China, the United States and the New Normal

Shutting down a China WFOE

I got a badly written and angry email yesterday in response to my post, On the Impact of China Tariffs: Is This a Dead Cat Bounce? In my post I predicted a decline in manufacturing orders from China, starting in the next few months. The email accused me of “hating China” and wanting “to impede its peaceful” rise and of being “jealous of its progress.” All this because we have lately been writing how so many of our law firm’s own clients and so many others are leaving China, or looking to leave China. We have been getting quite a lot of these sorts of emails lately.

Guess what people. Our posts about foreign companies leaving China have nothing to do with our feelings regarding China and everything to do with what we are hearing and seeing. Our statements of fact about companies leaving China are not being made out of animus to China, but out of a desire to tell the truth and help foreign companies figure out what to do about China going forward. Life would be far easier and economically lucrative for us if foreign companies were not running for an exit from China. But from what we see, they are.

We are telling the truth about companies (not just American companies) looking to leave China because part of what we do is help companies legally fulfill their goals and their plans. My law firm’s international lawyers have been helping companies negotiate their exits from China, by among other things, helping them figure out where to go instead of or in addition to China. We also have been helping them set up in other countries, do deals involving other countries, protect their IP in other countries, and draft necessary contracts in other countries. In the last few months our international lawyers have been kept nearly as busy with countries like Vietnam, Cambodia, Mexico, Indonesia, Thailand, Malaysia, Turkey, India and Pakistan as with China.

The above is but an introduction to what we see as China’s diminished future for foreign companies. Since pretty much the inception of the US-China trade war we have seen it as more than a trade war. At first, we saw the US tariffs as an effort by the United States to get China to “open up” and “act right” on things like the internet and IP. But because we did not see China changing on these things, we did not see the trade war ending.

Vice-President Pence’s speech on China earlier this week has only reinforced that the trade war between China and the US will not be ending any time soon, if ever. The New York Times has called that speech the Portent of a New Cold War between the United States and China, and China’s own Global Times wrote an article, Pence speech shows Washington’s tougher policy on China. Don’t blame us; we are just the messengers. Things are getting tough between China and the United States right now and the trade war is just a symptom of that, not the disease.

The United States is aggressively and unabashedly doing what it can to isolate China and remove it from the world of international trade. The new free trade agreement between the United States and Canada is further proof of this as it essentially blocks Canada and Mexico from engaging in free trade with China. See What Trump’s new trade pact signals about China. Word is that shutting out China is going to become a regular thing in all new U.S. trade agreements. See US Commerce’s Ross eyes anti-China ‘poison pill’ for new trade deals.

The above is why we will continue to write about what North American and Latin American and European and Australian businesses should be doing to deal with the new normal regarding China. We are writing these things because we value our credibility and because we presume our readers value our no-holds barred advice — threatening emails or not.

For more on the new normal, check out the following:

And just in case you still believe we are saying the above for political not business reasons, here is your palliative: a great book that asserts the United States is blaming China for the US’s own ills: Blaming China It Might Feel Good but it Won’t Fix America’s Economy, by Ben Shobert, a good friend of mine. Ben — what are you seeing out there in terms of companies looking to leave and/or leaving China? 

What are you-all seeing out there?

UPDATE: An international lawyer friend just sent me a link to this blog post by Renaud Anjoran over at the Quality Inspection Blog. Renaud heads up a top-flight quality inspection/product sourcing company out of Shenzhen, China, but his post was written from Vietnam and is entitled Transferring Production from China to Vietnam to Avoid Tariffs. Renaud’s post is essentially a how-to on moving production from China to Vietnam. Obviously, Renaud went to Vietnam and wrote this post because his clients are also looking to reduce their dependence on China.

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