Looking for ways around U.S. sanctions . . .
Since June, 33 listed companies on China’s stock exchanges have announced plans to search for production sites outside of China. While multinationals were the first to look for different production facilities, the news that even Chinese multinationals are leaving sends a very important signal that the protracted trade war with the U.S. is seriously diverting production lines across the board.
Vietnam fending off ‘fake industry’ . . .
Nearly 70 per cent of the departing companies cited Vietnam as their preferred destination, followed (in alphabetical order) by Cambodia, India, Malaysia, Mexico, Serbia, and Thailand. For its part, Vietnam has moved quickly to impose strict rules of origin for its manufacturers to guarantee that local value added involves more than 30 per cent of the product. Vietnam is concerned about being seen as just a site to by-pass U.S. restrictions, and worries that it could miss out on permanent benefits from investments and developments into its own advanced manufacturing capabilities.
Meanwhile, the yuan takes an even deeper dive . . .
As if the accelerated loss of industrial capacity was not enough, the Chinese yuan reached its lowest point in 11 years, with the depreciation breaching the critical level of 7 yuan-per-dollar for the first time since 2008. The Bank of China was quick to assert that “we will not engage in a competitive devaluation and won’t use the exchange rate as a tool to handle international trade disputes,” in clear reference to the U.S.’s decision last week to officially declare China a “currency manipulator” – little solace to Canadian investors worried that the trade war is expanding to include currencies.
- CNBC: China fixes yuan midpoint at 7.0211 on Monday
- Nikkei Asian Review: Goodbye China: Chinese manufacturers follow multinationals out the door
- Nikkei Asian Review: Hanoi narrows ‘Made in Vietnam’ to block Chinese detours