How are Chinese firms responding as foreign buyers ‘don’t want anything made in China’? (2023)

The writing is on the wall when it comes to the future of Norman Cheng’s operations in China, and like the protection offered by helmets his company produces, he sees a shift away from China as a matter of self-preservation.

To that end, he intends to open a smart factory in Vietnam next year – a US$30 million undertaking that embraces automation and will essentially be a replica of the plant he opened just last month in the southern Chinese manufacturing hub of Guangdong province.

The decision by one of the world’s largest helmet makers, Strategic Sports, was a long time in the making, and it was not borne out of capacity concerns. Cheng says they have plenty of that in China, where their first automation plant went into operation two years ago, capable of producing millions more helmets a year.

Instead, the move is a deliberate and tactical attempt to hedge against ever-growing geopolitical risks and retain his Western clients – many of whom have grown uneasy and more cautious about their supply chains, looking to hedge their bets by sourcing from a bigger pool of countries.

“We wouldn’t have had to build a new factory in Vietnam if we were only considering production capacity,” Cheng explained. “But from a geopolitical point of view, I have to have it in Vietnam.

“American clients have pushed us to go to Vietnam, and since they are very committed to placing orders there, we are going there.”

Currently, Strategic Sports employs more than 4,200 people, with more than 10 facilities spread across Asia, Europe and North America. And the most recent available figures show it took in US$210 million in 2021. Its 40 production lines make helmets for all types of uses, including sports, security and construction.

But even with those expansion plans, he has no intention of abandoning China. On the contrary, even after the opening of his Guangdong plant in Huizhou was delayed for nearly two years due to China’s strict zero-COVID controls, it is now a critical cog in his production machine. He chose Guangdong because the manufacturing hub has been building up sophisticated industrial clusters for decades.

But relying solely on China operations is no longer considered the safest bet for manufacturers, as the country’s “world’s factory” status is not as strong as it was in the past. Compounding concerns is the fact that China faces a worsening demographic crisis that has made it more difficult for companies to hire skilled labourers.

In Vietnam, Cheng’s planned facility will feature a high degree of automation that will allow 400 workers to make about 8 million helmets a year. It will also embrace green energy, with solar panels and rainwater-recycling capabilities.

And while his Huizhou factory mainly fulfils orders from European clients, Cheng admitted that those clients have expressed interest in trying to source from his Vietnamese factory in the future, with an eye on shipping to some Southeast Asian and European markets.

For the time being, however, many customers already have what they need. He said that’s because many overestimated market demand during the pandemic, when interest in sporting goods skyrocketed.

As a result, they kept buying, thinking that supply-chain disruptions could stretch into at least 2024. And they asked him to step up production last year. Now their inventories are overstocked, and they’ve had to rein in purchases this year, resulting in Cheng seeing a nearly 70 per cent drop in orders received.

“Now that it looks like the pandemic is over, demand has dropped to the level of 2018 and 2019, but our clients have already bought what they need for the next two to three years,” he said. “The orders this year account for only around one-third of what we got last year.”

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And he says the trend is being seen across the board, “not only in our industry”.

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“Many [firms] in the bicycle, sports equipment and clothing sectors are facing the same challenge,” he said, “as the inventory pressure facing European and American clients is very high.”

Dan Digre, CEO of loudspeaker manufacturer Misco Speakers, based in the US state of Minnesota, said he had to delay shipments for four to five months due to his clients’ excessive inventories. Still, he does not expect the trend to derail supply-chain adjustments.

“It’s a tricky time now … we’re not seeing supply-chain delays, but demand push-backs,” he said, referring to customers requesting that product deliveries be postponed. “There is no delay (in embracing) the China-plus-one model, but companies will slow production with the weak demand.”

The model, as it has commonly become known, involves manufacturers staying in China, but reducing their outsized reliance on it as a production base by shifting operations elsewhere.

Digre said his company also adjusted its supply chain to avoid punitive tariffs imposed by the US and China on each other amid their trade war that began in 2018.

“The company has moved its production from the US to China to escape the high import tariffs on certain components. At the same time, some finishing products made in China will be moved to the plus-one production lines to avoid import tariffs when they are shipped back to the US,” he said.

Matthew Fass, president of Maritime Products International in the US state of Virginia, said the inventory situation, the trade war and depressed demand have all complicated the decision-making process surrounding supply chains.

“We are still trying to understand the ‘new normal’ with supply-chain management and even consumer trends coming out of COVID-19,” Fass said. “This current dynamic does make it more challenging to understand the best ways to work toward healthy supply-chain diversification.

“It is a misperception (to think) that many of the seafood supply chains exist in China based solely on some easily interchangeable availability of labour or a favourable regulatory environment,” he said, noting how supply chains take decades to build up.

In the midst of this growing trend by companies to relocate and diversify operations to reduce their China exposure, domestic analysts have been sounding alarms about economic impact. And manyhave called on Beijingto take steps to retain leading foreign companies amid such supply-chain adjustments, while also urging Chinese companies to upgrade their industrial chains.

Chinese leadership has responded with an all-out push to woo foreign investors. But still, China reported adrop in foreign direct investmentinflows during the first four months of this year. And its recent national security raids of foreign consultancy firms have pushed foreign companies to further reassess the risks associated with operating in China.

“There’s been talk that the US-led decoupling is a delusion, but I don’t agree. Once companies leave, they won’t come back,” said Liu Kaiming, head of the Shenzhen-based Institute of Contemporary Observation, which monitors the working conditions of Chinese contract manufacturers.

“A large number of Chinese companies also continue to invest in overseas capacity to survive,” Liu said. “This is a trend that will not stop.

“China’s re-export trade to ASEAN (countries) over the past two years has been substantial, mainly in the export of raw materials, which will actually increasingly be produced in Vietnam and other emerging markets.”

Raymond Yow, a US trader who imports home-improvement products such as household decorations, cement boards, solar panels and LED lights to American retailers, attended theCanton Fair in Guangzhoulast month, browsing new products and meeting manufacturers.

But he also planned to go to Vietnam and Indonesia to explore potential new and cheaper supplies.

Yow was already thinking about importing from Indonesia – where wood resources are abundant and prices are low. But an increase in overseas consumer opposition to Chinese-made products, especially in the middle parts of the US, has put pressure on his retail clients, giving him further impetus to take action.

“‘Replace those made in China if you could,’ they would suggest,” he said.

Nonetheless, Yow noted how doing business in China still has its “incomparable advantages”, compared with Southeast Asia. He pointed to greater e-commerce convenience, relatively efficient logistics, and more sophisticated industrial and supply chains.

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But because of that external pressure, he has to seek more diversification options, even though the undertaking means a lot more work.

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Wang Gang, head of a company that makes thermoelectric coolers in the northern Chinese province of Hebei, is also facing a quandary arising from geopolitical challenges.

“It was in 2017 and 2018 when we first felt the discrimination against Chinese products, as European clients were reluctant to label their products as ‘made in China’ because they were often considered cheap and low-end, which could hurt their company image,” he said.

Their thermoelectric coolers, widely used in telecommunication cabinets, have subsequently been rejected by many Western markets, especially the United States, due to national security concerns.

“One of our most important clients in the US market told us they don’t want anything made in China. That’s why they asked us to relocate our factory to Vietnam, to address their concerns,” he said. But still, Wang does not plan on relocating to Southeast Asia, as such a move would be unrealistic for a small business like his.

But this is now the reality facing many of China’s exporters – US companies are favouring other Asian countries, and this is occurring amid a weak global economic outlook and growing tensions between China and the US-led West.

Efficiency in production and logistics, which China has used to consolidate its supply-chain dominance in the past, are increasingly being overshadowed by the more pressing need to guard against sudden cut-offs stemming from geopolitical conflicts such as the Ukraine war, according to a senior executive with a Taiwan-based manufacturer that has plants in China and neighbouring countries

“When diversifying their supply chains, global brands [prioritise] order allocations,” said the executive, who declined to be identified. And with global demand so weak, “we must first keep operations in Vietnam, then continue to increase production in India, while the production of Chinese factories will be the last consideration, due to the US-China tensions”.

Peter Bogh Hansen, China policy director with the Confederation of Danish Industries, confirmed that surplus inventories among buyers, combined with other factors such as geopolitics, logistics and energy challenges, are forcing companies to change their global business strategies to have a more regional focus.

“I doubt that the economic situation in Europe will have much impact on Danish companies’ decision to reduce their dependence on Chinese supply chains,” Hansen said. “That decision has mostly to do with concerns about the geopolitical situation.

“But perhaps it means that Danish companies will be considering alternative locations closer to China, i.e. in other Asian countries, rather than moving supply-chain functions back to Europe.”

This article was first published onSCMP.

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Is it OK to buy made in China? ›

"Made-in-China means lower quality."

False. There is no evidence that Chinese products are lesser quality than US-made products. During the industrial era, the bulk of textile manufacturing moved overseas for cheaper labor for the same quality production.

Why is manufacturing moving away from China? ›

Manufacturers move away from China in light of supply issues, cost increases - FreightWaves.

Why is everything we buy made in China? ›

In addition to its low labor costs, China has become known as "the world's factory" because of its strong business ecosystem, lack of regulatory compliance, low taxes and duties, and competitive currency practices.

What percentage of US consumer goods are made in China? ›

This U.S. fraction is much higher for imports from China. Whereas goods labeled “Made in China” make up 2.7% of U.S. consumer spending, only 1.2% actually reflects the cost of the imported goods.

What American companies rely on Chinese factories? ›

Tech and automobile giants like Intel, Apple, Tesla, General Motors and Ford not only rely on Chinese consumers, but also have huge manufacturing networks in the country.

What US companies are leaving China? ›

Apple has begun moving manufacturing from China to Vietnam, where its AirPods Pro 2 are now likely to be produced. Two years ago, Samsung moved its Chinese manufacturing to Vietnam. Hasbro has moved its Chinese production to India and Vietnam.

What American companies are moving production out of China? ›

Apple has already moved some iPhone manufacturing to Vietnam and is planning to move some of its MacBook production to the Southeast Asian nation. Other companies that have shifted some of their production lines out of China to Vietnam are Nike, Adidas, and Samsung.

What is minimum wage in China? ›

Minimum Wages in China remained unchanged at 2590 CNY/Month (366.383 USD/Month) in 2023. The maximum rate of minimum wage for employees was 2480 CNY/Month and minimum was 690 CNY/Month. Data published Yearly by Ministry of Human Resources and Social Security.

What percentage of American clothing is made in China? ›

In past years, China has accounted for as much as 40 percent of all clothing brought into the country. The U.S. Commerce Dept. reported that apparel goods coming from China were down nearly 7 percent in the one-year period to $28.35 billion.

Is there child labor in China? ›

Millions of children across China are laborers. This is more common outside the cities where the population is less dense. Families migrate from the cities to rural areas for farmland, but hundreds of millions of families move from rural areas to the city and leave their children behind.

Does Walmart food come from China? ›

The majority of its suppliers are in the United States. However, the supply chain for Walmart stores is global, with suppliers in the United Kingdom, Canada, China, Mexico, Taiwan, Hong Kong, France, and other countries.

Is it cheaper to manufacture in the US or China? ›

China companies in certain industries believe they can manufacture less expensively with US manufacturers for several reasons: Land is much less expensive in certain parts of the US than in China. Electricity, natural gas, and logistical costs are also less expensive in the United States than in China.

Why are so many American products made in China? ›

Its parts, design, marketing and distribution may have come from anywhere — and that “anywhere” is often the United States. China is the United States' largest trading partner. Companies import goods from China in part because their lower cost allows higher retail markups.

What 7 US companies are owned by China? ›

American Companies You Didn't Know Were Owned By Chinese Investors
  • AMC. Popular cinema company AMC, short for American Multi-Cinema, has been around for over a century and is headquartered in Leawood, KS. ...
  • General Motors. ...
  • Spotify. ...
  • Snapchat. ...
  • Hilton Hotels. ...
  • General Electric Appliance Division. ...
Jan 12, 2021

Why do American companies outsource to China? ›

Outsourcing to China presents companies with access to one of the largest consumer markets in the world. China is also conveniently geographically situated between the Asian and European markets. This can provide you with plenty of opportunities to introduce your goods to other foreign markets.

Why is manufacturing in the US better than in China? ›

Shorter Supply Chain

It is now cheaper to produce some goods in the Mid-west United States than it is to produce them in China. There's a shorter supply chain: the engineers, the manufacturers, and the customer base are all contained within the same, relatively small but very well connected geographic area.

Why is Apple moving out of China? ›

Apple's leadership is concerned that China might retaliate if it moves too much capacity to other countries, or transitions too rapidly. Customers in China could turn against US-designed products amid heightened nationalism.

Will US delist Chinese companies? ›

More than 100 Chinese tech companies such as Alibaba , Baidu and had faced the risk of delisting in the U.S. in 2024 if their audit information was not made available to PCAOB inspectors. Investors often grapple with a lack of transparency into Chinese stocks. “It will allow institutional investors to come back.

Is Nike moving out of China? ›

Nike joins an expanding list of international media and tech companies that are pulling out of China, where consumer, financial, tech and media regulations are increasingly incompatible with those elsewhere in the world.

What is the alternative supply chain to China? ›

Altasia is the shorthand for the alternative supply chain to China, which is the result of the expanding geopolitical rift between the US and China, forcing global manufacturers to search for new production bases in Asia.

Why are so many foreign firms moving to China? ›

The supply chain and infrastructure advantage has become one of the most important drivers for foreign companies relocate to China, when global supply chains were seriously disrupted due to the aggressive implementation of infection control measures.

Where has most manufacturing in the US moved? ›

Summary. Between 1940 and 2016, employment in manufacturing shifted across America from the Northeast to the Midwest and the Southeast. The industry lost ground in many places and is now the largest employer in only two states—Indiana and Wisconsin.

How reputable is the Made in China at? ›

MadeInChina has a rating of 1.34 stars from 56 reviews, indicating that most customers are generally dissatisfied with their purchases. MadeInChina ranks 439th among Wholesale sites.

What does it mean when a product says made in China? ›

Made in PRC means Product of China or sometimes Made in China, and is a country of origin label affixed to products manufactured in the People's Republic of China(P.R.C stands for the People's Republic of China).

Can something made in China be vintage? ›

The Chinese factories opened up in the early '90s for mass manufacturing to Western countries, so for most “vintage” with a “MiC” label it will be no older than that, but there were always items made for the tourist market, and those that have survived prove that the Chinese seamstresses and artisans are some of the ...

Do Chinese products have to say made in China? ›

The general standard is that products will be exempt from individual marking if requiring such marking would be unrealistic, impossible or commercially impracticable. For instance, products that are small or extremely delicate will not require individual country of origin markings.

Are most of the goods Americans buy made in China? ›

China was the United States' largest supplier of goods imports in 2020. U.S. goods imports from China totaled $434.7 billion in 2020, down 3.6 percent ($16.0 billion) from 2019, but up 19 percent from 2010. U.S. imports from are up 325 percent from 2001 (pre-WTO accession).

Does Made in China mean manufactured in China? ›

A product may be labeled 'made' or 'assembled' depending on where it was sourced and/or manufactured. “Made” indicates all or most of the parts and components used to make the product originated from that country and were also manufactured in that same country.

When did everything start being made in China? ›

Industrialization of China did occur on a significant scale only from the 1950s. Beginning in 1953 Mao introduced a 'Five Year Plan' reminiscent of Soviet industrialization efforts. This five-year plan would signify the People's Republic of China first large scale campaign to industrialize.

What is the minimum wage in China? ›

Minimum Wages in China remained unchanged at 2590 CNY/Month (365.918 USD/Month) in 2023. The maximum rate of minimum wage for employees was 2480 CNY/Month and minimum was 690 CNY/Month.

Is China's manufacturing industry in trouble? ›

Factories in China are struggling at a time when the world's second largest economy has to contend with yet another concern: a growing power supply crunch. A government survey of manufacturing activity released Thursday fell to 49.6 in September, down from 50.1 in August.

What is China's number one export? ›

The most recent exports are led by Broadcasting Equipment ($231B), Computers ($192B), Integrated Circuits ($158B), Office Machine Parts ($101B), and Telephones ($53.9B).

Why does everything made in China say made in China? ›

The answer to your first question: it is by law you have to indicate the country of origin of the import goods. In this case, from China.

Is made in china legally required? ›

These days, the label “Made in China” is everywhere. This is actually a Customs requirement: all imported products must be marked with their country of origin. Countries of origin are where products were manufactured, produced, or grown.

Do people collect china anymore? ›

There is still a market for it, but it isn't as strong as it once was. Many people are also uninterested in inheriting their parent's Fine China. Even if Fine China items are family inherited, it is frequently stored in a box in a basement corner rather than being used or exhibited.

Are things made in china cheaper in china? ›

China has made a fortune producing cheap products that sell for low prices around the world. Yet many high-end goods manufactured in China –- everything from iPads to Coach bags — actually cost more in China than they do in the United States.


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