China
Foreign firms in China resist Trump’s trade war
Author: Nicholas Lardy, PIIE
In defence of his trade war with China, US President Donald Trump has yet again let his Twitter fingers get ahead of reality. He tweeted in late August 2019 that ‘China wants to make a deal so badly’ and that ‘Thousands of companies are leaving because of the Tariffs’. This supposed exodus of foreign firms is another element informing his view that China is under increasing economic pressure and is anxious to accept US terms for a trade agreement.
Yet the facts fail to support Trump’s view as is the case with his claim that US tariffs are slowing China’s economy and increasing its unemployment.
The trade war is not dampening foreign direct investment (FDI) into China. Non-financial FDI is currently running at almost US$140 billion annually, meaning that thousands of new foreign firms are established in China every month. Since the tariff war broke out in mid-2018 FDI has expanded at about 3 per cent annually, a similar pace to the previous five years. And the recent data does not include the massive new investments in chemical plants — China recently approved wholly foreign-owned investments by both ExxonMobil and BASF, each at a record US$10 billion.
Continued large inbound FDI flows are consistent with the expectations of member companies of the US–China Business Council. The Council’s recent member survey found that 97 per cent reported that their operations in China are profitable and 87 per cent said they had not relocated and had no plans to relocate any of their activities. In short, there is little support for the view that large numbers of foreign firms are fleeing China — the opposite seems to be the case.
A few foreign firms have recently left China but two points need to be kept in mind.
First, foreign firms have been moving out of China for decades. Some firms enter with business strategies that fail, leading to their exit. The best example is Occidental Petroleum. It entered China in 1983 with a flawed business strategy and was forced to write off its US$250 million investment when it withdrew in 1990. Other foreign firms, especially those exporting the most labour-intensive consumer goods, flourished in China for many years. But as local wages continued to rise, these firms eventually moved production to other countries with much lower wages such as Bangladesh.
Second, China has over a half million foreign-invested firms. Anecdotes of a handful of firms leaving China do not confirm a broad trend.
While some foreign firms report that they are considering alternatives to producing in China, it remains to be seen how many will actually leave and how many of those that leave will relocate to the United States. A large share of foreign firms in China, especially US firms, are there primarily to produce goods to sell on China’s still rapidly growing domestic market. These firms have no incentive to relocate within Asia, much less to the United States.
Caterpillar, for example, has more than 30 plants in China to make construction equipment that is mostly sold on the domestic market. The high costs of shipping relative to value make it infeasible to make heavy machinery in the United States and then export it to China. Caterpillar, like other foreign producers of capital goods in China, is very unlikely to relocate any of its production.
And relocating production out of China is easier said than done. Foreign affiliates operating in China draw on an extensive local supply chain that has been built up over decades and employ about 25 million Chinese workers, a significant share of which are skilled engineers and managers. Vietnam is commonly suggested as an alternative but it could only absorb a tiny fraction of production by foreign enterprises now operating in China. Vietnam’s total non-farm employment is only 44 million and foreign firms operating there already report shortages of skilled engineers and managers.
Relocating a significant number of foreign firms from China to Vietnam would put further upward pressure on Vietnam’s already rising wages, intensify existing skilled labour shortages and stretch its limited logistical capacity to breaking point.
Apple contracted Taiwanese manufacturer Foxconn to produce 220 million iPhones in China in 2018. Foxconn would face a number of difficulties if Apple asked the firm to relocate from China as Foxconn employs hundreds of thousands of factory workers and tens of thousands of skilled engineers and managers in China and draws on a network of more than 1500 local suppliers.
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Business
Gordonstoun Severs Connections with Business Led by Individual Accused of Espionage for China
Gordonstoun school severed ties with Hampton Group over espionage allegations against chairman Yang Tengbo. He denies involvement and claims to be a victim of political tensions between the UK and China.
Allegations Lead to School’s Decision
Gordonstoun School in Moray has cut ties with Hampton Group International after serious allegations surfaced regarding its chairman, Yang Tengbo, who is accused of being a spy for the Chinese government. Known by the alias "H6," Mr. Tengbo was involved in a deal that aimed to establish five new schools in China affiliated with Gordonstoun. However, the recent allegations compelled the school to terminate their agreement.
Public Denial and Legal Action
In response to the spying claims, Mr. Tengbo publicly revealed his identity, asserting that he has committed no wrongdoing. A close associate of Prince Andrew and a former Gordonstoun student himself, Mr. Tengbo has strenuously denied the accusations, stating that he is a target of the escalating tensions between the UK and China. He has claimed that his mistreatment is politically motivated.
Immigration Challenges and Legal Responses
Yang Tengbo, also known as Chris Yang, has faced additional challenges regarding his immigration status in the UK. After losing an appeal against a ban enacted last year, he reiterated his innocence, condemning media speculation while emphasizing his commitment to clear his name. Gordonstoun, on its part, stated its inability to divulge further details due to legal constraints.
Source : Gordonstoun cuts ties with business chaired by man accused of spying for China
Business
China Dismantles Prominent Uyghur Business Landmark in Xinjiang – Shia Waves
The Chinese government demolished the Rebiya Kadeer Trade Center in Xinjiang, affecting Uyghur culture and commerce, prompting criticism from activists amid concerns over cultural erasure and human rights violations.
Demolition of a Cultural Landmark
The Chinese government recently demolished the Rebiya Kadeer Trade Center in Urumqi, Xinjiang, a vital hub for Uyghur culture and commerce, as reported by VOA. This center, once inhabited by more than 800 predominantly Uyghur-owned businesses, has been deserted since 2009. Authorities forcibly ordered local business owners to vacate the premises before proceeding with the demolition, which took place without any public notice.
Condemnation from Activists
Uyghur rights activists have condemned this demolition, perceiving it as part of China’s broader strategy to undermine Uyghur identity and heritage. The event has sparked heightened international concern regarding China’s policies in Xinjiang, which have been characterized by allegations of mass detentions and cultural suppression, prompting claims of crimes against humanity.
Rebiya Kadeer’s Response
Rebiya Kadeer, the center’s namesake and a notable Uyghur rights advocate, criticized the demolition as a deliberate attempt to erase her legacy. Kadeer, who has been living in exile in the U.S. since her release from imprisonment in 2005, continues to advocate for Uyghur rights. She has expressed that her family members have suffered persecution due to her activism, while the Chinese government has yet to comment on the legal ramifications of the demolition.
Source : China Demolishes Uyghur Business Landmark in Xinjiang – Shia Waves
China
China Expands Nationwide Private Pension Scheme After Two-Year Pilot Program
China’s private pension scheme, previously piloted in 36 cities, will roll out nationwide on December 15, 2024, enabling workers to open tax-deferred accounts. The initiative aims to enhance retirement savings, address aging population challenges, and stimulate financial sector growth.
After a two-year pilot program, China has officially expanded its private pension scheme nationwide. Starting December 15, 2024, workers covered by urban employee basic pension insurance or urban-rural resident basic pension insurance across the country can participate in this supplementary pension scheme. This nationwide rollout represents a significant milestone in China’s efforts to build a comprehensive pension system, addressing the challenges of a rapidly aging population.
On December 12, 2024, the Ministry of Human Resources and Social Security, together with four other departments including the Ministry of Finance, the State Taxation Administration, the Financial Regulatory Administration, and the China Securities Regulatory Commission, announced the nationwide implementation of China’s private pension scheme effective December 15, 2024. The initiative extends eligibility to all workers enrolled in urban employee basic pension insurance or urban-rural resident basic pension insurance.
A notable development is the expansion of tax incentives for private pensions, previously limited to pilot cities, to a national scale. Participants can now enjoy these benefits across China, with government agencies collaborating to ensure seamless implementation and to encourage broad participation through these enhanced incentives.
China first introduced its private pension scheme in November 2022 as a pilot program covering 36 cities and regions, including major hubs like Beijing, Shanghai, Guangzhou, Xi’an, and Chengdu. Under the program, individuals were allowed to open tax-deferred private pension accounts, contributing up to RMB 12,000 (approximately $1,654) annually to invest in a range of retirement products such as bank deposits, mutual funds, commercial pension insurance, and wealth management products.
Read more about China’s private pension pilot program launched two years ago: China Officially Launches New Private Pension Scheme – Who Can Take Part?
The nationwide implementation underscores the Chinese government’s commitment to addressing demographic challenges and promoting economic resilience. By providing tax advantages and expanding access, the scheme aims to incentivize long-term savings and foster greater participation in personal retirement planning.
The reform is expected to catalyze growth in China’s financial and insurance sectors while offering individuals a reliable mechanism to enhance their retirement security.
| This article was first published by China Briefing , which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, and India . Readers may write to info@dezshira.com for more support. |
Read the rest of the original article.
- Gordonstoun Severs Connections with Business Led by Individual Accused of Espionage for China
- China Dismantles Prominent Uyghur Business Landmark in Xinjiang – Shia Waves
- China Expands Nationwide Private Pension Scheme After Two-Year Pilot Program
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