As supply chains shift away from China, others get their own economic miracles
By Chris Pereira
These supply chains evolved, most prominently in cities like Shenzhen, as companies and industries went from only assembling goods to designing, manufacturing and shipping globally leading products.
But just as China’s industrial capacity is nearing the height of its prowess, many parts of the supply chains are shifting abroad as trade restrictions in Western markets reshape entire industries.
This massive shift in trade is often discussed in terms of how it’s impacting prices, the American consumer market, the Chinese economy or the cat-and-mouse game of US policies trying to curtail Chinese goods entering the country. But what’s often left out of the discussion are the benefits received by these new manufacturing countries. The most immediate and obvious benefits are investments and job growth in these third-party countries.
SOURCE: South China Morning Post
Such manufacturing and investment were major factors in China developing its own world-class supply chains and logistics, and eventually the impressive technology companies coming out of China today. Why can’t the same be true for Vietnam or Mexico?
A Morgan Stanley report quoted an equity analyst as saying: “Nearshoring is expected to be a long and sustained race that could help build new ecosystems in Mexico’s existing manufacturing hubs.”
Other Chinese companies in the clean energy and EV space are reportedly seeking to build factories in the US to gain direct access to its market, though these projects are being met with significant political resistance. Would proposed EV battery manufacturing in Michigan’s decaying auto heartland not help in reviving that industry?
As China has become the global leader in clean energy technology, and the US seeks to limit its reliance on China for such technologies, this knowledge transfer from China to the US will also have significant implications in the long run.
While the US and other Western countries seek ways to counter China’s increasing tech prowess, and Chinese companies skirt these restrictions by manufacturing in third-party or destination countries, new winners and losers are emerging in this complex global trade matrix.
The biggest winners appear to be these third-party countries and the US. Chinese companies will still be able to do business, but they will eventually lose the hard-fought gains of dominating the supply chain and the technology behind it.
Chris Pereira is the founder and CEO of iMpact, a communications and business consulting group
