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Foreign companies shifting production out of China a

Foreign companies shifting production out of China a "normal market phenomenon": Chinese official

Published:17 September 2020

International companies are shifting their production out of China due to increasing costs and intensifying Sino-US trade friction, a top Chinese trade official has acknowledged while downplaying it as a "normal market phenomenon."

Beijing | International companies are shifting their production out of China due to increasing costs and intensifying Sino-US trade friction, a top Chinese trade official has acknowledged while downplaying it as a "normal market phenomenon." Meng Wei, spokesperson for the country's planning body National Development and Reform Commission (NDRC), played down the steady closures by the multinational companies which provided massive foreign direct investment (FDI) in China for decades enabling it to emerge as a global export hub.

She said on Wednesday that the recent moves by international companies to shift production base out of China can be seen as normal market activities.

Meng attributed the shifting of the companies to rising costs and intensifying trade friction between China and the US.

The official said that China is committed to further opening up its economy and improving its environment for foreign businesses.

"The shift is a normal market phenomenon," Meng was quoted as saying by the state-run Global Times.

China faced major disruptions to its massive supply chain industry in the last two years as US President Donald Trump pursued aggressive policies towards Beijing fuelling political and trade tensions besides the economic fallout from the COVID-19 pandemic.

The US on September 14 banned the import of five goods from China, including computer-parts, cotton and hair products, alleging that they are produced in forced labour camps in the restive Muslim-majority Xinjiang province.

US President Donald Trump in May had ruled out renegotiating the trade deal with China. The US and China in the beginning of the year signed Phase-1 of a trade deal, ending a bitter two-year tariff war that had rattled the global economy.

A number of countries including India, Vietnam and Bangladesh have announced special policies to attract the foreign firms leaving China.

Also, investment between the US and China in the first half of the year dropped to the lowest level in nearly a decade, Hong Kong-based South China Morning Post reported.

For the six months ending June 30, total capital deployed through direct and venture capital investments fell to an estimated USD 10.9 billion, from USD 26 billion at its 2016 peak, Post quoted a report by Rhodium Group and the non-profit National Committee on US-China Relations.

Direct investment by US companies in China dropped to USD 4.1 billion during the first six months this year as well, although several large acquisitions are moving forward, including JP Morgan's USD one billion deal to take control of its Chinese mutual fund joint venture, the report said.


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