The U.S.-China trade war has triggered a major exodus of foreign capital, and the Chinese Communist Party’s viral scourge has become a catalyst for the accelerated withdrawal of foreign capital from China. A few days ago, some experts said that the ripple effect of the withdrawal of manufacturing companies from various countries has impacted Xi Jinping’s “double cycle” concept.
Shannon Brandao, an international financial lawyer who founded and serves as editor-in-chief of China Boss News, recently wrote that manufacturers from big investors like Taiwan, South Korea and Japan are leaving China in droves, and that authorities are trying to retain those foreign direct investments despite little public acknowledgement.
Delta Electronics told the Financial Times in March that they plan to reduce their Chinese workforce by 90 percent, and that even without the U.S.-China conflict, China is no longer a good place to manufacture. The main reasons for this are rising wages and high employee turnover rates.
The Asia Times reported in late 2020 that there were national security concerns about Japan’s over-reliance on China for its supply chain during the Communist virus pandemic, as production was disrupted by embargoes and shortages.
Last May, Japan announced it would spend 220 billion yen ($2.2 billion) to assist Japanese-based companies in China to return to their home countries and provide 23.5 billion yen to help Japanese companies move factories to other countries, such as countries in Southeast Asia.
The first wave is for Japan’s need for medical equipment products, the second wave is Uniqlo (Uniqlo), Nissan (Nissan Motor), Toyota (Toyota Motor), Canon (Canon Digital).
Experts say that the great flight of foreign capital has made the Chinese Communist Party lose the “world factory”.
In the article, Brandau said that the withdrawal of more than 1,700 Japanese investment companies and manufacturers in 2020 has worried officials in charge of the Communist Party. Officials in Guangdong, Jiangsu and Zhejiang have sought business from their Asian neighbors.
To retain Japanese companies, authorities have introduced strong incentives such as tax breaks, authorizing local officials to buy Japanese cars and providing fiscal revenue to help a company build new electric and hybrid car plants.
At least 60 percent of local businesses, including smaller auxiliary factories, stores and restaurants, have also been forced to close since South Korea’s Samsung closed its smartphone factory in Huizhou, Guangdong province, in 2019.
A local factory in the town of Chang’an in Dongguan, which relies on large orders from Samsung, faced severe losses following the shutdown, which forced thousands of workers and management to take furloughs or reduce their hours, hitting the local economy.
Last May White House economic adviser Larry Kudlow also said the government is willing to subsidize the cost of U.S. companies moving production lines out of China and is willing to cover the transfer costs of companies returning to China, including factories, equipment, intellectual property, renovations and more, which will be 100 percent subsidized by the government.
Brandau said the Chinese Communist authorities are busy slowing down the pace of manufacturers leaving. Although the Communist Party’s official media denied or suppressed reports that foreign companies were leaving, the actions of Communist Party officials belied those claims.
The ripple effect of the withdrawal of manufacturing industries has already impacted Xi Jinping’s so-called “double cycle” concept of the economy, in which the “major domestic cycle is the mainstay and the domestic and international cycles promote each other.
Experts point out that the trade war has made the Chinese Communist Party lose the “world factory”.
China was once called the “world factory”, the number of foreign trade industries, the number of employees are very large. According to the Ministry of Commerce of the Communist Party of China, the top 10 countries and regions that invested in China between January and May 2018 were Hong Kong, Singapore, Taiwan, South Korea, Japan, the United States, the United Kingdom, Macau, the Netherlands and Germany.
Total FDI in these accounted for 95.2 percent of foreign investment in China. China’s foreign trade industry covers a wide range of aspects.
In an exclusive interview with The Epoch Times, Kuo Yuk-yan, a professor at the Institute of China and Asia-Pacific Regional Studies at Sun Yat-sen University in Taiwan, analyzed that many foreign investments have been withdrawn from China to move to Vietnam and other Southeast Asian countries since the U.S.-China trade war in 2018.
He said that in terms of traditional industries, the withdrawal and transfer effect has long been fermenting during the U.S.-China trade war. It was not until the Chinese Communist Party pneumonia that a tide of withdrawal emerged.
Experts analyze that most of the traditional industry enterprises transfer to Indonesia, as for Vietnam will gradually to the middle and high level products, such as semiconductors, scientific instruments, machinery and other aspects of development, to challenge China.
Prof. Kuo Yuren bluntly said that a wave of joint disinvestment from multiple countries will emerge. If the supply chain and industrial chain of enterprises in China, including high-end manufacturing and design are moved out of China, China will become an empty shell.
Experts estimate that the accelerated withdrawal of foreign investment will not only affect Xi Jinping’s “double cycle” concept, but will also trigger a series of social crises, including the real estate industry, the banking sector, and the social security crisis, which may eventually turn into the ruling crisis of the Chinese Communist Party.
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