USA-China Tensions - Is Manufacturing in China Still Worth It in 2020?

How should recent headlines in USA-China relations affect your business decisions?

(Main image by Reuters: Kevin Lamarque)

For many businesses, small to multi-national, recent engagements between the Trump government and Beijing are complicating business relations with partners in China.

How might the geopolitical circumstances affect OEM/ODM and other manufacturing services operating in China? How might your supply chain, particularly for electronics, be impacted if your business begins or resumes with Chinese companies in 2020?

As an OEM/ODM company, Listener Pro believes in providing honest guidance on the issue. In short, while many other industries are negatively impacted, those worries do not transfer to manufacturing.

Events Marking Declining USA-China Relations

Rising tensions between the USA and China are complicating business in many other fields outside of manufacturing.

Most recently, the Trump administration has gone after TikTok and WeChat. TikTok, aka Douyin, a social media app made by Chinese company ByteDance with an estimated 800 million active monthly users, according to Mansoor Iqbal of BusinessofApps.

Two executive orders were signed by President Trump aimed at banning TikTok and WeChat from the U.S. market. Tencent and ByteDance will have to choose between selling their U.S. operations to a U.S. company by mid-September or lose access to the U.S. market entirely.

TikTok by Chinese company ByteDance may be forced to exit the US by September - Getty Images

WeChat, aka Weixin, while having a smaller presence in the Western market is still widely used by Chinese residents for key advantages of familiarity with the app and ease of international calling compared to other mainstream messaging apps. The policy would also negatively affect US companies, namely Apple in China. If WeChat is banned in Apple app stores in China, where WeChat is more valuable to users than iOS, iPhone sales would be expected to be impacted harshly.

The USA government used similar reasoning to justify banning American companies from doing business with Huawei in 2019 for concerns of alleged spying capacity through Huawei’s 5G network to which Huawei denied.

In July, Trump also imposed additional sanctions on Chinese companies with ties to Xinjiang, 11 in total, on the basis of alleged human and civil rights abuse. Apple had imported staff uniforms from a sanctioned textile company. The company in question, Changji Esquel Textile pledged to appeal the sanctions, citing “an international audit in 2019 [confirming] there was no modern-day slavery at the factory.”

Rising tensions between the USA and China are complicating business in many other fields outside of manufacturing.

Opponents of Trump’s recent (and seemingly rushed) moves to deteriorate rapport with China argue that the bans and sanctions are primarily politically motivated, especially with the US’s lagging coronavirus response, domestic racial conflicts, and with federal election voting to occur this November.

However, these policies may or may not continue with a change in office, with Joe Biden running opposite to Trump. In fact, some experts argue that Biden may be advised to take an even harsher tone against China. Alternatively, conditions in US-China relations may improve but many experts argue that there already is irreparable damage, according to NPR.

The Takeaway for Businesses

For businesses contemplating a supply chain in China, while concern is a natural reaction, manufacturing in China could be unaffected for the near- to long-term. The US government and its allies are primarily concerned with two areas – security and human rights issues. Businesses considering manufacturing in China would be encouraged to carefully vet potential partners for ties to contentious political regions, for example. On the issue of cybersecurity and spying, these concerns would generally be irrelevant outside of software and SaaS products. For an electronics manufacturer like Listener Pro, business and consumer data would simply not be a piece of any partnership. Therefore, risk of compromising data would not be a issue our clients would face. In conclusion, the benefits of manufacturing products in China, like scalable production, low labour cost, and cheap international shipping, are largely not endangered.

Have questions for us? Contact us, we’d love to hear from you. Or, subscribe to our mailing list for more insights from Listener Pro.

About Listener Pro

Listener Pro is a Shenzhen-based company specializing in audio devices. We take an innovative approach to professional and home audio, with existing products in digital wireless in-ear monitor systems, digital wireless stage performance systems, long-range audio transmission, interview recording, and more.

Room 203, D Building, Duocai Science City, Guanle Road, Luhu Community, Longhua District, Shenzhen, China
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