Even Chinese manufacturers are shifting parts of their supply chains out of China to manage risks. That's because manufacturers are moving to near where their customers are. Southeast Asia has benefited from the shift. So have Mexico and some European countries.
Concerns about tech security and pandemic-related disruptions are propelling firms to move more production away from China, according to a senior Taiwanese official.
The latest data in the CNBC Supply Chain Heat Map shows China is losing more manufacturing to Vietnam, Malaysia, Bangladesh, India, and Taiwan. Exports in furniture, apparel, footwear, travel goods and handbags, minerals, and science and technology are all declining.
Apple has already moved some iPhone manufacturing to Vietnam and is planning to move some of its MacBook production to the Southeast Asian nation. Other companies that have shifted some of their production lines out of China to Vietnam are Nike, Adidas, and Samsung.
An eminent Chinese scholar on foreign trade studies has rebutted a claim made by analysts and a section of the media that India and some Southeast Asian countries will gradually replace China's role as the "world factory", a metaphor used to describe its major role in manufacturing.
Its most ambitious plans are for India, where it will work with a swath of partners to make iPhones, AirPods and Apple Pencils, as well as components for the Apple Watch, iPad and Mac. Apple has already tapped three of its main assembly partners from Taiwan to build devices in India: Foxconn, Pegatron and Wistron.
Companies from Japan, the United States and other nations are accelerating their moves to shift production out of China, to lessen the risk of disruption in their supply chains due to abrupt changes in Chinese government policy and turmoil following the spread of COVID-19.
Amazon.com will close its official app store in China in July, the latest retreat from the Chinese market by the US tech giant following last year's announcement that its Kindle e-book service would also shut.
Household-name consumer brands like Starbucks, Nike and Under Armour have a large customer base in China. Tech and automobile giants like Intel, Apple (AAPL), Tesla, General Motors and Ford not only rely on Chinese consumers, but also have huge manufacturing networks in the country.
Nike joins an expanding list of international media and tech companies that are pulling out of China, where consumer, financial, tech and media regulations are increasingly incompatible with those elsewhere in the world.
Citing a survey done by the Japan-based financial research and support services, The Singapore Post reported that as many as 249 Japanese companies left China between 2016 and May 2019.
In addition to its low labor costs, China has become known as "the world's factory" because of its strong business ecosystem, lack of regulatory compliance, low taxes and duties, and competitive currency practices.
The supply chain and infrastructure advantage has become one of the most important drivers for foreign companies relocate to China, when global supply chains were seriously disrupted due to the aggressive implementation of infection control measures.
The undisputable principal reason and benefit for companies to outsource to China is that its cost effective across several avenues. China presents numerous opportunities to save cash and maximise profits, while presenting ample access to an abundance of local talent across many industries.
The company cited supply chain tie-ups, riots at Foxconn's Zhengzhou factory, and China's extreme covid-19 restrictions as reasons for the move.
Trade with Foreign Countries
The main reason companies do this is because of the cost savings. China has very few labor laws and a low minimum hourly wage, which means companies pay employees a lot less for more hours of work. The trade war has caused about 2.4 million manufacturing jobs to move from the U.S. to China.
China is the largest trading partner to Japan, South Korea, Vietnam, and Taiwan. Given their proximity, those countries are hardly a surprise. But it is also the top trader with Russia—and Ukraine. In Africa, China is the top partner for countries like South Africa and Kenya.
The major sectors and industries driving growth for China include the services sector, agriculture, manufacturing, and technology. China is also one of the world's largest exporters and importers in the world.
Alibaba was founded on 4 April 1999 by Jack Ma as a B2B e-commerce site and soon branched out into B2C markets and various other fields. Alibaba now is quite similar to Amazon in terms of the different industries that both operate.
In its earlier years, Amazon pushed its e-reader and tablet product offerings, but China's complex regulatory approval process delayed their debut, which also hampered growth the U.S. e-commerce giant.
“We work to identify fake reviews but no process is perfect,” it said. In 2021, Amazon terminated more than 50,000 China-based retail accounts for rule violations, according to the Shenzhen Cross-Border E-Commerce Association. Walmart's marketplace isn't the only alternative for Chinese sellers kicked off of Amazon.
Still, China's economic headwinds could lead to major impacts. Any slowdown in the Chinese economy will create new price pressures in the U.S. if its export prices rise — and hurt the demand for U.S. products.
This might be surprising since China is currently the second largest economy in the world and is poised to overtake the size of the US economy by 2050. However, measuring the Chinese economy solely in terms of GDP is misleading because it obscures China's severe intra-country inequality.
“The critical technology tracker shows that, for some technologies, all of the world's top 10 leading research institutions are based in China and are collectively generating nine times more high-impact research papers than the second-ranked country (most often the US).”