Senior Chinese official sees limited impact of factory shift to SE Asia: report

24, Jul. 2019

TOKYO, NNA – The impact of the move by some companies to shift factories from China to Southeast Asia to avoid higher U.S. tariffs has been limited, Vice Minister of Industry and Information Technology Xin Guobin told a news conference on Tuesday.

This was the third official statement on manufacturing relocation in less than two weeks, according to the Global Times, a Chinese daily.

In southern China's manufacturing hub Guangdong Province, 588 foreign manufacturing companies moved production capacity to countries including Vietnam, Malaysia and Thailand in 2018, Xin was quoted as saying.

He added that these companies accounted for just 1.4 percent of the headcount of manufacturing companies investing in Guangdong, the daily said. The exodus is outnumbered by inflows however, with 1,918 companies setting up plants in Guangdong, according to the report.

Xin said that China has maintained its global top three ranking in attracting foreign direct investment since 2008 and has been the number one destination among all developing countries for 25 consecutive years.

In 2018, when global FDI dropped 40 percent from 2017, FDI into the Chinese manufacturing sector still grew 23 percent, Xin was quoted as saying.

But the latest economic indicators point to slowing growth in China.

Chinese exports fell 1.3 percent from a year earlier June, reversing a surprise gain in May when shippers rushed to beat higher U.S. tariffs, official data showed last week. Imports slumped 7.3 percent after an 8.5 percent drop in May, indicating domestic demand remains sluggish.

China's economy grew 6.2 percent in the second quarter from a year earlier, the slowest in 27 years, due to weaker domestic and external demand amid the U.S. trade dispute.

Beijing is expected to support growth with fiscal spending, while the People's Bank of China has lowered the ratio of cash that commercial banks must hold in reserve six times since early 2018.