New economic research finds that China’s dominance in global supply chains is holding firm through multinational business re-location and trade regulations.
The research, published by S&P Global, claims that, despite media speculation of a mass production exodus from China prompting a reconfiguration of global supply chains, China’s share of global exports is relatively stable.
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Relocation of production
Trade wars, geopolitical tensions and industrial policies have all been cited as factors in many multinationals’ decisions to reevaluate their global supply chains. This myriad of factors has prompted firms to look to emerging markets in Asia and Mexico to be home to parts of their supply chains.
In the electronic and clothing industries, firms have begun to relocate outside of China due to rising labour costs.
Aside from relocation, these factors can also cause China to miss out on the potential of new investment, with other locations in Asia being considered above China for new manufacturing or processing plants.
These shifts in supply chain investment decisions had previously been expected to affect China’s supply chain dominance and thus global market share.
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By GlobalDataChina’s share in global exports holding steady
Instead, according to S&P Global, FDI and export trends show a smaller change than expected from these ongoing sentiments in business.
Predictably, China’s share of US goods imports has fallen due to the Trump administrations tariff increase in 2019.
China’s market share has also fallen in Japan and the EU, However, when assessed globally, China’s market share is slightly higher than in 2019.
This maintained market share can be attributed to China’s exporters expanding their share of the import of emerging markets, which is an increasing market segment.
According to S&P Global, China’s retention of global market share could be due to “the rising role of ‘normal’ exports from supply chains run by increasingly competitive domestic Chinese firms that rely more on domestic suppliers.”
This follows a shift from processing exports to normal exports that occurred around 2010.
While forecasts estimated emerging markets in Asia and Mexico to benefit from the shifts in production. Data shows that as a collective these groups have only experienced a modest rise in exports. Similarly, FDI levels have not risen in these regions as much as anticipated.
