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Against the background of U.S. threats to bill the PRC for the pandemic, a break in U.S.-China economic and technological ties is likely. Surveys of American companies show a new trend of transfer of production from China to other countries. Entrepreneurs claim the threat of “economic separation” and the breakdown of economic chains. Despite such prospects, the Chinese economy will grow this year, and the American economy is likely to shrink by almost 5%.
The weakening of ties between the US and China economies has become a more real prospect due to supply chain gaps and the further complication of relations between the two countries, writes the Wall Street Journal, citing the results of a survey conducted by the American Chamber of Commerce (AmCham) in China and the American Chamber of Commerce in Shanghai.
According to their study, today only 44% of 25 large American companies say that the separation of the two largest economies is impossible, while in October last year 66% of respondents stated that such a gap is impossible.
In addition, more than a quarter of respondents plan to start finding new sources of supply for some or all of the materials they use, according to the chamber. However, the researchers immediately specify, in some cases it is only a change of region within China, not a transfer to other countries. Nevertheless, 16% of companies have announced their intention to partially or completely move production outside the PRC, the researchers emphasize. About 40% of companies claim that their supply chains will remain the same. At the same time, more than half of respondents AmCham believe that it is too early to say whether the pandemic COVID-19 change their long-term supply strategy.
“This is about diversification, not total displacement,” said Ker Gibb, President of the AmCham in Shanghai. However, the coronavirus infection that struck China in the first place and led to the closure of businesses and a cliff of supply chains on which many global companies depend has increased understanding of the need to go beyond that country ‘s borders, he adds.
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Although China resumes production after a viral break, respondents do not doubt that AmCham supply chains will be restored in the near future. Thus, according to their survey, 96% of respondents expect supply chain operations in China to return to normal operation within three to six months.
“However, the fact that the current crisis adds a new dimension to the conversation of disengagement cannot be avoided,” the researchers note, recalling that even before the pandemic, some companies questioned the feasibility of the dependence of supply chains on the PRC against the background of the cost of labour in the Black Sea and trade war with the United States.
Recall, the idea of withdrawing the production of American companies from the People ‘s Republic of China was based on the economic confrontation between the Black Sea and the United States, which resulted in a trade war between the two economic powers. And the idea of re-location of American production has not disappeared. In particular, White House economic adviser Lari Kudlow told Fox News: “As for policies to get companies back home, we can do a lot.” ‘If we had 100 per cent immediate spending across the board. Plant, equipment, intellectual property structures, reconstruction… We would pay the transportation costs of American companies from China back to the United States, “he added.
It is not only Americans who are thinking about moving production from China. Tokyo is discussing the allocation of 243.5 billion yen (about $2.25 billion) to help Japanese firms withdraw their production chains from China.
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