Capturing Asia’s Growth in Supply Chain

In this blog, we share our view on the supply chain and logistics landscape in Asia, in particularly China and Hong Kong. We also share our strategy at EV Cargo to capture growth in this exciting region.

Our View on the Asia Supply Chain and Logistics Landscape

Our View on Asia

With its large and growing middle class, Asia offers significant opportunities for companies looking to expand their customer base and reach new markets. There are opportunities for increased trade and investment in Asia, which has become a major player in the global economy.

"China-Plus-One" strategy is a recent hot topic for the region. Recent disruptions caused by the COVID-19 pandemic, increasing costs in China, and US-China trade tensions have led to calls for diversification of supply chains away from China. Industry participants believe that the days of rapid globalization may be over, but this does not necessarily mean an end to globalization. There will be more regionalization, nearshoring and even on-shoring, but production supply chains are likely to remain intertwined and only grow more complex – something that should be highly favorable to logistics services providers.

On the ground, we are seeing Asia sourcing offices adopting ‘growing de-Chinafication’ as part of their sourcing footprint. Some major sourcing offices have moved to Singapore, where they may feel better placed to manage the Southeast Asian region. We expect that there will be a rebalancing of volumes across the region in the next few years, with continued growth in the percentage and overall terms in Malaysia, Indonesia, Thailand, and Vietnam, particularly among US customers. Moreover, there will likely be category-specific trends, with lower-quality goods such as garments and footwear moving quicker to Southeast Asia and other lower-cost regions. This trend is worth close monitoring, and data analytics tools can help companies stay ahead of the curve and manage their supply chain risks effectively.

Our View on China Market

While the trend of diversification away from China is continuing, the shift away from China will likely be gradual. China will remain a major player in the global supply chain ecosystem, given its status as the world’s second-largest economy and second-largest logistics market. It still supplies most components and raw materials, even if the goods are finally manufactured outside of China. China's well-established manufacturing presence, vast infrastructure, skilled workforce, efficient logistics networks, and product quality remain significant advantages. It remains cheaper for smaller suppliers particularly to centralize manufacturing in China.

Furthermore, "China-Plus-One" possibly creates additional movement of production materials from China to overseas production plants. China is also shifting its export market to Southeast Asia, South Asia, the Middle East, Central / South America, and Africa. Additionally, "China-for-China" strategy is relevant as China's domestic consumption is another powerhouse to grow its economy.

Our View on Hong Kong

EmergeVest and EV Cargo are both headquartered in Hong Kong, which we regard as an ideal location to provide services related to the free flow of goods, data, and funds.

Despite the recent political and economic challenges, we believe that Hong Kong remains a critical player in the global supply chain ecosystem. Hong Kong has a long history of being a critical hub for global trade and supply chains, due to its proximity to the manufacturing centers in South China, Taiwan, and Southeast Asia. In addition, Hong Kong's sophisticated logistics infrastructure, legal system, subject matter expertise, and free trade policies. Moreover, Hong Kong's position as a financial center provides an excellent platform for financing trade transactions and supply chain activities.

EV Cargo’s Asia Strategy

EV Cargo has a well-developed corporate strategy, which involves having a major presence and capability in all significant logistics markets. We focus on developing know-how in the right parts of the world to enhance our customers' supply chains. In particular, EV Cargo is executing its strategy to meaningfully expand its footprint and capability across the Asia region, and in particular China.

EV Cargo’s Asia strategy

The further development of EV Cargo’s capabilities across Asia is an important strategic objective to enable EV Cargo to deliver on its global growth strategy by developing emerging international trade lanes, capitalizing on one of the world’s preeminent growth markets, and capturing more of the end-to-end value in its customers’ international supply chains.?The strategy includes strengthening ownership in the Asia market to maximize value capture on the current Asia to UK / Europe trade lane, maximizing the share of fast growth intra-Asia trade, and maximizing the share of cross-border eCommerce volume growth.

EV Cargo's Asia strategy is focused on investing in capability, migrating control, expanding in China, in-sourcing across Southeast Asia and opening in India. EV Cargo is making substantial progress on expanding its Asia logistics execution platform, through a combination of M&A, replacing existing minority joint ventures in key export markets, and opening its own green-field offices. Toward this end, EV Cargo is opening subsidiary offices in both China and in multiple markets across Southeast and South Asia (air and sea freight offices in Singapore, Malaysia, Cambodia, Myanmar, Thailand and Vietnam) as well as a regional control tower in Hong Kong.

EV Cargo China Strategy

China is also one of EV Cargo’s largest and most strategic origin markets. The expansion of our own dedicated platform in China fulfills another key milestone in the development of our global network, enabling EV Cargo to best serve the diverse supply chain needs of our many customers worldwide. Our China expansion can add significant leadership, local knowledge, and develop freight forwarding, contract logistics and eCommerce opportunities in the region spanning a wide range of industry sectors.

In China, we have opened multiple air and sea freight offices in key coastal gateways including Shenzhen, Shanghai, Ningbo, Xiamen and Qingdao. EV Cargo also launched its newly enhanced China eCommerce capability with the opening of a new eCommerce fulfillment center in Hangzhou, which forms part of its integrated end-to-end service for international brands selling online in China.

EV Cargo is building a strong and highly experienced team to drive rapid execution, with several notable new roles across the business, Finance and HR functions.?Notably, Barry Ng (ex-Cargo Services Far East, ex-Janco) joined EV Cargo as Managing Director of Greater China, driving the expansion of EV Cargo’s business across Greater China and internationally. Barry brings 37+ years of experience and the appointment adds significant leadership, local knowledge and expertise across freight forwarding, logistics and e-Commerce-related services. The China team of 100+ highly skilled supply chain professionals are ready to management customers' China shipments.

EV Cargo’s ongoing targets for China market include driving organic sales growth in this large and strategically important logistics market. The new operations will be fully integrated within EV Cargo’s substantial logistics execution platforms in the UK and Europe, and its rapidly developing platform across Asia.

For M&A in China, we are particularly interested in targets focused on imports and distribution into China and across Asia and proprietary technology stack optimized for the China market.

Summary

In summary, we are bullish on Asia’s role and opportunities in supply chain and logistics. EV Cargo is well-placed to enhance its operational capabilities in Asia and help deliver on its global growth strategy by developing emerging international trade lanes and capitalizing on one of the world’s preeminent growth markets.?