More US firms operating in Asia delaying or cancelling investments, exiting China, as trade war escalates

An American Chamber of Commerce survey released on June 26 found that nearly 90 per cent of respondents saw this region as a more attractive place to do business compared with 75 per cent a year ago. PHOTO: AFP

SINGAPORE - The trade war that is forcing increasing numbers of American firms with operations in the region to delay or cancel investments or even exit China entirely could end up benefiting South-east Asia.

An American Chamber of Commerce survey released on Wednesday (June 26) found that nearly 90 per cent of respondents saw this region as a more attractive place to do business compared with 75 per cent a year ago.

"That's great because it could mean companies are raising investments and relocating their supply chains to parts of South-east Asia," said Mr Gerry Mattios, expert vice-president at Bain & Company, which partnered AmCham Singapore to analyse the results of the May survey.

"But we don't think South-east Asia will become the factory of the world, mostly because the trend for supply chains is to be less global and more local."

"Overall the tendency is to bring supply chains closer to markets they are serving."

While more companies are looking to shift manufacturing to Vietnam, Singapore could be an indirect beneficiary as key corporate decision-making processes could move here, said AmCham executive director Ann Yom Steel.

The May survey polled 144 respondents, about 90 per cent of which work either globally, across Asia-Pacific or Asean.

About 60 per cent of those quizzed were American-based firms, and 84 per cent were from the services, manufacturing or technology industries.

AmCham chairman Dwight Hutchins noted that "given the significant number of American businesses with Asia-Pacific headquarters in Singapore overseeing investments and supply chains associated with China, it has become mission-critical to explore sourcing options from elsewhere in the Asia-Pacific region for their US markets".

AmCham Singapore first conducted a survey of its members' perceptions of the United States-China trade war last September.

The May poll was to ascertain how the trade war affected their business strategies.

It found that American manufacturing firms with more than 1,000 employees in South-East Asia and operating at a global or regional scale were the most negatively affected with 54 per cent delaying or cancelling investment decisions, up from 49 per cent in 2018.

More companies are also recognising they need a more flexible supply chain: 37 per cent are considering moving sourcing away from the US, up from 29 per cent; while 42 per cent may move sourcing out of China, compared with 37 per cent last September.

But 11 per cent are considering exiting China altogether, up from 5 per cent. This is particularly troubling to Ms Daphne Au, insurer AIG's regional head of APAC regulatory and government affairs.

Ms Au, a panellist speaking on the survey findings on Wednesday, said: "Being in the business of risk, the fact that there is a slowdown in global trade due to uncertainty is not good for everyone, including insurance firms.

"We insure those trade businesses, in the event trade continues to slow down, it will impact our clients, and the business of risk.

"If Asia doesn't take advantage of this situation and correct its policy decisions on... market access to ease foreign investments into countries, they will miss the boat.

"Now is the time to promote cross-border transactions, digital economy, market access."

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