Abstract
This thesis investigates how external influences affect the competitiveness of foreign manufacturers in China and examines Southeast Asia as a potential solution for their relocation strategies. It unpacks the push factors driving these manufacturers to relocate out of China and the pull factors that make Southeast Asia a solution for such relocations. Since China opened its economy to foreign investment in the late 1970s, it has transformed from an agrarian society into a modern industrial hub, earning the title of the “world’s factory.” However, since 2010, this status has been under tremendous pressure as an increasing number of foreign manufacturers have relocated out of China, especially to Southeast Asia. This is due to higher operating costs and wages as the country transitions from low-end to high-end manufacturing, exogenous shocks such as the US-China trade war and the need to diversify the risk of overreliance on China's supply chain, and to return to home country to revitalise innovation.While many studies have examined various aspects of manufacturing relocation strategies, including internationalisation, domestic relocation, and reshoring, there is a lack of research on the factors that drive foreign manufacturers to relocate their production base from one overseas location (such as China) to another, third country (for example, Indonesia or Vietnam in Southeast Asia). This type of relocation, where companies shift production between foreign countries rather than returning to their home country or relocating domestically, represents a gap in the current literature on manufacturing relocation strategies. The thesis findings highlight Southeast Asia’s importance and practicality as a viable solution for manufacturers relocating their operations out of China.
The study employs a three-step research methodology consisting of: i) secondary data collection, ii) multiple case studies, and iii) surveys. The data gathered from these steps is then analysed using thematic analysis to identify key patterns and insights. Using purposeful sampling, five foreign manufacturers from different industries that had relocated their operations from China to Southeast Asia were selected for the case studies. This involved
in-depth interviews with company representatives to understand the push–pull factors and the company’s competitive priorities driving their manufacturing location strategies. Subsequently, survey questionnaires were distributed to 360 foreign manufacturers operating in China but not in Southeast Asia. The findings were triangulated to understand the strategic considerations that drive foreign manufacturers to opt for international relocation, specifically moving their operations from China to Southeast Asia.
The research findings showed various reasons why companies shifted out of China. One notable push factor is the United States-China (US-China) trade war, and explicitly the introduction of a 25% additional import tariff on Chinese exports to the US amid economic conflicts in 2018. The imposition of additional import tariffs on certain products impacted overall profit margins and made it challenging to sustain previous levels of profitability when manufacturing in China for the US market. The products affected by the additional tariffs need to be produced outside China to maintain competitiveness for those affected companies who export to the US market. In contrast, those intended for the domestic Chinese and foreign markets can continue production within China. The recent Trump 2.0 has caused more stir in the global market as the US president increased the tariff across all trading partners in different percentages, with China the highest among all of them.
This study adds to the literature on international business relocation strategies by exploring the push and pull factors influencing the relocation decisions of foreign manufacturers in China. The research findings could inform foreign manufacturers in making informed relocation decisions and developing strategies that are well-suited for future challenges. Additionally, it offers policymakers insights into the investment climate and incentives needed to attract foreign direct investment from China.
| Date of Award | 2025 |
|---|---|
| Original language | English |
| Supervisor | Tesfaye GEBREMEDHIN (Supervisor), Craig APPLEGATE (Supervisor) & Riyana MIRANTI (Supervisor) |