Trade tensions accelerate move of China’s factories - ING

Timme Spakman, economist at ING, suggests that with the maturing Chinese economy, its pace of growth is slowing as firms are switching from labour intensive production to production of higher value added products and services.

Key Quotes

“Wages are rising and the economic model is shifting towards consumption growth.”

“Higher wages mean that labour intensive production is moving out of major Chinese cities towards cheaper rural areas, as well as to other countries like Vietnam.”

“Automation is an opportunity to hold onto activities plagued by rising wages but it won’t stop the shift in global trade flows.”

“The US-China trade war is accelerating this trend as major companies such as Ikea are relocating production in Vietnam to avoid US tariffs.

“Outsourcing and offshoring by Chinese and western companies to other Asian counties is leading to diversification of trade flows in Asia.”

“China's declining import share and slowing economic growth rate hollows out the position of China as the locomotive of world trade.”