Insider by Huileng Tan Dec 26, 2022
China is losing its place as the center of the world's supply chains. Here are 5 places supply chains are going instead.
• China's COVID policies are pushing companies to diversify supply chains away from the country.
• They had already begun moving out due to geopolitical tensions and tariffs from the Trump era.
• India, Vietnam, Thailand, Malaysia, and Bangladesh are stepping up to replace the world's factory.
China has been the factory of the world for the last 4 decades. The pandemic triggered a reckoning of this status.
Global manufacturing powerhouse China's rise as the world's factory spanned over four decades and ushered in an era of globalization and integrated supply chains.
But that facade started to crumble around 2018, after former President Donald Trump launched a trade war against the East Asian giant. This, in turn, has prompted investors to reassess their geopolitical risks.
While some investors did move parts of their manufacturing facilities out of China at the time, it was really the pandemic — and China's zero-COVID policy — that drove home the importance of not depending on one country for manufacturing needs.
"The geopolitical tensions in themselves may not have resulted into this level of realignment of supply chains, but COVID certainly provided that extra vision extra fillip, the extra fuel to the fire," Ashutosh Sharma, a research director at market research firm Forrester, told Insider earlier in December.
And the effects of the trade war continue to linger. President Joe Biden hasn't kiboshed the elevated tariffs Trump imposed on China — in fact, in October, he imposed export controls on shipping equipment to Chinese-owned factories making advanced logic chips. This further burdened an already strained relationship.
To navigate this complicated web of US-China trade tensions, multinationals are now more than ever, looking to hedge their business risks.
More:
https://www.businessinsider.com/china-trade-war-covid-companies-moving-supply-chains-2022-12#china-has-been-the-factory-of-the-world-for-the-last-4-decades-the-pandemic-triggered-a-reckoning-of-this-status-1
