Shifting Supply Chains From China: What Will Rise from the Ashes?
In the eighth instalment of Longan Law Firm’s “China In and Out” podcast series, Frank Hong explores both the current state of global supply chains and likely future trends, in particular the effect of “de-risking” on China.
Frank notes the economic difficulties that China currently faces, including a decline in its stock market and an increase in bankruptcy and labour disputes. While the relocation of factories from China to other countries is driven by American customer demand, this phenomenon predates the Biden presidency and is partly a response to US anti-dumping tariffs.
De-risking Supply Chains or Relocating Factories: A Matter of Perspective
It is important to distinguish between the perspectives of Chinese suppliers and American/European buyers on factory relocation and de-risking. These shifts contribute to economic challenges in China, such as job losses and deflation, but governments have the right to diversify supply sources for resilience.
Some American business leaders’ perceptions of the risks related to Taiwan, however, are likely to be wide of the mark. A consideration of broader Western media narratives suggests that mainstream Western media’s reporting on China often lags behind reality and fails to fully recognise China’s role as more than a world factory, failing to understand its emerging innovation ecosystem.
Three Perspectives on De-risking
Finally, the podcast presents three perspectives to broaden understanding of de-risking supply chains away from China:
- the complexity of supply chains and the diminishing influence of buyers on intermediate suppliers;
- the evolution of Chinese exporters and the emergence of Chinese multinational corporations; and
- the concept of "de-dollarisation" in relation to China's role in the global economy.
It may well be that that, by the end of the decade, de-risking will be remembered mostly for its unintended consequences.