Business

Chinese firms learn to adapt as US trade war rages

Survival tactics include cutting prices, moving manufacturing abroad

BEIJING Export-reliant Chinese companies are slashing prices, moving production abroad, creating new domestic markets and even rebranding goods as they try to survive the escalating trade war with the US.

Factories along the eastern coast, fish processors in the south, apple juice exporters in central China and farmers in the north-east have all been forced to change their business models since US President Donald Trump launched the conflict more than a year ago, hitting everything from motorcycles to MRI machines.

TOUGH

But no matter what the survival tactic, times are tough and set to get worse with newly threatened tit-for-tat tariffs meaning virtually all trade between the world's two biggest economies would be covered.

"It has impacted all of us exporters... we include the tariffs in our quotes now," a sales manager at Shaanxi Hengtong Fruit Juicesaid.

Chinese apple juice exports have nosedived 93 per cent in the first half of the year since Mr Trump hit them with tariffs in September last year.

Shaanxi Hengtong Fruit Juice, which sends almost all of its product abroad, and some of its subsidiaries had to pledge shares as collateral for loans last year. One of its juice plants also put up dozens of its machines and appliances as collateral for another loan.

The fish processing industry has been hit hard too. China is the main supplier of frozen tilapia to the American market, but those exports are also down this year and fish farmers have been forced to look inward.

"The US is taking advantage of its market position and bullying the many scattered Chinese tilapia suppliers," the Hainan Tilapia Sustainability Alliance said on its WeChat account.

"The trade war is the last straw to crush the industry."

The trade group has been brainstorming how to grow sales at home, but different domestic tastes mean it has its work cut out for it.

Companies in other hard-hit industries have simply had to absorb some of the tariff pain.

"We have dropped our prices for the US market to cover some of the tariffs," said Mr Andy Zhou of Anytone, which makes radio handsets.

Radio exports to the US were down to just US$33 million (S$46 million) in the first six months, from US$230 million a year before.

Some Chinese companies have moved manufacturing abroad to Indonesia, Vietnam and Malaysia to skirt tariffs.

But the trade war has helped some Chinese sectors. Beijing's retaliatory tariffs have benefited its soybean farmers, with a boost in subsidies to local growers. The subsidies have upped China's soybean output but it still needs to import 85 per cent of what it consumes each year.

- AFP

BUSINESS & FINANCE