Exit from China to dodge Trump’s duties gains pace

Sparks fly as employees work in the weld shop at the SAIC-GM-Wuling Automobile Co. Baojun Base plant, a joint venture between SAIC Motor Corp., General Motors Co. and Liuzhou Wuling Automobile Industry Co., in Liuzhou, Guangxi province, China, on Wednesday, May 23, 2018. GM and its partners sold 4 million vehicles in China in 2017, about 1 million more than the automaker sold in the U.S. Photographer: Qilai Shen/Bloomberg

SYDNEY • A manufacturing retreat from China to avoid US tariffs is gathering pace.

With US levies on US$200 billion (RM838 billion) of Chinese products set to balloon to 25% in 2019, companies on the mainland making everything from household goods to cameras are lining up other production facilities across South-East Asia.

Ayala Corp, the Philippines’ oldest conglomerate, is in talks to provide land to a Chinese company planning to build one of the world’s biggest tile factories to sidestep US duties, Ayala chairman and CEO Jaime Augusto Zobel said in an interview last Tuesday at Bloomberg’s New Economy Forum in Singapore.

Fujifilm Holdings Corp, which makes its popular Instax cameras near Shanghai, said it may shift that process to Thailand or the Philippines “if the situation is going to be really serious”.

Interviews with regional business chiefs indicate major — and potentially permanent — changes to supply chains are taking place because of the economic dispute. Even if US President Donald Trump reaches an accord with President Xi Jinping in coming weeks, the diversion of Chinese manufacturing may be irreversible, partly because tensions could flare up again, some leaders say.

“Nobody’s running away from exporting to the US or losing share,” said Francisco Aristeguieta, CEO of Citigroup Inc’s Asia unit. “What they’re very active in doing, however, is assessing their supply chains. — Bloomberg