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“Offshoring” Switching to “Friendshoring” for Trade - AEI

“Offshoring” Switching to “Friendshoring” for Trade - AEI

(4 August 2022 – United States) Business decision makers are moving to the defensive by shifting their operations away from China to friendly countries the American Enterprise Institute (AEI) reports.

As globalisation accelerated in the 1990s, Western countries embraced the new concept of offshoring. Even at that time it was unpopular as corporates gravitated towards cheaper and less empowered labour. With its increasingly skilled workforce and expanding middle class keen to import Western goods, China was the ideal combination of manufacturer and market…what a difference a couple of decades make.

Now corporates are turning themselves inside out to switch production to “friendlier” countries where they don’t need to prepare against geopolitical tensions, heralding the onset of the concept of “Friendshoring”.

While offshoring is here to stay that doesn’t mean manufacturing in China is. In a June survey conducted by the European Union Chamber of Commerce in China, almost one in four Western enterprises reported that they were considering moving operations away from the country.

East & Partners Trade Finance research highlighted a concerted shift away from China as a key import/export destination as early as 2016 among Australia’s largest Top 500 corporates. That trend only continues to unfold” commented East & Partners Global Head of Markets Analysis, Martin Smith.

“But where to Friendshore? Companies currently operating in China are planning moves to countries including Turkey, Serbia, India, and Vietnam, while others plan to spend a bit more and go with locations in countries that are traditionally allies. Turkey and India, say, are hardly bosom buddies of the West, but they won’t be willing or able to exploit globalisation for geopolitical gains” commented Senior Fellow at AEI, Elisabeth Braw.

“Friendshoring will need to involve a string of countries, since no country can single-handedly replace the factory of the world. And replacing one major location with several smaller ones will involve complex logistical planning, not to mention more transportation.”

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