By Zbitnev @ Shutterstock.com
According to reporting by Trefor Moss in The Wall Street Journal, the COVID-19 pandemic is making a breakup of the American and Chinese economies more likely. Moss notes that 16% of companies intend to take business out of China. It wouldn’t surprise us to see that number skew even higher. Moss writes:
The coronavirus pandemic is making the “decoupling” of the U.S. and Chinese economies a more realistic prospect, American companies in China say, as it disrupts supply chains and further strains relations between the two countries.
In March, 44% of 25 large U.S. companies surveyed said decoupling would be impossible, down from 66% in October, the American Chamber of Commerce in China and the American Chamber of Commerce in Shanghai said.
The results of the March survey by the two organizations, published Friday, found more than a quarter of the companies plan to start sourcing some or all of their materials from different locations after the pandemic—though in some cases different regions of China rather than outside the country. Only 16% said they intended to shift some or all of their production outside China.
And while 40% of companies said their supply chains would remain the same, over half said it was too early to say whether the pandemic would change their long-term supply strategy.
The coronavirus—which hit China first, shutting down factories and cutting supply chains many global companies depend on—has heightened awareness of the need to diversify away from China to spread risk, said Ker Gibbs, president of AmCham Shanghai.
“It’s about diversification as opposed to a complete relocation,” Mr. Gibbs said.
Even before the viral outbreak, some companies were questioning the wisdom of their supply-chain reliance on China, where labor costs are rising and with the U.S.-China trade dispute increasing the political risk.
