China may no longer be the world's great factory. The coronavirus crisis and the trade war have sparked a massive flight of companies, as warned Rabobank in your last report. Will the Asian giant manage to stop this bleeding in time?
The data is there. Exports of Chinese products to the US have plummeted 17% to $ 88 billion in 2019. China and its imports already weigh four basis points less on the US balance.
Added to this is the relocation led especially by the technology sector, for example, of semiconductor and wireless equipment manufacturers. "It is not a surprise that they are the companies that are leaving China the most considering their strategic importance and the pressures of the Trump administration to keep Chinese companies out of their digital infrastructure, "experts at Rabobank.
If China is ceasing to host these companies, who is beginning to host these tenants? The USA itself, Vietnam, Mexico and Taiwan. "They are the main winners of this change of plans", they point out. At the same time that China has exported 88,000 million less to the United States, the latter has received exports valued at 68,000 million throughout 2019.
That $ 20 billion deficit between the two figures is understood not as how the US is importing fewer goods but now manufactures them within its borders, which would fit perfectly with Trump's protectionism.
"Surprisingly, India and Thailand are missing 'the party'", they recognize in Rabobank. Both countries should also cash in on the business exodus that is beginning to take its toll on China. Despite their good diplomatic relations with Washington, the main reason is that neither Indians nor Thais harbor an especially large technological ecosystem, which prevents them from being able to manufacture to satisfy the insatiable appetite of the United States.
THE US WILL CONTINUE TO FIGHT TO 'REPATRIATE' ITS COMPANIES
Does this mean that all companies are going to stop manufacturing in China? Only the Americans. And not all. "It will all come down to a cost-benefit analysis," these experts believe. Each company will have to decide if it prefers to continue working under the umbrella of low wages for its workers and less transportation costs. "Among other advantages that will be difficult to find in other countries."
"That said, we believe that from Washington (whether governed by Republicans or Democrats) the pressure will continue to recover American companies by offering them regulatory incentives," he observes. Rabobank. "Many companies will be forced to choose a side as the geopolitical tension resulting from the trade war continues to escalate," say its experts.
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