US Companies are Shifting Their Investments from China to South- and Southeast Asia

The survey result of the American Chamber of Commerce in Shanghai indicates that around 20% of the US companies in China are shifting their investments planned for China to other destinations, mostly to Southeast or South Asia. The reasons lie not only in the rising costs, but in a shortage of skilled workers and the fiercer domestic competition in China. It is primarily the limitation of data traffic which causes many American companies to leave. In the service sector, 76% of respondents cited that Internet censorship is damaging Chinese business.

Beijing will drastically limit the use of virtual private networks (VPN) from February 2018 onwards. Individual access is forbidden, and anyone who wants to communicate via the Internet must operate through an authorized local service provider. In addition, data from companies can no longer be stored abroad. Instead, it must be kept on Chinese servers. If you want to encrypt your communication, you must provide the appropriate key to the state. The communication of foreign companies is largely under the control of the Chinese authorities, which is just as obvious as unacceptable.

Redirections from China to Southeast and South Asia are an interesting strategic option. This is especially applicable to innovative companies that need to protect valuable data and communicate securely. Countries such as Singapore, Malaysia and Thailand (all members of the ASEAN China Free Trade Agreement), present themselves as alternative locations. The People’s Republic is certainly an important market for foreign companies, but definitely not the only one.

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