Global manufacturing behemoth The development of China as the world’s factory lasted four decades, ushering in an era of globalization and linked supply chains.
However, that façade began to collapse in 2018, when former President Donald Trump launched a trade war against the East Asian behemoth. As a result, investors have reassessed their geopolitical risks.
While some investors did relocate sections of their manufacturing operations out of China at the time, it was the pandemic and China’s zero-COVID policy that emphasized the significance of not relying on a single nation for manufacturing needs.
“The geopolitical tensions may not have resulted in this level of supply chain realignment in and of themselves, but COVID certainly provided that extra vision, extra fillip, extra fuel to the fire,” Ashutosh Sharma, a research director at market research firm Forrester, told Insider earlier in December.
And the consequences of the trade war are still being felt. President Joe Biden has not backed down from Trump’s increased tariffs on China; in fact, in October, he slapped export curbs on shipping equipment to Chinese-owned manufacturers producing advanced logic circuits. This aggravated an already tense relationship.
Multinational corporations are attempting to hedge their business risks more than ever as they negotiate the tangled web of US-China trade tensions. Here are five nations where China’s supply networks are instead shifting.
India is a natural alternative to China as the world’s factory, with its huge plains and massive, young people. Particularly because India’s population is expected to exceed China’s in 2023 to become the world’s most populous country, according to a July estimate from the UN’s Department of Economic and Social Affairs.
Apple, for example, has already relocated some iPhone manufacturers to the Indian states of Tamil Nadu and Karnataka and is considering relocating iPad production to the South Asian country as well. In a September note, JP Morgan analysts predicted that Apple would shift 5% of its iPhone 14 production to India by the end of 2022. They predict that by 2025, one in every four iPhones would be manufactured in India.
India has a vast labor pool, a rich industrial history, and government encouragement for increasing industry and exports. As a result, many people are wondering whether Indian manufacturing is a viable option for China,” Julie Gerdeman, CEO of supply chain risk management platform Everstream, told Insider. However, the transition is easier said than done.
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According to government data, India’s Prime Minister Modi has been seeking to attract foreign direct investments, or FDI, since he assumed office in 2014. FDI reached a record $83.6 billion in the past fiscal year.
Even if the Indian government is increasing its appeal to foreign investors, it is still more difficult to do business in India than in China, owing to bureaucracy, red tape, and various stakeholders who delay decision-making.