de-Chinafication of global trade

More than one-third of logistics companies will increase their prices this year, owing to high energy costs, cratering demand and supply chain disruptions, according to Ti’s 2023 Agility Emerging Markets Logistics Index

The index, which analyses and ranks countries based on their attractiveness for investors, according to various criteria, seems to demonstrate growing de-Chinafication.

It found that South-east Asia (13.6%), India (13.4%) and Europe (13.1%) were all destinations for business in 2023 – asked: “Do you plan to move production/sourcing activities to any of the following regions?” – with China lagging at 12.6%, where it would have been well ahead in previous years.

Indeed, Malaysia, Indonesia, Thailand and Vietnam were all in the index’s top 10, the latter having moved up a spot. Even if China remains in the lead for now, 20.5% of respondents said they would be moving production and/or sourcing out of China and 18.4% said they would be reducing investment there – strict anti-covid policies being the chief reason.

“That China is quickly losing its allure as an investment destination isn’t just talk,” Ti noted. “A number of manufacturers have started moving at least some manufacturing out… survey results show that many businesses have made structural changes to their supply chain networks, including implementing multi-shoring, on-shoring, near-shoring or friend-shoring strategies, in order to increase network resilience.”

In fact many of the businesses involved in Ti’s survey appear to be shaken by experiences during the pandemic. Moving production and sourcing to domestic shores (19.4%), or to nearby countries (16.7%), proved popular, but by far the more favoured strategy was diversification rather than relocation, with 24% saying they moved production and sourcing to numerous locations (‘multi-shoring’ in Ti parlance) to reduce risks. Just 10.8% of respondents said their post-Covid supply chain plan “looks about the same”.