Daily Management Review

Why Americans Wind Up its Chinese Businesses


05/14/2015


US corporations are actually reducing the investment in China's economy. The main reasons of the decline in investment activity were Chinese government’s barriers to entry to market, as well as a slowdown in the Chinese economy.



In any case, experts of the American Chamber of Commerce comes to this conclusion in the annual report on the state of the business climate in China. A Boston Consulting researchers state: reshoring - the process of returning productions previously withdrawn overseas - even becoming a global trend.
 
This process leads to a decline or even death of related industries and to the fact that the country is losing the potential for the emergence of innovation and development of new industries in the future. A few decades ago, US companies began to withdraw the production of electronic devices in Asia. And then eventually the development in this high-tech industry have emerged, particularly it were mini-batteries. As a result, it has become a leader in Asia in the design and manufacture of compact, rechargeable lithium-ion batteries, which were originally invented in the United States.

Rising costs in China, the growth of political opposition in China, particularly the position of America's new industrialization. That are the main thing in this matter. This is a general trend in the gradual withdrawal of Western companies in China. It has existed for several years. All of this emerged due primarily to the increase in costs and increase in labor payments in China. In addition, the West sees China as an ally.

There was a time when the West had certain illusions about China. Americans drawn West with China as a junior partner in the solution of a number of international issues and China was considered as a potential member of the club, which will be a global way to solve problems. But China itself refused to be a junior partner in the club and quite decisively shown that has its own interests, its own policy.

The opposition is now apparently originated in the Pacific Ocean between the Chinese and American interests. Now it has become a policy not retracting China but enveloping it with a number of agreements with countries that have opposed him. And as part of this policy, one of its elements is just weakening the capacity of China.

The plants were under construction in China not just because the climate is suitable, but primarily because there is cheap labor, and in America, these same plants would simply become unprofitable. Therefore, in this case the business, apparently, save whatever is possible, assuming a serious confrontation of the United States and the West as a whole with the rest of the world.

For Business what is most importantly, of course, a matter of saving capital. They, in this case, throwing their businesses, are themselves getting a serious loss. Just as they say, anything in this situation is better than nothing. Therefore, the main issue here for business - money is money, even during the war.

Incidentally, the conclusions of the American Chamber of Commerce confirms the poll, which was conducted by The Boston Consulting Group among the largest American business. So, in late 2013, more than half of US companies with an annual turnover of over one billion dollars somehow planned to start returning production capacity from China to the United States or are actively investigating the matter.






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