World News

Chinese factories consider overseas move ahead of possible tariff introduction

Published on: February 6th, 2019

Factory rents in Vietnam surge on rising demand for space.

As reported by The Nikkei Asian Review, Chinese factories are stepping up efforts to diversify beyond China to combat rising costs and the looming possibility that the US, the industry’s biggest buyer, will impose tariffs on toy imports.

Vicky Tong, a director at the Business Association of China in Vietnam, said the office responsible for Guangdong, where many Chinese toymakers are based, saw a near trebling of visits last year from companies looking for production facilities in the country.

Jerry Gou, who heads a toy manufacturer based in the southern Chinese city of Suzhou, is one toymaker who has realized the advantages of having factories outside China. At the annual toy fair in Hong Kong recently, he sought to attract international buyers by featuring banners promoting its factories in Vietnam and India.

With US President Donald Trump threatening to impose 25% tariffs on Chinese goods, Jerry believes buyers will prefer manufacturers who are able to ship toys from outside China.

Jerry commented: “You never know what will happen in the future. We need to make plans early on.”

China produces 80% of the world’s toys, and the US is its largest customer. With the 90-day trade war truce between Washington and Beijing set to expire on 1st March, and recent talks yielding little progress, many Chinese toymakers are accelerating their overseas relocation efforts.

The most popular choice has been Vietnam, due to its proximity to China, according to industry sources.

Vicky commented: “The US-China trade war has definitely quickened Chinese manufacturers’ shift to Vietnam,” as most visiting companies do substantial export business with the US.¬†Toys and plastics factories are among those making the most urgent requests, she said. Vicky recalled a group of Chinese manufacturers who came last August and presented a bag of cash to factory owners. “They pleaded, ‘Please rent the factories to me,'” Vicky said, even though the factories are still under construction.

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