Apologies for not posting recently. I arrived in Beijing May 10th and have spent the last 2 weeks just getting my bearings and setting up the RCCPB's Beijing office. Things are beginning to calm down and fall into place; so I should be writing in the space more regularly.
Andrew Higgins of the Washington Post has a wonderful article today on the tussle between American and Chinese furniture makers. Facing a "tsunami" of Chinese imports, US furniture makers got together and brought an antidumping case against the Chinese. They won a 7% tariff penalty, which actually is extremely low, but high enough to put pressure on the Chinese, who are facing higher labor costs and a gradually rising RMB. So the Chinese have responded by moving much of their production from Dongguan, in southeastern China just north of Hong Kong to Vietnam. By being in Vietnam, they pay lower wages and avoid the penalties instituted against Chinese furniture makers.
This may sound like a dirty trick, but nothing about antidumping is clean, from how tariff penalties are calculated (a fig leaf of technicalites covering arbitariness) to the ruling process (the empowered panelists are from the plaintiff's home government and are lobbied by local legislators). Though not mentioned in the story, the Chinese response -- to move -- is also not uncommon. BASF, the world's largest chemical company, has multiple factories around the world not only because it is economically efficient to do so, but because it also makes it easier to get around antidumping penalties. When hit w/ margins on a product made in one factory, they can simply move production to another facility. In the Chinese case, they built new factories from scratch.
One of the neat twists of the story is that the primary investors in the factories are actually not Mainland Chinese, but Taiwanese. So it's really about a Taiwanese, not Chinese move, to Vietnam. With no strong ties to the central government and no long-term commitment to employ Mainlanders, it was not a hard decision to move to Vietnam. I actually think moving is a strategy open to Mainlanders in this and other sectors as well. Of course, the US wouldn't mind if they moved their furniture production to America; that may happen for other more capital-intensive sectors with high transportation costs, but I don't expect that will be the final result in this case.