Many in the American business community are reconsidering their close ties to China
SCOTT SIMON, HOST:
All week, we've been taking a closer look at China since it lifted its COVID lockdowns a year ago. Over the last year, Beijing's relationship with Washington has continued to evolve, and American business has watched closely and nervously. NPR international affairs correspondent Jackie Northam brings us the story.
JACKIE NORTHAM, BYLINE: Over the past year, there's been a lot of talk about China Plus One diversification and de-risking. They reflect the current tensions facing foreign businesses in China. This was illustrated in a recent poll by the American Chamber of Commerce in China, says its president, Michael Hart.
MICHAEL HART: One of the questions that we ask in our survey each year is, are you planning to move your operations outside of China? You know, this past year was the vast majority said no. Seventy-some percent said we're not leaving. Now, the previous year it had been 80-some percent. And so, you know, a 10-percentage point increase of companies had said they're starting to look around for other locations.
NORTHAM: That's largely because of geopolitical tensions and Beijing's tightening of controls, including a new counterespionage law. But Mary Lovely, an economist at the Peterson Institute for International Economics, says the key question is - where would the companies go if not China? She says one possible alternative is Mexico. The government there has been working to make it easier for multinational companies.
MARY LOVELY: But Mexico has always had a bit of trouble getting itself organized in terms of the infrastructure that are needed, the security level that's needed. You know, trains coming into the U.S. are routinely robbed. So, you know, you have to have the ports, the security, the financial system, the workers.
NORTHAM: India and Vietnam are also seen as potential alternatives, but they're not nearly ready for an onslaught of U.S. companies, says Dan Harris, a lawyer with Harris Sliwoski, which helps provide legal advice for foreign companies operating in China. Harris points to one client that produces fashion brand apparel, which moved all its manufacturing from China to Vietnam.
DAN HARRIS: And they would just say, we love Vietnam. It's so great. I can't even believe there's still people in China. And then three or four years later, they moved everything back to China because all of a sudden, we'd need zippers fast or buttons fast, and we'd have to fly them over from China. And it cost us a fortune.
NORTHAM: Peter Tirschwell, a supply chain specialist at S&P Global Market Intelligence, says China has just been at it longer than the other nations. He says they make a high-quality product for a lower price and have good infrastructure.
PETER TIRSCHWELL: China has invested billions in roads and ports. They're the only country in the world that built their port infrastructure ahead of demand, whereas virtually every other country in the world is behind in their port development.
NORTHAM: But developments both inside and outside of China in the last year are not something American business owners can ignore. They are increasingly forced to make a choice.
IAN RODENHOUSE: This is a photo of me at a brewing equipment manufacturing plant...
NORTHAM: For Ian Rodenhouse, working in China is worth the risk. Before COVID, the 35-year-old logistics specialist started working with an associate in Shandong province, promoting American craft beers.
RODENHOUSE: So it wasn't just the shipment of beer, the freight into China, but it evolved into sort of a branding venture.
NORTHAM: The venture fizzled out with the pandemic, but Rodenhouse, a Mandarin speaker, is about to return to China to try again. He's aware of the tension between Washington and Beijing, raids on companies and exit bans blocking the departure of some American citizens. He's been warned by friends and other people in the logistics industry to avoid the country, but Rodenhouse says he sees nothing but opportunity in China.
RODENHOUSE: If you're willing to take the risks initially to sort of wade through these maybe more challenging things that present themselves to you, it always will be worth the risk. I think that's just a feature of business, but I think especially in China.
NORTHAM: Hart, with the American Chamber of Commerce in China, says many other American companies feel the same way.
HART: The crazy thing about all of this is U.S. tensions are bad. China's economy has slowed, difficult to do business. Guess what? Last year - record trade between us and China.
NORTHAM: So despite the rhetoric and the wish to de-risk from China, business goes on for now. Jackie Northam, NPR News, Washington. Transcript provided by NPR, Copyright NPR.
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