China Still an Important Market for US Companies, but Diversification Well Underway

In mid- to late-April, Partner and Head of the North American Desk Kyle Freeman traveled to San Francisco and Washington D.C. to reconnect with US-based clients and partners after more than three years of adhering to Covid-related travel restrictions in China.

Traveling to both coasts of the United States, Kyle spoke with a diverse set of clients, other service providers, and trade organizations on a range of topics, from investment in Asia to compliance and regulatory developments.

Highlighting the general mood among the partners and businesses he spoke with, Kyle said, “Given trade tensions between the US and China, US companies are increasingly considering supply chain diversification options and are looking to India, Vietnam, and other locations in Southeast Asia as alternatives. These countries also offer incentives and various types of assistance for foreign investors, so it was great to meet with the US-based trade representatives of these countries to discuss the programs and how we can work with our clients to leverage them.”

Kyle also appreciated what the discourse on-the-ground confirmed, saying: “Even with US-China trade tensions, US companies are still continuing to invest in and grow their operations in China, something a number of partner firms highlighted, as well as something we are seeing from our side.”

On the escalating compliance considerations, he noted: “With increasing US regulations related to trade with and investment in China, US companies in some industries are facing increased compliance requirements for their China operations, so it was especially beneficial to meet with our US partner firms to discuss how we can further work together to help these clients stay compliant and grow their businesses both in the US and China.”

Cyber and data security, a recurrent theme

A recurring issue that came up in discussions was cybersecurity and data compliance. With recent cybersecurity regulations in China, new data regulations in Vietnam, as well as an increasing number of US states issuing related regulations, US companies have to focus more on these compliance issues.

Kyle noted, “Speaking with our clients on these issues helped pinpoint some key areas of their concerns. I spoke at length with partners on how best to support our clients and keep their Asia subsidiaries in compliance while also revising their cybersecurity and data policies at the HQ-level with US-based legal partners.”

As US companies increasingly diversify their operations, which until now were predominantly based in China, they will have to pay more attention to compliance in whichever markets they use to strengthen their supply chain against external shocks. The legislative frameworks and working of regulatory agencies in these secondary markets will present a different set of due diligence considerations.

Learn more about compliance and doing business in Asia

Kyle will be in the US again in June 2023, traveling to San Diego, California and Chicago, Illinois. To arrange a meeting to discuss either compliance concerns or doing business in Asia in general, please get in touch via email.

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