(Yicai) Oct. 13 -- China is still the most competitive production hub for small home appliances despite the frequent changes in US tariffs in the past six months prompting some small- and medium-sized exporters to explore building factories abroad, according to industry insiders.

Luckyway Home Appliances was planning to set up a plant overseas in Cambodia or Malaysia six months ago, but after on-site inspections, related plans were scrapped, General Manager Li Mingyang told Yicai yesterday.

A large proportion of Luckyway's electric fans is exported to the United States, and the company still entirely produces at its factory in Zhongshan in southern Guangdong province.

"The electricity supply for factories in Cambodia is not guaranteed, and the monthly salary of Malaysian workers has reached CNY3,700 to CNY3,800 (USD519 to USD533)," Li noted. "If the difference between export tariff rates to the US in China and Malaysia is not big, building a factory in Malaysia does not necessarily provide a cost advantage."

The monthly salaries of Malaysian workers have risen 7 percent to 8 percent compared to six months ago, and factory rental costs have also increased, Li said, adding that manufacturing costs and supply chain capabilities of the Chinese small home appliance industry remain the most competitive globally.

The inadequate supply chain support is another challenge Chinese small home appliance companies face when planning overseas expansion.

The Mexican white goods supply chain has a big gap compared to the Chinese one, with the American country being unable to meet the needs of Chinese firms operating in the region, Hu Hai, chairman of the Hofusan Industrial Park in Mexico, told Yicai.

For small and medium-sized home appliance makers that do not rely on the US market, the willingness to build factories overseas is lower.

Only about 15 percent to 20 percent of the small appliances made in Cixi, known as China's small home appliance hub, are exported to the US, Yu Xuehui, founder of Cixi Home Appliances Store, told Yicai.

Local small- and medium-sized home appliance exporters are mostly adopting a wait-and-see attitude about establishing factories overseas, according to Yu. "Their general strategy is to pivot to other markets to fill the gap if they really cannot penetrate the US market."

There are more than 3,000 home appliance firms in the area surrounding Ningbo, where Cixi is located, but only around 20 of them have built production bases abroad, Yu said. Small home appliance makers are generally not very large, so managing overseas plants remotely is a challenge for them, he added.

In the complex and ever-changing trade environment, small- and medium-sized enterprises face challenges in establishing factories overseas, industry insiders said, adding that the key to responding to the rising tariffs lies in promoting product innovation and diversifying product markets.

Editors: Tang Shihua, Futura Costaglione