Is the Made in China era over?
Possibly.
According to global manufacturing consulting firm Kearney’s seventh annual Reshoring Index study, there has been a gradual shift of U.S. companies moving their manufacturing operations from China to Vietnam (46 percent of its manufacturing base comes from China), Thailand, Indonesia, Malaysia, and Taiwan.
Patrick Van den Bossche, Kearney partner and co-author of the 19-page report, wrote in the study:
“Three decades ago, U.S. producers began manufacturing and sourcing in China for one reason: costs. The trade war brought a second dimension more fully into the equation―risk―as tariffs and the threat of disrupted China imports prompted companies to weigh surety of supply more fully alongside costs. COVID-19 brings a third dimension more fully into the mix, and arguably to the fore: resilience―the ability to foresee and adapt to unforeseen systemic shocks.”
What is interesting about the numbers is that the study was done prior to the Coronavirus outbreak. Now that COVID-19 originated in Wuhan, companies will probably have a greater incentive to transition away from the world’s second-largest economy.
It is unlikely that China will be fully abandoned, but Beijing will no longer be the primary component in the global supply chain.
Indeed, President Donald Trump would likely claim credit for this, highlighting that his tariffs were the cause for this. He may be right, but the tariffs punished American importers the most because they paid the costs, which minimizes the cost-benefit of buying from China.
It looks like China will no longer be the superpower successor.
Leave a Comment