On December 5, 2023, the Hang Seng Index dropped 318 points, closing at 16,327 points. The image shows the exterior of the Hong Kong Stock Exchange. (Photo by Guo Weili / Dajiyuan)
[People News] A new study conducted by a prominent American financial firm indicates that even before Donald Trump, who advocates imposing high tariffs on Chinese goods, won the U.S. presidential election, the trend of top global companies shifting production and operations out of China had already been accelerating.
According to Voice of America, the study was carried out by the global strategic consulting firm Bain & Company. The survey included responses from 166 CEOs and COOs, with 69% of executives stating that their companies were in the process of moving production out of China—up 14 percentage points from 55% in 2022.
Where are these companies relocating? The survey found the top five destinations to be the Indian subcontinent, the United States and Canada, Southeast Asia, Western Europe, and Latin America. Companies moving to the Indian subcontinent accounted for 39%, while 16% moved to the U.S. and Canada, 11% to Southeast Asia, 10% to Western Europe, and 8% to Latin America.
The report also noted that an increasing number of companies are reshoring production back to their home countries or "nearshoring" to neighboring nations.
The survey, conducted in July this year, was published in Fortune magazine. It revealed that 81% of executives expressed plans to relocate their supply chains closer to their target markets—up significantly from 63% in 2022.
Bain & Company attributed the trend of companies leaving China to rising geopolitical uncertainties and increasing costs. However, the report also highlighted that for 39% of the U.S.-based companies surveyed, the Inflation Reduction Act passed by the U.S. Congress in 2022 was another significant factor driving the reshoring of operations.
Fortune noted that the act is one of President Joe Biden's key domestic policy achievements, providing incentives and tax credits in critical sectors such as green energy technologies. Another initiative, the CHIPS Act, encourages the domestic development of the semiconductor industry in the U.S.
The report warned that a potential significant hike in U.S. tariffs on Chinese imports could deal a new severe blow to China, the world’s second-largest economy.
China’s economy has fallen into a deflationary trap amid a real estate market collapse and a debt crisis. For the past two years, China’s inflation data has consistently been in contraction. This has not only led to the closure of numerous factories and a continuous reduction in corporate investments but also caused a sharp rise in unemployment and a significant slump in consumer spending. One of the most prominent issues is China’s severe overcapacity problem, which has led to growing resistance from other nations.
Accelerated Outflow of High-Net-Worth Individuals
Alongside the increased corporate exodus, the outflow of China’s high-net-worth individuals (HNWIs) is also accelerating. A migration survey report published in June revealed that China experienced the largest global outflow of HNWIs last year. It is projected that 2024 will see a record 15,200 individuals leaving China, dealing another blow to the country.
The report was published by international residency and citizenship advisory firm Henley & Partners. It attributed the accelerated departure of HNWIs to uncertainties in China’s economic trajectory and geopolitical tensions.
The report predicted that in 2024, the outflow of HNWIs would reach a record 15,200, with most heading to China’s main competitors, particularly the United States. In 2023, 13,800 Chinese HNWIs left the country, with most relocating to the U.S., Canada, and Singapore.
Henley & Partners stated that it is challenging to determine exactly how much wealth these HNWIs are taking with them. However, Andrew Amoils, Head of Research at New World Wealth, a wealth intelligence firm that collaborated on the report, noted that "based on our experience, departing wealthy individuals typically have fortunes ranging from $30 million to $1 billion."
The report estimated that in 2023, each Chinese HNWI who left the country took with them no less than $1 million in wealth.
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