Mon, Dec 03, 2018 - Page 7 News List

Trade war refugees race to move out of China

Foreign companies are scrambling to relocate their facilities, but a lack of skilled workers and poor infrastructure in their new homes make moving a hassle

By Farah Master, Orathai Sriring and Anne Marie Roantree  /  Reuters, HONG KONG and BANGKOK

Illustration: Yusha

Fred Perrotta spent four years building a network of Chinese suppliers for his line of trendy backpacks, but as soon as the US announced tariffs on almost half of its Chinese imports, he started looking for suppliers in other countries.

That process is now so far advanced that it is too late to reverse it, even after US President Donald Trump and Chinese President Xi Jinping (習近平) called a three-month truce in their trade war at this week’s G20 summit, the 33-year-old said.

Perrotta’s company, Tortuga, is joining what industry experts say is the biggest shift in cross-border supply chains since China joined the WTO in 2001.

The shift is creating stiff competition to secure new facilities in neighboring countries and rebuild supply chains outside of China, home to a fifth of global manufacturing.

“Everyone is nervous and scrambling around,” Perrotta said by telephone from Oakland, California, where he took delivery of the first samples from a potential new supplier in Vietnam.

“Long-term, we will probably shift everything,” he said.

The scramble is driven by the risk of more, and higher, US tariffs on China, and fears that nearby emerging economies can only accommodate new businesses on a “first come, first served” basis.

Vietnam and Thailand are emerging as preferred destinations, but they still face capacity constraints ranging from red tape to skilled labor and limited infrastructure.

Interviews with more than a dozen company executives, trade lawyers and lobby groups in various industries revealed a frenzy of activity across Asia in the past few months: Executives are requesting product samples, touring industrial parks, hiring lawyers and meeting with officials.

In June, Hong Kong-listed furniture maker Man Wah Holdings bought a factory in Vietnam for US$68 million and earlier this month said that it plans to almost triple its capacity to 373,000m2 by the end of next year.

“The acquisition is to mitigate the risks posed by tariffs,” Man Wah said in a statement.

Vietnam-based industrial real-estate developer BW Industrial said that inquiries have surged since October and all its factories are now leased out.

“The manufacturers are from all over the world, but they all have production plants in China and need to start production ASAP,” BW Industrial sales manager Chris Truong told reporters.

In Thailand, SVI PCL, which provides electronics and manufacturing solutions, said it has just selected four new deals worth about US$100 million with existing customers who have operations in China.

“The trade war is good for us,” chief executive officer Pongsak Lothongkam said. “We have been approached by so many companies that we have to prioritize.”

KCE Electronics, Southeast Asia’s biggest maker of printed circuit boards, has been contacted by US companies that want to seek a new supplier to replace one in China, chief executive officer Pitharn Ongkosit said.

“It’s a good opportunity. Many customers have contacted us to ask about our products and prices. But there are no sales yet, as it will take time,” he said.

Stars Microelectronics PCL, another Thai electronics manufacturing services provider, is also getting new business.

“Two [or] three companies will start moving their production base [out of China] to us soon,” chief executive officer Peerapol Wilaiwongstien said.

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