Chinese Companies Expand Diversification Beyond China, According to HSBC CEO
Chinese companies are actively expanding their operations beyond China, impacting not only foreign firms but also the overall market, reveals HSBC CEO Noel Quinn
Sign up for CNN's Meanwhile in China newsletter to stay informed about the country's rapid growth and its global implications. HSBC CEO Noel Quinn highlights that the diversification away from China is gaining momentum, impacting not only foreign companies.
Speaking at the Bloomberg New Economy Forum, Quinn shared that he had recently spoken to the CEO who revealed a significant 70% growth in assisting Chinese clients to expand their business model beyond China. This observation marks an intriguing shift. Quinn, who assumed the role of CEO in 2020, further emphasized that current data indicates a higher level of activity among Chinese clients expanding beyond China compared to those entering the country. This observation was in response to a query about firms looking to minimize risks associated with the world's second-largest economy.
Signage of Standard Chartered Plc and HSBC Holding Plc sit atop of buildings at the Marina Bay financial district on October 12, 2023 in Singapore.
(Photo by Suhaimi Abdullah/NurPhoto via Getty Images)
Suhaimi Abdullah/NurPhoto/Getty Images
HSBC, the largest trade finance bank globally, specializing in Asia, has incurred a $500 million loss due to the decline in Chinese real estate and has cautioned about the potential for further deterioration.
Quinn observed that Chinese suppliers were expanding their supply chains beyond China, reaching other regions in Asia and around the world. This trend aligns with China's gradual transition away from being the world's factory, as the country aims to focus more on service-oriented and consumption-driven economic growth.
"China's economic growth model is undergoing a significant transformation, which will inevitably lead to changes in its supply chains and global supply in the next decade or so," Quinn pointed out.
According to a July report from research provider Rhodium Group, the trend of diversifying away from China has been ongoing for years, with numerous Chinese companies also venturing into overseas manufacturing to take advantage of reduced costs.
However, if companies choose to relocate to countries like Vietnam or India, it does not necessarily mean that China will suffer any losses. The firm stated that new factories in these countries may still rely on supplies made in China. According to researchers, it will take several years, if not decades, to replace China's role. On the other hand, detecting de-risking can be challenging as the report mentioned that there is no specific economic data that can effectively capture companies' intentional decisions to reduce their actual economic involvement with China.
De-risking is a term coined in the financial sector, denoting the practice of mitigating risk without severing all connections. Lately, leaders and professionals in Western countries have emphasized the importance of adopting this approach to handle their growing vulnerability to mounting geopolitical unpredictability in China.
Quinn highlighted on Wednesday that numerous global businesses still find the Chinese market appealing due to the continuous growth of the country's consumer base and urbanization.
"When considering whether to be involved in this economically, as a product supplier, the answer is yes. However, my focus is solely on the economics, not the politics," he stated.
