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Sino-us trade truce

Hong Kong media: trade truce, China's small business relocation in Vietnam should think twice

Chinese exporters are reconsidering plans to move production to Vietnam, seizing on a trade truce between China and the United States.Today, the cost of moving to Vietnam is rising.

For many companies, a 10% tariff is difficult and manageable, but a 25% tariff would be a fatal blow, which is the main reason why Chinese manufacturers are considering relocating.Many companies seem to be counting on China and the U.S. to resolve their differences and end a trade war next year, which would eliminate the tariff issue.But even if the truce is extended, observers say the threat of higher tariffs could persist, perhaps for years.But many exporters, especially small and medium-sized enterprises in the manufacturing hubs of the pearl river delta and Yangtze river delta, are taking advantage of the current opportunity to delay relocation plans.

Xie jun, a furniture exporter in eastern zhejiang province, said the cost of building a factory in Vietnam had soared in recent months and many companies could not afford it.Hopefully the government will end [the trade war] next year."The owner of a sofa foam and sponge factory went to tongnai province near ho chi minh city earlier this year to build a factory.Just the initial stages of the move, such as changing factories, moving automated production lines from zhejiang to the region and paying subsidies to send skilled Chinese workers, cost nearly rmb10m.It costs more than building a factory the same size in zhejiang.

Since the summer, many Chinese factories have struggled to relocate, and they have found that production costs are no longer low in places like ho chi minh city, pingyang, long 'an and tongnai provinces.These areas have good transport links connecting factories to deep water ports and airports.

Analysts estimate that between 5,000 and 6,000 factories -- owned by Hong Kong, Taiwanese or private Chinese investors -- have been sent to Vietnam so far this year to inspect the relocation.As a result, Vietnam's land, labor and building materials costs have soared.In the Giang Dien industrial park in tonai province, about 70km from ho chi minh city, the price of long-term industrial land leases has risen to $90 a square metre from $60-70 a square metre last year.

Gao jian, co-founder of Vnocean, a business consultancy, says there are costs associated with building a factory.A 5, 000-square-meter plant costs $20, 000 a month to rent, plus a $140, 000 deposit and the first month's rent.Plus $90,000 a month for workers.Other expenses include taxes and the transportation of imported equipment and other raw materials."The United States has suspended tariffs on $200 billion of Chinese goods for 90 days.That is enough to reassure many companies that they are shelving plans to relocate.(translated by He Huifeng, wang beizhe)