US business leaders moving away from China, look for alternatives

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WASHINGTON D.C.: Amid escalating tensions between Washington and Beijing, surveys of U.S. business leaders with factories in China showed they are keen to cut back their exposure in the Asian country and are shifting their investments to friendlier countries.

To curb Beijing’s access to state-of-the-art technology that could be used in weapons, the Biden administration announced plans this week to stop shipments to China of more advanced artificial intelligence (AI) chips designed by Nvidia and others.

According to the U.S. Bureau of Economic Analysis, Mexico has surpassed China as the leading destination for foreign direct investment by American firms.

The exodus has intensified as relations between Beijing and Washington under the Biden administration have turned from a trade war into a geopolitical rivalry, including over Taiwan.

After visiting China in August, Commerce Secretary Gina Raimondo said U.S. companies told her that China has become “uninvestible,” due to Beijing’s actions, such as fines and raids, which have made it risky to do business there.

Matt Dollard, senior analyst at RSM US, a consulting firm focusing on mid-market companies, said, “We have businesses doing full exits from China.”

In addition, more than a third of respondents, mainly large US-based multinationals, to an annual survey by the U.S.-China Business Council conducted in June and July have reduced or stopped their investments in China over the past year, a record high and more than the 22 percent recorded in last year’s survey.

However, the trade group said only a few firms said they plan to fully exit China, and many are instead pursuing a “China-plus-one” strategy. Rather than expanding in China, these companies direct new investments to other low-cost countries, such as Vietnam and India.

Ryan Gunnigle, CEO of Atlanta-based toy maker Kids2, said he is continuing to invest in his China factories, both in terms of automation and new capacity, but he is also launching several projects in Vietnam.

Jim Estill, CEO of Canadian company Danby Appliances, said he hopes to have his Chinese supply base down to 50 percent in the next year and is gradually moving to suppliers in other countries, such as Turkey.

“My concerns are primarily political. We could wake up tomorrow and find out China invades Taiwan, which would shatter my business,” he said.

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