Chinese export companies rush to build factories in other countries including Cambodia and Vietnam to evade U.S. trade tariffs

China’s key export companies are pushing to build and expand their factories overseas, in Cambodia and Vietnam, according to Epoch Times and other media sources. One of them, KingClean Electric Co. is a company that creates cleaning appliances and garden tools and it says its overseas business accounted for 67 percent, according to its 2017 annual report. In October, KingClean Electric’s investment plan in constructing a Vietnamese production base was reviewed and approved during a shareholders’ meeting. In November, the project was approved by the Department of Commerce of Jiangsu Province. On Dec. 25, the securities department of KingClean Electric said, “We can’t control the tariff rate because the external environment has great uncertainty. Our company’s export business accounts for a relatively high proportion. So we can only try to find a solution, do our best, and make decisions based on our development.”

Zhejiang Henglin Chair Industry Co. Ltd. from Anji County, Zhejiang Province, is China’s largest exporter of office chairs. According to media reports, the company will invest $48 million to set up a manufacturing base in Vietnam. Zhejiang Jasan Holding Co. Ltd., a knitwear company based in Hangzhou city, Zhejiang Province, made two announcements in December that it will invest $36.23 million and $29 million to establish two companies in Vietnam.

The Chinese Communist Party’s (CCP’s) asserts strict control on foreign exchange, companies find it difficult to send funds overseas to start factories because of restrictions on how much can be transferred out of China. However, domestic enterprises can move funds abroad through foreign trade. Foreign-invested companies can legitimately transfer their profits overseas.

Henglin Chair and Jasan Holding took a similar approach— they used their wholly owned  Hong Kong and Vietnamese subsidiaries to channel investment funds out of China.

A senior executive at a listed company in Zhejiang Province told the Business Herald on Dec. 26 that the local government has a specific rule on how corporate funds go overseas.“Only a certain amount of funds can be approved each time, so we have to make multiple transactions instead of sending all the funds at once. Thus, the investment cycle has been extended, adding uncertainty.”

 Strategic Sports, a leading helmet production company in Dongguan, Guangdong province, China’s manufacturing hub, is part of an industry that has escaped tariffs .

After analyzing public comments, the U.S. Trade Representative decided in September to exclude nearly 300 products — mainly consumer goods from China — from the last batch of tariffs. Items exempted include smartwatches, bike helmets and highchairs.

Despite this, Strategic Sports’ owner, Norman Cheng, is investing in a new factory with about 500 workers in Vietnam early next year. The term “trade war” is becoming a magnet term in for attracting new tenants to Vietnamese industrial parks. It is  attracting small and medium-size factories that make furniture, textiles and electronics in China’s Pearl River Delta and Yangtze River Delta regions, the country’s main export production hubs.

Manwah Holdings, the furniture enterprise, which has over 18 million square feet of manufacturing space in mainland China, moved quickly to launch its ambitious expansion in Vietnam.

By July, the company will build eight new factory buildings, as well as six new 12-story apartment buildings to house workers in a rural hamlet two hours north of Ho Chi Minh City, said Simon Siow, general manager of Manwah’s new manufacturing in Vietnam.