American Companies Assume The Separation Of The US And Chinese Economies Is Likely
The weakening of ties between the US and Chinese economies has become a more realistic prospect due to gaps in supply chains and further complication of relations between the two countries, writes the Wall Street Journal, citing the results of the survey.
In March, just 44% of the 25 major American companies said that the separation of the economies is impossible, compared to 66% in October last year, according to research by the American Chamber of Commerce (AmCham) in China and the American Chamber of Commerce in Shanghai.
More than a quarter of respondents plan to start searching for new sources of supply for some or all of the materials they use, although in some cases they only talk about changing the region within China, and not about other countries. Only 16% said that they intend to partially or completely move production outside of China.
About 40% of companies reported that their supply chains will remain the same. However, more than half of the respondents said it was too early to say whether the COVID-19 pandemic would change their long-term supply strategy.
The coronavirus infection that hit China in the first place and led to the closure of businesses and the breakdown of supply chains that many global companies depend on, has increased awareness of the need to go beyond the borders of this country, said Ker Gibbs, President of AmCham in Shanghai. "This is about diversification, not full relocation," he added.
Even before the pandemic, some companies questioned whether supply chains should be dependent on China, where labor costs are rising and a trade war with the United States has increased political risks.
According to Gibbs, political risks are now also important for many American companies in China, as the coronavirus worsens relations between the US and China, which are already damaged by two years of trade disputes.