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Foreign companies and joint ventures account for nearly one-third of China’s total trade, according to official data that makes clear the extent to which international businesses in China could be affected by US President Donald Trump’s trade war.
Wholly or partly foreign-owned companies in the country accounted for $980bn of China’s exports last year, or more than one-quarter, and $820bn of imports, or more than a third, data from China’s General Administration of Customs and calculations by the Financial Times showed. China registered a record trade surplus of nearly $1tn last year.
Large US companies such as Apple and Tesla and many smaller producers rely on China as a manufacturing base. Many of these companies import raw materials or components for assembly into products that are then exported.
This leaves them exposed to the possibility of paying both US and Chinese tariffs on the same goods, economists said, after Trump sharply escalated levies on all Chinese exports to 145 per cent, leading Beijing to retaliate with duties of 125 per cent.
“Foreign firms are really being squeezed in the Chinese market,” said Heiwai Tang, director of the Asia Global Institute at the University of Hong Kong. “If they import, they pay the Chinese tariffs. When they export back to the US, they pay the US tariffs.”
“They are hit twice.”
China’s export machine was built on the back of wholly and partly foreign-owned companies, including those from Hong Kong and Macau, which sought to take advantage of the country’s huge and low-cost labour market to manufacture goods.
Foreign-invested companies, as they are called in China, accounted for 55 per cent of the country’s total trade in 2008.
This share has fallen over the years as China has developed a more aggressive policy of industrial self-reliance. But foreign-invested enterprises still represented 29.6 per cent of trade by dollar value last year, according to the government figures.
They accounted for just 16 per cent of China’s trade surplus last year, however, as foreign companies’ quantity of exports was offset by their larger share of total imports.
“There’s a number of foreign companies operating in China who are not American but who rely on American inputs and so they are also being affected,” said American Chamber of Commerce president Michael Hart. China’s ministry of commerce is considering exemptions on tariffs for some sectors, Hart said.
China does grant some exemptions from its customs duties for companies importing components and raw materials for goods that will be re-exported, which is known as the “processing trade”.
Some larger US manufacturers, including smartphone makers and some electronics producers, have also won temporary exemptions from Trump.
But with the trade war, many foreign companies may still find it prohibitive to export from China, particularly smaller producers.
Jacob Rothman, chief executive of China-based Velong Enterprises, which makes kitchenware and home products in China sold by US retailers including Walmart, said it imports Tritan, a form of plastic, from US-based company Eastman.
“We get hit with double tariffs on products with this material,” said Rothman. “Once when importing the material, and again when exporting the finished goods.”
He said China had granted a tariff exemption if the final product was exported back to the US within a certain time period. But China did not grant the exemption if the product was exported to countries other than the US.
Economists warned the trade war could cause further declines in China’s foreign direct investment inflows, which dropped 27.1 per cent in 2024 on a year earlier in renminbi terms, according to commerce ministry figures.
“For those entering China to serve the Chinese market, they may still come. But if your aim is to serve other markets, especially the US, you will be hurt a lot,” said Qiu Dongxiao, economics department head at Lingnan University in Hong Kong “So you need to reconsider your global strategy.”
