Chinese manufacturers’ investments in production facilities overseas are likely to continue to increase amid rising trade barriers and geopolitical risk, Fitch Ratings said Tuesday.
“A growing number of high-tech Chinese manufacturers have been decentralising their supply chains from China to other countries since 2018 to avoid US tariffs and to hedge against rising geopolitical tensions,” the global rating agency said in a statement.
“Competitive Chinese clean-energy companies have also been adding offshore capacity in end-markets to better serve customers and bypass trade barriers that increasingly favour domestic producers,” it added.
The agency said production expansion will enhance supply-chain resilience, in addition to helping manufacturers to maintain and capture market share, but they are also subject to higher regulatory risks in some markets.
It noted that Chinese manufacturers’ investment destinations are diversified as they aim to maintain and capture market share, so they do not necessarily target low-cost regions.
“Chinese manufacturers may save on tariffs and logistics costs, and benefit from greater supply chain flexibility and smoother customer relationship management,” is said.