 2023.

In April, the Eurasia Group consultancy highlighted that Vietnam's trade surplus with the US had significantly increased. This was not solely due to a shift in production from China to Vietnam but also because Chinese companies were redirecting their products through Vietnam.

 

According to Davin Chor, an economics professor at Dartmouth College in New Hampshire, while direct imports from China may have declined, it is important to consider the indirect routes that still connect the US to Chinese supply chains.

Audrey Liang, a sales representative from Summit Enterprise, a knife and tool production company, shared that after 26 years of operating solely from their Yanjiang factory in Guangdong province, southern China, they are now establishing a second facility in Vietnam. The company anticipates that this new site will be fully functional by the close of next year.

Summit Enterprise's clients suggested a Vietnamese location due to political factors and reduced tariffs on goods from Vietnam, despite the country's higher production costs and less skilled workforce, according to Audrey Liang. She emphasized that without this client requirement, the company wouldn't have considered expanding to Vietnam.

Jack Ye, a sales representative at Xiamen Obaili Manufacturing, a Chinese backpack manufacturer, acknowledged the benefits of manufacturing in China, such as superior delivery times, cost-effectiveness, and quality. However, he indicated that the company might explore international locations if Donald Trump, known for his stringent stance on Chinese trade, secures another term as US president.

In light of China's adept manoeuvres’ to evade sanctions imposed by Western nations, it is foreseeable that all Western countries, inclusive of the United States, will soon openly declare their disinterest in any product manufactured by a Chinese entity or a company under Chinese proprietorship. The paramount issue for Western nations is China's illicit appropriation of their intellectual property, its ability to produce goods at a minimal cost, and its audacity to sell these goods, thereby posing a formidable challenge to the Western economies. China has contrived numerous unprincipled strategies to bolster its economic advancement, much to the chagrin of Western nations. This crafty game of China can persist until the United States unequivocally legislates that it will abstain from purchasing any product from Chinese individuals, companies, or any entity under Chinese ownership. However, prior to this, the Western world must devise an alternative to China that matches or surpasses China in quality and undercuts it in price. In this scenario, a substantial network must be established in Southeast Asian countries such as India, Vietnam, Thailand, Indonesia, and Malaysia, which can promptly supplant China.

By: Tarah Nguyen/ VIETNAMTIMES

Source: https://vietnamtimes.org.vn/trade-disputes-with-us-drive-chinese-investments-to-vietnam-and-mexico-73724.html

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