By Think Real - On 16 July 2019, Meng Wei, Spokeswoman of the National Development and Reform Commission (NDRC) of China made a response to the recent discussion about the relocation of Chinese manufacturing business into foreign countries. “The relocation scale is not that large, and the businesses relocated are mainly low and medium end, according to statistics. This has no big impact on the domestic economic growth and labor & employment,” she said.
“In recent years, China’s manufacturing business has entered a new phase of upgrade and transformation. During this, it is normal to see some enterprises construct new plants in foreign countries,” she continued.
Here are 3 key reasons for the relocation of domestic manufacturing business into foreign countries.
1. Cost. Most of the manufacturing businesses are relocated in places where the costs for labor and environmental protection are low.
2. Business development strategy. The enterprises, based on their own business development strategies, are actively exploiting the international market.
3. The Sino-US trade friction. A few enterprises are relocated because they want to avoid the influence caused by the Sino-US trade friction.
It is not easy for the enterprises to move out. They must consider the local political situation, the exchange rate, the supporting facilities for a complete supply chain, the transport, the cultural environment and belief of labor, etc. In fact, there are some enterprises coming back to China for such unaccustomedness.
The NDRC is now busy promoting the quality development of domestic manufacturing business. The policies are focused on the 4 keys below.
1. To continue enlarging the openness of high level industries. By introducing the foreign high-tech and high-productivity capital, the administration would like to lead the development of domestic high quality industries.
2. To improve market vitality and release the domestic market demand.
3. To build a good business environment, such as completed infrastructure and favorable policies.
4. To improve the service quality related to the industry chain.
“When such policies are issued and make results, most of the Chinese enterprises would stay in China and continue their development, and more foreign enterprises would come to China to make investment and promote domestic business development,” said Meng Wei.