Can the U.S. End China’s Control of the Global Supply Chain?
Due to the ongoing trade war between China and America since 2018 and now the Covid-19 pandemic, the Trump administration has suggested some Asian countries start producing goods to reduce our dependency on China and restructure global supply chains. Many Asian analysts have said that during this struggling time when companies are trying hard to survive and when cash flow is low, making new investments and changing supply chains is nothing more than America’s wish.
Although many governments have survived well during the lockdown by producing their goods or importing from other countries, several politicians are still looking for alternatives to China for independence. After seeing the impact of the lockdown in China on goods supply, some countries like Taiwan, South Korea, and Japan are already shifting goods production away from China. They are doing it at a slow pace because China plays a huge role in supplying goods that no other country can match or manage suddenly.
Last year the Taiwanese government told companies to make investments outside of China and promised to provide them the necessary means such as tax breaks and cheap financing. Japan’s Prime Minister Shinzo Abe has also encouraged investors to invest within the country. Hiroaki Nakanishi, a Japanese businessman and current chairman at Hitachi Ltd. said last month that they should not entirely depend on China. This is because if China faces a crisis or lockdown they will face severe consequences as well. South Korea has also announced they will be assisting investors in making investments in their home country.
Despite all these things happening, China still has many advantages. Even with all the support, Taiwanese and Japanese governments are still providing opportunities to their investors. a lot of overseas investments were made in China last year. Dan Wang, an analyst at Gavekal Dragonomics, said that China has a massive force of expert workers, abundant supplier networks, and other such things that still make this country an unparalleled manufacturer and goods supplier.
Even though governments are looking for alternatives, productions in China continue to grow. China is now the world’s largest auto market for Tesla Inc. And Tesla has since started producing cars in China. Honeywell International Inc., an American company, has recently made a new investment in Wuhan, a city in China where the first corona case was reported. Geng Shuang, a spokesperson for the Chinese Foreign Ministry, said that the structure of the global supply chain and global industries is decided by the companies themselves and market forces. It cannot be disturbed or broken easily.
For whatever has been said and done to restructure supply chains and develop new industries, the question that arises is whether the made propositions will be sustainable or not and who will be responsible for paying the huge amounts for building new industries outside of China. During this time when companies are already struggling to survive, building new supply chains is a very challenging task. Also, companies cannot tell their workers and shareholders to take a U-turn because of certain political issues.
If there is anything that could reduce China’s role in the global supply chain then it would probably be the evolution of global trade, development of new markets, and new technologies, not the political issues alone.