Can The World Really "Minus China?"
China’s logistics chain has been on full tilt since over four decades ago. It has been a crucial node in the supply chain of companies around the globe. Since the Covid 19 pandemic hit, China has seen a roller coaster of economic change. Its ‘Zero Covid Strategy’ of swift lockdowns helped the country in its rapid return to growth in 2020 when many other markets were still under sloping influence of the pandemic.
Nevertheless, the reignition of Covid 19 in Shanghai and other parts of the country has tightened the hold for manufacturers and labourers. Strict lockdowns have forced the labourers inside homes and spiked labour costs to a sky high. This was fuel to fire for the already fragile US and China relationships and it also impelled other companies to rethink about continuing operations in China.
The ‘China one strategy’ which was implemented by companies to diversify from Chinese markets to other countries such as India, Vietnam, and Thailand. However, the recent tension in US-China relations, China’s support Russia in the Ukrainian war, Beijing’s threats to invade South Korea and the respread of the pandemic has pressured other countries to implement the ‘Minus China strategy’, where the multinationals have decided to completely boycott Chinese shores and attempt business at welcoming countries. India and Vietnam stand at an advantage for being developing countries. Sources say that Yahoo Inc suspended its services in China due to ‘increasingly challenging’ business and legal environment. Hasbro has moved its production to India and Vietnam. Apple has started suspending its production from China to India and Vietnam. Samsung had already shifted its manufacturing territories to Vietnam two years ago and is planning its expansion in India. Companies are actively contemplating relocation but they are being reticent about it. Gertner’s survey of 260 global supply chain leaders in February and march 2020 stated that 33% have already moved sourcing and manufacturing activities out of China or plan to do so in the next 2-3 years.
China disembarking from the global supply chain gives many evolving countries the chance to fill in the market niche. India, Vietnam and Thailand are countries with great geography and will provide a domestic market as well as cost effective talent pool, knowledgeable workers and transpiring opportunities. Countries like India, Vietnam, Cambodia, Taiwan, Bangladesh etc. make it much easier to settle and kickstart the manufacturing for the recently uprooted companies.?