In the face of the escalating trade tensions between China and the US, the Chinese manufacturing industry is undergoing an unprecedented test. The latest developments of Giantech, a company listed on the A-share market, reflect the difficult choices and transformation pains that Chinese enterprises are facing under global trade barriers.
On June 3, Giantech held its annual shareholder meeting for the year 2024. During the meeting, Chairman Qiu Jianping discussed the impact of current US tariff policies, stating that the company expects a decrease in order volume and subsequent impact on sales for the year.
To address the US tariff policies, Chairman Qiu Jianping announced at the meeting the plan to transfer 70%-80% of the production lines for products exported to the US to Southeast Asia and Latin America within the next two years.
As a global leader in hand tools and power tools manufacturing, Giantech heavily relies on the US market. In 2024, the company generated 63.44% of its total revenue from the Americas, amounting to 9.387 billion RMB.
During the shareholder meeting, Giantech’s Board Secretary, Zhou Siyuan, admitted that while the company anticipated US tariffs on Chinese products, they did not expect that products exported from Southeast Asian countries such as Vietnam, Cambodia, and Thailand, where the main overseas production bases of Giantech are located, would also be affected. Currently, the US imposes tariffs of 46% on goods from Vietnam, 49% on goods from Cambodia, and 36% on goods from Thailand.
On April 2, US President Trump announced global reciprocal tariffs. In preparation for negotiations on new tariffs with the US, an increasing number of Southeast Asian countries including Vietnam and Malaysia have explicitly stated their refusal to assist Chinese exporters in “origin washing”.
Prior to this, Taiwanese scholar Sun Guoxiang expressed to Dajiyuan that for export-oriented Chinese enterprises, the US remains their largest single market. Losing orders from the US would mean massive layoffs or even closures. While large enterprises can relocate manufacturing to Southeast Asia, it requires significant investment and takes one to two years.
Giantech expects a capital expenditure of $50 million in Southeast Asia in 2025 (approximately 360 million RMB), intended for land acquisition and factory construction. Additionally, the company needs to persuade suppliers to migrate synchronously in order to rebuild a complete supply chain system.
Zhou Siyuan anticipates that it will take three years for production costs in Southeast Asia to be on par with those in China. During this period, companies will face significant cost pressures. Currently, the company and its customers share 50% of the tariff costs, but these costs may gradually be passed on to consumers in the future, raising end-product prices.
According to the official website, Giant Holding Group, founded by Qiu Jianping in 1993 and headquartered in Hangzhou, Zhejiang, employs over 45,000 people, covering five core industries including tools, tires, forklifts, diesel engines, and robots, ranking 131st in the 2024 list of the top 500 private enterprises in China. The group owns four listed companies, with Giantech being a leading tool manufacturing enterprise in China.
Vietnam is one of the relocation destinations planned by Giantech. The Vietnamese government recently cooperated with the US to strengthen supervision on “origin washing”.
Sun Guoxiang mentioned that despite Southeast Asian countries trying to maintain neutrality in political and economic aspects, the US’s trade blockade capabilities have significantly strengthened since 2018. The “detour strategy” of Chinese companies is facing increasingly stringent restrictions.
The predicament of Giantech is not an isolated case but rather a microcosm of the Chinese manufacturing industry in the new global trade landscape. Industry analysts believe that Giantech’s production relocation plan reflects the passive adaptation of the Chinese manufacturing industry to the drastic changes in the global trade landscape. This forced transformation not only increases operational costs for enterprises but also disrupts existing supply chain layouts. The experience of Giantech may just be the prelude to a wave of reshaping global supply chains.