HSBC helps China’s manufacturers expand their production lines in Southeast Asia to dodge trade war tariffs

25-May-2019 Intellasia | South China Morning Post | 6:00 AM Print This Post

HSBC, the largest lender in Hong Kong and Europe, said it is offering a lifeline to business clients looking to shield themselves from the full force of the US-China trade war by expanding their production facilities in Southeast Asia.

With the trade spat between the planet’s two biggest economies intensifying, a growing number of manufacturers in mainland China are looking to build additional factories in Malaysia, Thailand, Vietnam and India, said Helen Wong Pik-kuen, the HSBC’s chief executive for Greater China.

Many of them had already established secondary production plants in the region over the last five to 10 years to tap the benefits of cheaper land and labour.

“These customers did not have a crystal ball so they did not foresee the trade war between the US and China,” said Wong. “These second production lines now could act as a good ‘plan B’ for these manufacturers for them to shift their US orders to be made outside the mainland. This would allow many customers to still accept a lot of US orders while they do not need to worry about the tariff.”

She said HSBC is well placed to help these clients to expand their secondary facilities, with its strong presence in Southeast Asia. This could take the form of providing loans or introducing them to local suppliers or partners.

Manufacturers in China were hard hit when US President Donald Trump more than doubled the tariff on $200 billion worth of Chinese imports to 25 per cent on May 10. The White House is preparing to add levies to nearly all Chinese-made products later this year.

President Trump and his Chinese counterpart, Xi Jinping, are expected to meet on the sidelines of the G20 summit in Osaka, Japan, at the end of June, but no talks are scheduled between the countries before then.

Another strategy manufacturers are using to offset the impact of the trade war is to sell their products domestically instead of exporting to the US.

“Chinese customers nowadays can afford high-quality products,” said Wong.

Some are having to change their suppliers because of the trade war, which HSBC can also help with, she added.

HSBC is expanding in China, with the hope of tapping opportunities stemming from the opening up of capital market and the development of the Greater Bay Area, Beijing’s plan blueprint to integrate Hong Kong, Macau and nine cities in Guangdong to create a world-class economic hub.

Even with headwinds from the trade war, HSBC saw revenue in the Pearl River Delta area grow by almost a third last year, compared with 2017. Its staff in the area has doubled to 3,000 in the past three years.

HSBC last year set up a majority-owned securities firm in Qianhai a special economic zone next to Shenzhen that can offer a range of services for domestic and international investors wishing to access the A-share market, Wong said.


Category: China

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