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Author Topic: Trade War Casualties: Factories Shifting Out Of China  (Read 50 times)
Hydrogen
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July 31, 2018, 11:52:19 PM
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 #1

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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 considering relocating are doing so sooner than planned.

In recent interviews with the British press, Goldman Sachs and Trump administration alum Steve Bannon said that the nationalist policies of the new White House ultimately seek to remap global supply chains in favor of American manufacturing.

China has been reacting to Trump’s measures. Each tariff imposed on them has been met in kind by tariffs against American imports. Trump has proposed $200 billion more, but Xi Jinping, China’s leader, has not retaliated with similar numbers.

China’s Ministry of Commerce said Thursday that the country would abide by World Trade Organization rules and would like to see them fixed for the better of globalization.

“China is supportive of WTO reform and hopes the reform will address the concerns of most members and reflect their needs,” Ministry of Commerce spokesperson Gao Feng said at a press conference last week. “It’s better to avoid a trade war.”

China has responded to the current trade war by providing new fiscal stimulus, including tax breaks.

Chinese premier Li Keqiang came out of nowhere last week, saying that Beijing would do everything possible to prop up the domestic economy in light of a trade war. Mainland equities are down over 20% since their highs reached in mid-January. Investors are expecting a looser monetary policy from the central bank. But foreign investors also face a weaker Chinese currency, meaning forex risks will eat up gains in the A-shares.


GDP growth remained largely solid at 6.8% in the first half, with retail sales and property investment holding steady. Now that the trade dispute is heating up, things are seen taking a turn for the worse. A slight weakening was spotted in June industrial output and investment, and worries have been on the rise that escalating trade tensions could bite into the economy in a couple of months. A full scale trade war, wherein Trump’s high-water mark of $500 billion in tariffs is reached, is forecast to take at least a half-percent off of Chinese GDP, based on research by Matthews Asia, a San Francisco-based mutual fund company.

Tariffs are hurting China.

The country is expanding imports steadily with some items heavily reliant on the U.S. market. For instance, China tariffs on soybeans are 25%. Chinese traders are now forced to either pay 25% more for American beans or go to Brazil and pay just about the same price even without the tariff. Brazil is always more expensive than the U.S.

In the next five years, imports are expected to hit $8 trillion, a potential boon to U.S. companies ... providing China lets them in.

https://www.forbes.com/sites/kenrapoza/2018/07/30/trade-war-casualties-factories-shifting-out-of-china/

....

If china's economy is indeed headed downwards (as it seems) I hope they will reconsider their stance on crypto currencies and embrace the progress and innovation they represent rather than invoking restrictive policies.

One ironic item here is china cutting taxes to stimulate their economy(underlined).   

I wonder why china can get away with tax cuts to stimulate their economy and not be criticized for it. While Donald Trump is accused of treason and genocide for wanting to cut taxes inside the USA--for identical reasons. Its almost as if there is an agenda in place where china is allowed to do things to improve their economy. But if someone pursues policies which are good for the united states economy the media will attack them ferociously.

Its almost as if the media has an agenda where they want china's economy to succeed and america's economy to fail.

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July 31, 2018, 11:59:11 PM
 #2

Realistically speaking, I don't think China would reconsider anything on crypto, especially when they have a trade war around. I am hearing about this war and all this just now, and its a shocker.

I honestly can't believe that China's cost of labor is becoming high, its one of the cheapest countries when it comes to cost of labor. Cutting taxes won't do much right now, as the war is already begun. They need some better fiscal policies. The Chinese Governement acts like a dick and now they are paying for it. I don't America to take lead on this entire scenario, I want the developing countries to go up from this, US is taking everyone nowhere.

There are n Number of factories in China, if all move out, the neighboring countries can take a huge advantage from this. Vietnam, for example has been struggling for ages now, they can do something and make things much better.


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August 01, 2018, 03:32:14 AM
 #3

Why the trade war? Why not Chna lower their tarrifs on US goods that they are reliant on and so the US will do the same on Chinese goods that the Americans a reliant on?

Donald Trump wants more fairness in international trade. If they cant accomodate fairness then its fair that the US raise their tarrifs to make up for the high tarrifs made on American goods.
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August 02, 2018, 04:22:26 PM
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There are n Number of factories in China, if all move out, the neighboring countries can take a huge advantage from this. Vietnam, for example has been struggling for ages now, they can do something and make things much better.

Vietnam is eating those Chinese factories one by one, and it's not like it has begun this year.
Wages in China are growing and workers are becoming twice as expensive.
https://www.economist.com/china/2016/04/16/bleak-times-in-bra-town
https://e.vnexpress.net/news/business/demand-for-factory-space-soars-in-vietnam-as-companies-abandon-china-3479527.html

Remeber, this is an article from 2016:
Quote
Labor costs in Vietnam are about half of those in southern China, with factories paying their workers about $4,000 per year. Meanwhile, the price in China is on the rise. Since 2001, hourly manufacturing wages in China have risen by an average of 12 percent a year, according to the Economist. By the end of last year, the average annual wage of a Chinese worker had reached $9,000


Even here in Europe, I've started seeing this trend.
Cheap clothes and lingerie are made in Bangladesh and Vietnam, the Nike store was half full with shoes from India, and for the first time, I've seen some tools in the bricolage shop made in Indonesia.
Tariffs might be the nail in the coffin, but the coffin was ordered and ready years ago.

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August 02, 2018, 04:51:52 PM
 #5

I'd be happy to see manufacturing moving out of China, even if the jobs only move to Southeast Asia (or wherever).  China has been counterfeiting every great product the rest of the world has produced for more years than I can count, and I'm not a big fan of the country in general.  They're a bunch of thieves as far as I'm concerned.  Not that I dislike the people, because I have a great respect for their history and their collective intellect. 

Countries like Indonesia and the rest need those manufacturing jobs too.  Maybe the shitposting situation would even improve if they could find real-life jobs.  That's probably a pipe dream, but I suspect it's not easy to work for a living in south Asian countries--don't know if the islands are included in that; my grasp of geography leaves a lot to be desired.


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August 02, 2018, 07:08:20 PM
 #6

Realistically speaking, I don't think China would reconsider anything on crypto, especially when they have a trade war around. I am hearing about this war and all this just now, and its a shocker.

I honestly can't believe that China's cost of labor is becoming high, its one of the cheapest countries when it comes to cost of labor. Cutting taxes won't do much right now, as the war is already begun. They need some better fiscal policies. The Chinese Governement acts like a dick and now they are paying for it. I don't America to take lead on this entire scenario, I want the developing countries to go up from this, US is taking everyone nowhere.

There are n Number of factories in China, if all move out, the neighboring countries can take a huge advantage from this. Vietnam, for example has been struggling for ages now, they can do something and make things much better.
This is just the supply an demand in full action, if a lot of factories move to a country to the point that the qualified workers begin to become the scarce commodity then this means the scarcer commodity becomes more expensive.

At the same time inflation in China is growing since they are manipulating their currency supply, this is something the whole world has accused them of doing and this is driving prices up, let me illustrate it, China gets lots of dollar due to its exports but the businesses want yuan, if China did not manipulated its currency supply this will mean that the yuan gets more expensive and this will hurt exports and a balance of trade with the US will be achieved eventually, but what the Chinese governments does is to simply print more yuan, this makes its currency weaker and allows for more exports but this creates inflation, driving the prices and wages up.

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August 02, 2018, 11:59:19 PM
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Vietnam is eating those Chinese factories one by one, and it's not like it has begun this year.
Wages in China are growing and workers are becoming twice as expensive.
China fucked up big time, it is just a matter of time, that the US would also fall behind. I wouldn't want for that happen, because everything in this world, is related to the United States of America. We would visualize the Mr.Robot tv show for real, this time. Riot and chaos everywhere.

Even here in Europe, I've started seeing this trend.
Cheap clothes and lingerie are made in Bangladesh and Vietnam, the Nike store was half full with shoes from India, and for the first time, I've seen some tools in the bricolage shop made in Indonesia.
Tariffs might be the nail in the coffin, but the coffin was ordered and ready years ago.
We all know China produced ok type of quality products, but if the neighboring developing countries make the quality of things worse, China will regain the power. And these countries lack capital, China is rich as fuck. Something that needs to be considered deeply is this.

I'd be happy to see manufacturing moving out of China, even if the jobs only move to Southeast Asia (or wherever).  China has been counterfeiting every great product the rest of the world has produced for more years than I can count, and I'm not a big fan of the country in general.  They're a bunch of thieves as far as I'm concerned.  Not that I dislike the people, because I have a great respect for their history and their collective intellect. 

Countries like Indonesia and the rest need those manufacturing jobs too.  Maybe the shitposting situation would even improve if they could find real-life jobs.  That's probably a pipe dream, but I suspect it's not easy to work for a living in south Asian countries--don't know if the islands are included in that; my grasp of geography leaves a lot to be desired.
Well, bitcointalk is only gonna get more infected by this entire fucked up shit. Get ready to visualize the spam haven, but this time, its gonna be much worse. Chinese unemployed workers are gonna raid bitcointalk.


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August 03, 2018, 07:44:05 AM
 #8

China has been signalling their willingness to soften their prior regulations that killed off the legal crypto economy, mainly because of the fact that it drove people 'underground'. If they on top of that have to deal with an imploding economy themselves, they have no choice but to allow crypto and everything around the blockchain technology to develop itself there.

People quite often think that China is no longer a thing when it comes to crypto, but they can't be more wrong. It's safe to say that there may be dozens of millions of crypto users on a daily basis using crypto in every possible way. It's something China can't do anything about other than to soften their regulations and to have all these people operate on legal ground again, which grants China the control over them that they want.

Another factor is that Japan and South Korea might turn out to become super powers in the Asian continent if China doesn't act, and based on all stated points, I expect them to return.

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