As Apple has accelerates its plans to move some of its production outside of China, the country’s share of global exports of furniture, footwear and clothing accessories continues to fall, highlighting a trend stared in 2016.
The anti-lockdown unrest gripping China has forced the authorities in Beijing to respond by easing some restrictions in big manufacturing centres, as they map out a “new stage and mission”. There are concerns that more freedom of movement could allow the virus to rip through a population where immunity is lower than in the west. Those health risks mean the “world’s workshop” is heading for a difficult winter, casting a shadow over the prospects for international trade. Western companies have learned lessons from the first wave of lockdowns, and some may be better prepared, but for others, at a time when supply chains are still recovering from nearly three years of on-off pandemic problems, there is trouble ahead.
A wider shift away from reliance on China has already begun, encouraged by the Donald Trump-led trade wars with China and the pandemic disruptions of the past three years. Internal demographic changes have made Labour more expensive as the country’s population growth has slowed. Meanwhile, trade between the U.S. and E.U. has risen sharply, and analysts view Mexico and Vietnam as countries that could benefit the most from diversifying supply chains.
Six out of 10 companies surveyed by Make UK thought supply chain problems were the biggest risk to their businesses. As a result, more companies were beginning to move away from the fabled “just in time” system of supply management to one best described as “just in case”. Companies can’t afford to have their supply chains solely in China. They’d rather have components coming from Manchester or Munich.
Depending on Beijing’s ability to keep control of any future outbreaks, or whether Covid spreads more rapidly through China than it has so far, will determine manufacturing capacity. The wider impact on China’s own economy, which has already been hit by a slump in its huge property sector and is growing more slowly than at any time for 35 years, could also be important.
This has set the scene for a broader world order: multipolarity, where groups of nations with enough influence and incentive to pursue economic strategies that, if achieved, do not substantially follow the same direction of other global power centers.
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