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Hong Kong, Taiwanese firms to move production out of China

Hong Kong and Taiwan businesses are planning to pull some of their production from China after the US administration announced that roughly $200 billion worth of Chinese-manufactured goods would receive a tariff increase to 25 percent from 10 percent. The new tariff rates went into effect May 10, after President Donald Trump announced the unexpected move five days earlier on Twitter. Thousands of Chinese products will be taxed at 25 percent, including furniture, telecom equipment, plastics, seafood, and auto parts.

Many of these products are made by Hong Kong and Taiwanese companies that for a long time have had manufacturing facilities in China, because of its cheap labor. Now, these companies are relocating some production to avoid the added costs related to US tariffs. Many tech manufacturers, such as suppliers to US tech giant Apple, have already made plans to move production to Vietnam, Malaysia, the Philippines, and elsewhere, from China, after U.S. tariffs were first announced in March 2018.

Taiwanese government will speed the process of helping Taiwanese companies return to the island, while setting the goal of signing a bilateral trade agreement with the United States. Majority of exports to the United States, now with products with the label ‘Made in China’, will soon be replaced by high-quality products that are ‘Made in Taiwan.’

Taiwan’s Ministry of Economic Affairs launched a “welcome back” program in January, which provides incentives for Taiwanese companies to return home, such as free rent for the first two years, favorable bank loans, and access to tax consultation.