{"id":11565,"date":"2019-05-23T05:00:23","date_gmt":"2019-05-23T04:00:23","guid":{"rendered":"https:\/\/omnidexmining.com\/tariffs-pressure-chinese-factories-to-upgrade-or-move-not-to-the-u-s-but-to-a-second-china\/"},"modified":"2021-02-16T08:58:08","modified_gmt":"2021-02-16T08:58:08","slug":"tariffs-pressure-chinese-factories-to-upgrade-or-move-not-to-the-u-s-but-to-a-second-china","status":"publish","type":"post","link":"https:\/\/omnidexmining.com\/es\/tariffs-pressure-chinese-factories-to-upgrade-or-move-not-to-the-u-s-but-to-a-second-china\/","title":{"rendered":"Tariffs Pressure Chinese Factories to Upgrade or Move Not to the US but to a Second China"},"content":{"rendered":"\t\t
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Reporting from Guangzhou, China \u2014\u00a0<\/span>Christopher Devereux believes anything can be \u201cmade in China.\u201d<\/p>\n

In 2003, he came to Guangzhou to open ChinaSavvy, a British-owned firm that connects Western companies with Chinese factories to produce metal and plastic goods.<\/p>\n

For 16 years, ChinaSavvy supervised factories making everything from industrial rock crushers to Canon camera parts.<\/p>\n

But within three months of Donald Trump\u2019s election in 2016, ChinaSavvy had opened a new branch in Vietnam.<\/p>\n

\u201cAt that time there were no tariffs, but we thought it was a prudent step to take,\u201d said Devereux, the company\u2019s managing director and vice chairman of the British Chamber of Commerce.<\/p>\n

By the time\u00a0the newest U.S. tariffs on Chinese goods\u00a0were enacted last week, Devereux had changed the company\u2019s name from ChinaSavvy to Omnidex, and now he\u2019s fielding calls from panicked clients wanting to shift their supply chains to Vietnam.<\/p>\n

The\u00a0tit-for-tat trade war\u00a0between Washington and Beijing is pushing some foreign manufacturers to move factories out of China \u2014 not to the United States, despite President Trump\u2019s insistence that tariffs will bring back\u00a0U.S. factory jobs, but to a \u201csecond China,\u201d in Southeast Asia.<\/p>\n

Even Chinese firms, which were already leaving over other issues, are speeding up their exits and changing the face of Guangdong province, once the manufacturing capital of the world.<\/p>\n

The United States and China have been imposing or increasing customs taxes on each other\u2019s goods for nearly a year while negotiating over business issues including intellectual property protection and foreign access to Chinese markets.<\/p>\n

On May 10, the U.S. raised existing tariffs on $200 billion of Chinese goods to 25% from 10%. On May 13, China retaliated, raising tariffs on $60 billion of U.S. goods.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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A worker at the Everwin precision technology factory in Dongguan, in China's Guangdong province.(Aleksandar Plavevski \/ EPA\/Shutterstock)<\/figcaption>\n\t\t\t\t\t\t\t\t\t\t<\/figure>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Although tariffs end up mostly being paid by\u00a0domestic consumers, they are affecting the supply chain.<\/p>\n

Low-end manufacturers, facing\u00a0rising wages\u00a0and increased labor and environmental controls, had already started leaving China to seek cheaper labor and looser regulations. Trump\u2019s tariffs are prompting them to move faster.<\/p>\n

Devereux said his American clients have been calling every other day, asking how quickly they can shift supply chains to Vietnam.<\/p>\n

\u201cCustomers don\u2019t trust Trump, that he\u2019s not suddenly going to come up with more tariffs,\u201d Devereux said. \u201cSo they\u2019re looking for us to move products we manufacture that aren\u2019t even covered by the tariffs at the moment, to be ready to move that to Vietnam.\u201d<\/p>\n

It\u2019s not just foreign companies shifting supply chains. Chinese companies are also moving to Vietnam, where they can avoid tariffs and pay one-third to half the minimum wage in Guangdong, he said.<\/p>\n

\u00a0<\/div>\n

None of his clients have chosen to move\u00a0<\/b>production lines to the United States, Devereux said.<\/p>\n

\u201cYou force businesses back to the United States, and you have a wage level that\u2019s five times, 10 times more,\u201d he said. \u201cHow are you going to compete? Even if you keep on putting bigger and bigger tariffs, you\u2019ve got to manufacture somewhere else.\u201d<\/p>\n

Trump pushing factories out of China doesn\u2019t create jobs for the\u00a0U.S. factory worker, Devereux said.<\/p>\n

\u201cEffectively, he will create another mini-China in Vietnam,\u201d he said. \u201cAnd then I suppose he\u2019ll put tariffs on those\u201d products.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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Workers churn out nursery products at the Wonderland company in Dongguan, China.(Aleksandar Plavevski \/ EPA\/Shutterstock)<\/figcaption>\n\t\t\t\t\t\t\t\t\t\t<\/figure>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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China\u2019s factory province<\/h3>\n

Guangdong province was once the heart of China\u2019s economic reform. It attracted waves of investors \u2014 first from Hong Kong and Taiwan, then from farther abroad \u2014 who turned small towns such as Dongguan into sprawling factory cities in the 1990s and 2000s.<\/p>\n

As China became the \u201cfactory of the world,\u201d migrant workers from poorer, inland provinces flooded to Guangdong, accepting dire working conditions and dirt-cheap wages that were still higher than anything they could get at home. Migrants would line up overnight for factory jobs.<\/p>\n

Twenty years later, Guangdong has\u00a0transformed. Rising affluence has raised wages and empowered workers to demand better labor protections.\u00a0Millennials want freedom\u00a0and meaning in their choice of work, not 18-hour days in a factory.<\/p>\n

\u00a0<\/div>\n

Chinese millennials are rejecting dull factory jobs \u2014 and transforming the economy \u00bb<\/b><\/p>\n

\u201cThe trade war gives China a chance to rise up,\u201d said Kate Liang, president of Guangdong ABLinox Sanitaryware Co., which makes stainless steel kitchen and bathroom fittings in Zhaoqing, a quiet city about an hour\u2019s drive from Guangzhou.<\/p>\n

When the Trump administration began imposing tariffs, Liang said, she started reading philosophy books to help her strategize. A book about West Point leadership strategy lay on her desk.<\/p>\n

\u201cIt\u2019s survival of the fittest,\u201d she said, invoking her favorite theorist, Charles Darwin. \u201cIf the environment is harsh, maybe a lot will die. But those who live on will be the best.\u201d<\/p>\n

In Guangdong\u2019s factory boom, in the early 2000s, she said, business was good, but \u201cthere was low quality, zero process.\u201d<\/p>\n

As trade war escalates, Chinese remember \u2018national humiliation\u2019 \u00bb<\/b><\/p>\n

As cheap mass production gets squeezed out of China, she hopes higher-quality companies will remain. \u201cIt affects those who are low-end, lower quality, wasteful \u2014 bad energy use, bad for the environment \u2014 those working purely for money,\u201d she said.<\/p>\n

Many of Liang\u2019s competitors have moved to Vietnam since wages increased in China. But she decided to stay and upgrade her company.<\/p>\n

\u201cAfter 10 years, the salary for Vietnam will increase. Everything will increase, and then they need to go away again,\u201d Liang said. \u201cIf you move, it\u2019s good for the Vietnamese economy but not for the industry, because there are no breakthroughs. You\u2019re just walking the same road again, wasting the same resources, time and earth.\u201d<\/p>\n

U.S. customers make up 20% of Liang\u2019s market, and she wants to expand there. But if tariffs continue, she said, she\u2019d focus on China and other markets.<\/p>\n

\u201cMy market exists, whether you buy or not,\u201d Liang said.<\/p>\n

\u2018Everyone is anxious\u2019<\/h3>\n

Those who rely on U.S.-China trade for a living are not so confident.<\/p>\n

Charles Fung, deputy general manager of Great Supply Chain Management, a logistics company in Dongguan that makes shipping and customs arrangements for U.S. buyers of Chinese goods, said the new tariffs were a \u201cshock.\u201d<\/p>\n

The U.S.-China trade war just got a lot worse. And there\u2019s no quick fix for relations \u00bb<\/b><\/p>\n

\u201cWe exporters are directly affected, especially people like me who only work on America,\u201d Fung said. \u201cWe really hope this will be solved in the next few months. But we\u2019re not sure how Trump is thinking, so everyone is anxious.\u201d<\/p>\n

As U.S.-China trade talks continue, Fung said he is also watching negotiations between shippers and buyers.<\/p>\n

Theoretically, U.S. consumers pay the tariffs on Chinese goods. But buyers have negotiating power, and many Chinese factories split the cost of taxes with their American buyers.<\/p>\n

\u201cTrump\u2019s taxes are not just added on to Americans,\u201d Fung said. When tariff levels were at 10%, many Chinese factories split the taxes with their American buyers, he said. \u201cFifty percent of 10% taxes was a lot. But they just did it, because this was the only way.\u201d<\/p>\n

But a 25% level, he said, would be harder to bear.<\/p>\n

\u201cSo many people are saying fight, fight, kill, kill,\u201d Fung said, referring to nationalistic comments\u00a0in Chinese media about resisting U.S. pressure.<\/p>\n

\u201cBut a lot of us here are living off of the U.S.-China relationship. We survive on this, especially here in the world\u2019s manufacturing center.\u201d<\/p>\n

Many other Dongguan agents who once worked on U.S.-China shipping have now shifted to work on the China-Vietnam line, Fung said.<\/p>\n

Fung, however, has invested decades into building relationships with agents in L.A., Chicago, Seattle and New York. He\u2019s specialized in the American system and doesn\u2019t want to change fields. But he\u2019s thinking about it.<\/p>\n

\u201cI really hope it\u2019ll get better, so that the U.S. and China both benefit. I\u2019m sure American consumers hope that too,\u201d Fung said.<\/p>\n

\u201cIf they don\u2019t work together anymore, we\u2019ll be living off nothing but air.\u201d<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Get in touch with Omnidex Mining if you need more information or a quote.<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t
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