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Not only foreign companies but also China is under pressure to transform supply chains


Photo: Internet


One of China's largest water heater manufacturers said that customers from the United States are asking the company to move production out of China because of concerns about rising geopolitical tensions.


Lu Yucong, Chairman of Guangdong Vanward New Electric, blames the rising protectionism in the US and Europe in recent years. “Some US companies have special requirements to be able to continue to cooperate. Including moving factories out of China, to countries like Thailand and Vietnam," Lu said.


Not only foreign companies but also Chinese companies are under pressure to change the supply chain.


Many multinational corporations are re-evaluating their operations globally following a series of recent events such as the Ukraine conflict, the pandemic, and US-China tensions. They are also increasingly concerned about the Russia-China relationship and the threat of sanctions.


According to Lu's comment, this has increased sharply in the last 2-3 years. Not only the US but also European countries are acting against globalization. That is protectionism. His company, whose annual revenue is about $1 billion, has also been hit hard by the increase in taxes on "made in China" goods.


“The client asked us to move production out of China because they all felt that the cost could not be reduced any further [due to increased taxes]. That's how we lose our competitive edge, and buyers can't accept that either."


Vanward has decided to move some of its factories in southern China to Egypt and Thailand, even though it makes operations difficult.


“The labor costs in Thailand may be cheaper, but there the supply chain is not as developed as in China. The main goal of the move is to avoid the risks associated with the US-China trade conflict," added Lu.


Last year, many companies, such as clothing retailer Mango, said they were planning to diversify their supply chains outside of China. Chinese companies themselves also plan to open new factories in Southeast Asia, such as textile company Luthai Textile and tire maker Jiangsu General Science Technology.


At the global consumer electronics fair held in Hong Kong last week, some Chinese manufacturers promoted to customers that they have factories in Vietnam and other countries.


In its 2023 Doing Business Report, the American Chamber of Commerce in China said that 24% of its survey participants are considering or have begun to move part of their production out of China, an increase of 10% over the previous year.

(Nhip song thi truong)


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