Li & Fung shifts focus to mitigate impact of tariffs

Li & Fung Ltd, a leading global supply chain solutions partner for consumer brands and retailers, has been reallocating its production to other markets beyond the United States, to mitigate the potential effects of China-US trade tensions, according to a company executive.

Chang Ka Mun, managing director of Li & Fung Development (China) Ltd and Fung Business Intelligence under the Fung Group, a Hong Kong-based conglomerate, said, "At this stage, sentiment in the global market has been badly affected (by the China-US trade conflict)."

"We have advantages in position because we can reallocate our production to other parts of the world to deal with this issue. At this stage, we're still fine," he said.

The Fung Group, formerly known as the Li & Fung Group, comprises major subsidiaries in trading, logistics, distribution and retailing. According to Chang, the company has launched sourcing processes in other markets.

Chang's comments came amid lingering trade tensions between China and US.

In mid July, the US announced a second possible raft of tariff hikes targeting a wider range of Chinese imports worth $200 billion. The latest move is the Office of the US Trade Representative concluding a two-day public hearing proposing tariffs on another $16 billion worth of Chinese exports.

Noting the significance of maintaining multilateralism, Chang said the Chinese government has acted correctly, and will continue to follow the existing path.

"China needs to always stick to and respect the principle of multilateralism, and further reform and opening-up. This is very fundamental," Chang said. He also urged companies to enhance their research and development capabilities to survive in this very complicated "economic war".

"It is imperative for the two countries to be able to get back to the normal track," Chang said. "I don't think trade protection measures are conducive to the economic development of both China and the US. The US should really review its protectionist stance on trade policy and respect multilateralism.

"In this world, we're actually interlinking with each other through a global supply chain. Trying to hurt one country cannot help you at all. I hope other countries understand this global trend and respect the principles of the World Trade Organization."

China's exports of textiles to the US are expected to shrink if the US tariff list targeting $200 billion worth of Chinese goods takes effect, Li Jie, an analyst at Everbright Securities, wrote in a research note.

But companies with stronger global supply chains will be less affected by the trade dispute and have stronger capacities than traditional exporters, which rely on domestic output capability, Li said.