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Almost 50% of corporates across parts of Asia, the UK and the US have either already moved their operations out of China or plan to do so within the next 12 months, according to a report by banking research firm East & Partners.

The Outlook 2024 report reveals that Chinese companies are leading this trend, with at least half of those surveyed having shifted some or all of their operations out of the country, and a further 24% considering doing so in the next year.

The top reasons cited by CFOs and corporate treasurers for this shift are lower operational costs elsewhere, geopolitical tensions and the significant depreciation of the Chinese renminbi, East & Partners tells GTR.

“Cheaper solutions are the primary driver for corporations based in Hong Kong and Singapore, while geopolitical tensions are driving the move for the non-Asia markets included in the research – Australia, the UK and the US,” says a spokesperson for the company.

Chinese corporates, on the other hand, are primarily driven by risk management concerns, particularly around “avoiding costly production delays and delivery bottlenecks experienced during multiple supply chain disruptions post-pandemic”, they say.

The report surveyed 556 corporate treasurers and CFOs across Australia, China, Hong Kong, Singapore, the UK and the US.

East & Partners tells GTR that “the prevailing high level of uncertainty [around tariffs following the 2024 US election] is having a detrimental impact on corporates’ ability to strategically plan for the medium to longer term”.

The United States Trade Representative finalised its latest round of tariffs last week, imposing rates of up to 100% on products including electric cars, solar panels and critical minerals.

In a recent interview with GTR, Deutsche Bank’s head of corporate bank David Lynne, highlighted this shift as part of a larger and accelerating trend to shorten supply chains and mitigate geopolitical risk.

“Every company is looking at that,” Lynne said. “They may be doing that through China plus one, which is largely in Asia Pacific. They may be shifting some of the manufacturing from China into Mexico or into areas such as Europe. Eastern Europe is a big beneficiary [such as] Czechia, Hungary and Poland.”

The impact of this reshoring remains relatively limited for now, however. A recent McKinsey report on trade flows in Southeast Asia shows that whilst countries in the region, particularly Indonesia and Vietnam, are seeing rapid growth in foreign direct investment inflows and export values, China still dominates in terms of output.

“China’s and Southeast Asia’s exports are growing at around the same pace, at a CAGR of about 7 percent between 2019 and 2023,” the report says. “While we observe that export growth has reached the same rate, it is important to note that China has the highest exports in terms of volume, by an order of magnitude, and will likely stay high for the foreseeable future.”

China’s exports in 2023 totalled US$3.5bn, almost double the total volume of Southeast Asia as a whole, at US$1.8bn.

Additional reporting by Jacob Atkins