Chinese manufacturers’ investments in production facilities overseas are likely to continue to increase amid rising trade barriers and geopolitical risks, according to Fitch Ratings.
In a statement on Tuesday, the rating agency said members of Asean are key destinations, attracting investments from both traditional manufacturing and electronic vehicle (EV) product producers, while more high-tech manufacturers are building plants in the EU and US.
It said while facilities in developed markets may raise production costs, Chinese manufacturers may save on tariffs and logistics costs, and benefit from greater supply chain flexibility and smoother customer relationship management.
However, Fitch sees higher execution risks for Chinese manufacturers as many lack overseas operating experience compared with their global peers.
It said the risks are especially high for those expanding rapidly and investing in new markets with riskier operating environments.
Chinese manufacturers of EV products also face high regulatory uncertainty when entering the US, which may constrain their ability to capture additional market share.
Fitch said production expansion will enhance supply-chain resilience and help manufacturers to maintain and capture market share, but this is subject to higher execution or regulatory risks in some markets.
A growing number of high-tech Chinese manufacturers have been decentralising their domestic supply chains since 2018 to avoid US tariffs and hedge against rising geopolitical tensions.
Competitive Chinese clean energy companies have also been adding offshore capacity in end-markets to better serve customers and bypass trade barriers that increasingly favour domestic producers.
Source: The Edge Malaysia
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<p>Time: 2024 By: Ministry of Industry and Trade</p>
