US Corporates Rely on China Despite Diversification
(19 December 2023 - United States) While US corporates continue to allocation production to Southeast Asia and Mexico under pressure to reduce exposure to China, many are finding it exceedingly difficult to do so.
The WSJ reports that trade data, corporate announcements and new academic research reveals a large proportion of the products shipped to the US from markets such as Vietnam, Indonesia and Mexico are being manufactured in factories owned by Chinese entities expanding overseas, in many instances to circumvent US tariffs.
A study published by the Bank for International Settlements (BIS) found that supply chains between China and the US have are significantly more complicated since 2021 as greater trade flows are rerouted through other corridors.
The US and Chinese economies are also decoupling in many other ways, for example direct US investment into China dropped to a two-decade low of US$8.2 billion in 2022 and China accounted for just 13.3 percent of US goods imports in H1 2023 - the lowest level since 2003 and far below the annual peak of 21.6 percent in 2017.
“We have to recognise that there’s ongoing mutual interdependence” said HSBC Chief Asia Economist, Frederic Neumann.
Subscribe