Under the heavy pressure of the US-China trade war, Chinese social media is flooded with advertisements for providing “origin laundering” services. However, an increasing number of Southeast Asian countries have explicitly refused to help Chinese enterprises with “origin laundering”. Experts analyze that the incompetence of the Chinese Communist Party has pushed small and medium-sized businesses engaged in export trade to struggle for survival in the gray area. If the Chinese Communist Party cannot comply with international trade rules for compliant transformation, China will face a wave of bankruptcies and unemployment.
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Amid the US-China trade war, Chinese social media is now inundated with advertisements for “origin laundering”. These ads claim to offer a one-stop service for mainland Chinese small and medium-sized enterprises engaged in export business to send products to Southeast Asian countries for “origin laundering” before selling them to the United States.
Dr. Sun Guoxiang, a professor in the Department of International Affairs and Business Studies at Nanhua University in Taiwan, told reporters that for Chinese enterprises focused on exports, the United States remains their largest single market. Losing orders from the US means massive layoffs or even closure. Therefore, “origin laundering” has become a “gray compromise” for companies between legal survival and demise, serving as the “gray survival motivation” for Chinese enterprises.
He pointed out that large enterprises can relocate their production to Southeast Asia, requiring massive investments and taking one to two years, which is unaffordable for small and medium-sized enterprises. Hence, they resort to using fake origin certificates from a third country to evade tariffs at a low cost. “Under pressure and lack of a way out, ‘taking shortcuts’ seems to be the only viable path for small and medium-sized Chinese enterprises now.”
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He said, “Origin laundering” has formed a “gray information market” and a “mature service chain”, with related information precisely targeted at exporters and small business owners on Chinese mainland social platforms through advertisements.
American economist David Huang told the Epoch Times that under high US tariffs, many Chinese companies are forced to use “origin laundering” to maintain orders and exports. This is a “gray industry survival strategy born under structural pressure.”
“‘Origin laundering’ is just a façade; behind it is a struggle of Chinese enterprises globally losing credibility,” he said. The main profit source for Chinese export enterprises is the European and American markets. If the decoupling of China-US trade intensifies, small and medium-sized Chinese export enterprises will be trapped outside the global supply chain, forcing them to choose to “helplessly survive at the edge of the law.”
Dr. Sun Guoxiang also believes that “origin laundering” is not just illegal behavior but a result of “a deep-rooted intertwining of institutional pressures and corporate survival anxieties in the context of international pressure and a lack of transparent and compliant transformation support within the Chinese domestic system, leaving Chinese small and medium-sized enterprises with no choice but to rely on platforms and gray intermediaries to survive.”
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Regarding the large number of “origin laundering” advertisements on Chinese social media, David Huang believes that the lack of regulation of these advertisements indicates a deliberate regulatory pass from the authorities, representing tacit approval, even encouragement, by the Chinese Communist government.
He said, “On platforms like Weibo, Douyin, and Xiaohongshu, these (origin laundering advertisement) services have not been suppressed, indicating the tacit approval, even encouragement, from the authorities behind them. In China, if it does not conform to the official propaganda, it cannot exist for even a second. What you see is what is allowed to be seen, which also proves this is a gray industry encouraged by relevant departments and the government.”
Dr. Sun Guoxiang stated that in the face of foreign capital withdrawal, order losses, and export obstacles, the official rhetoric of the Chinese Communist government still emphasizes “stability,” but there are secret strategies to find solutions.
He said, “The proliferation of ‘origin laundering’ advertisements on social media blatantly shows that relevant authorities are aware of this yet do not investigate. Sometimes local governments even tacitly approve of such behavior as they also depend on exports to generate GDP and employment data. Despite knowing it is illegal, they choose to ‘turn a blind eye’ and ‘tolerate’ ‘origin laundering’ as a semi-legal business.”
David Huang stated, “‘Origin laundering’ is not the violation of a single enterprise but rather a gray industry survival strategy tacitly approved or even encouraged by China’s ruling administrative class.”
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The backdrop for the widespread appearance of “origin laundering” advertisements was US President Trump’s announcement of global reciprocal tariffs on April 2. However, on April 9, Trump announced a 90-day postponement of high tariffs for over 70 countries excluding China and intended to negotiate with them during this period.
In preparation for new tariff negotiations with the US, more and more Southeast Asian countries, including Vietnam and Malaysia, have made it clear that they refuse to assist Chinese exporters with “origin laundering”.
David Huang mentioned that the stance of Southeast Asian countries is a comprehensive consideration of their national credibility, sovereignty, international relations, and potential US sanctions. If they assist Chinese enterprises with “origin laundering” again, these Southeast Asian countries fear being implicated and becoming “secondary victims” of US trade sanctions, prompting them to adjust their strategies towards China delicately.
“In the context of the US-China confrontation, these 14 Southeast Asian countries are willing to accept investments from China on one hand but on the other hand, they do not want to align too closely with China (the CCP). They hope to find a more perfect balance between Western societies and China,” he said.
Dr. Sun Guoxiang also mentioned that most Southeast Asian countries practice “balanced diplomacy” by actively refusing Chinese enterprises’ “origin laundering”, “they are signaling credibility to the US and the EU to avoid falling into a geopolitical risk and retaliation crossroads.”
He said, “Since the US is the primary export market for most Southeast Asian countries, if they are listed on the US tariff sanction list, ‘their overall export and foreign investment attraction capabilities will also be damaged’. Hence, they prioritize compliance with US regulations ‘to protect their own interests rather than politically allying with Beijing’.”
“The Southeast Asian countries choosing to crack down on ‘origin laundering’ are not only reacting to US pressure but are also making a strategic choice to defend their domestic economic autonomy and global trade reputation,” he said. “A large quantity of Chinese products being re-exported through a third country has squeezed the profit space of legitimate local manufacturing and small and micro-enterprises. Hence, the crackdown on ‘origin laundering’ is not only a response to external pressure but also a demand for internal industrial protection.”
At the same time, David Huang believes that “Malaysia, Vietnam, Cambodia, Thailand, and India, these countries are competing with China for the role of the center of the global supply chain and striving to capture the market space released by China as the ‘world’s factory.'”
“This demonstrates that they are unwilling to only be a transit point for Chinese products. They hope to become formal export powers, so they will also make efforts to comply with American and European regulations.” he said.
The root cause of Chinese small and medium-sized export enterprises struggling for survival in the gray area through “origin laundering” is, according to Dr. Sun Guoxiang, a result of the “deep institutional pressures and corporate survival anxieties intertwined in the structure of the Chinese governance system”, where political decisions take priority over economic realities, causing enterprises to become sacrificial lambs.
He stated that if the new version of Trump’s tariff war continues, “it is reasonable to infer that there will be a wave of mass bankruptcies among Chinese small and medium-sized enterprises, especially light industry manufacturers, hardware, furniture, and other exporters relying on the US market, due to losing overseas orders or unable to evade tariffs.”
David Huang believes that Beijing’s current strategy focuses on maintaining stability and prioritizing political security. “The central government tends to pass the pressure to local enterprises and local governments”, “outsourcing the pressure to private individuals and the underground economy”. At the national level, it is more about “administrative guidance and political encouragement” rather than substantive protection and financial support for small and medium-sized enterprises.
He stated that Beijing could solve the current foreign trade dilemma – “it needs to open up the domestic market, release space given by the privileged class and state-owned enterprises to private enterprises.”
Dr. Sun Guoxiang also noted that China does have a way out but this will “involve challenges of structural, institutional, and strategic reconstruction.”
David Huang said, “This is not just a trade war of tariff warfare, but a global competition of national credit, systems, and sovereignty.”
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