Production Shift Toward South East Asia

Over the past decade, more and more manufacturing operations have been switching away from China and toward South East Asian countries such as Vietnam.

This phenomenon is rooted in an increase in Chinese labor costs, the rising importance of the South East Asian market, and China's new economic orientation centered on higher value-added products and the service sector.

These past weeks, the recent adjustments of the country's zero covid policy have sparked new series of comments on this trend, as some wonder what will the impact of this policy shift on production and logistics be.

Is China's Importance in the Global Supply Chain Lowering For Good?

Not quite! While China's role is definitely going to evolve, its prominence in the global supply chain is unlikely to wane.

Indeed, while some labor-intensive industries and electronic products manufacturers have already started to relocate to South East Asian countries, Vietnam in particular, China remains its biggest source of import, especially when it comes to raw materials and core parts.

Analysts thus note that the two countries' value chains will further intertwine in the future, fostering renewed cross-border exchanges between the two countries.

Furthermore, over the past decades, China has developed a robust and well-connected transportation network in terms of land, sea, or air routes.

As such, whether in terms of import or export, China can rely on its logistic web to ensure its centrality in global trade. As noted by Xiaomi's spokesperson, "currently, no overseas country can replace China's supply chain clusters." Indeed, China has become a central nod to logistics operations not only in the Asian region, but worldwide.

Finally, following the shift in China's zero-covid policy, analysts note that the logistics and business relations between South East Asian countries and China will only become smoother in the future. Indeed, as cross-border movements and quarantine policies are easing, international trade in the region will gradually recover its pre-pandemic state.

How To Ensure Smooth Supply Chain Operations in the Region?

As manufacturing operations increasingly shift toward South East Asia, finding a logistic partner with expertise and presence in your key supply chain locations is essential.