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By APD writer Alice
Global trade has been much dependent on China and it is very hard for countries worldwide to separate from this great market.
When China locked down to prevent the spread of the COVID-19, supply chains around the world were hit and companies couldn't get access to raw materials and products.
Basic Fun, a toy company in Florida, the US, has to import 90% of its products from China. To diversify supplies, CEO Jay Foreman has regularly found suppliers in other countries in Asia, but yet successful.
Big companies were hit even harder. Apple had to change its supply chain and Ikea shut down many of its stores. Starbucks closed more than 2,000 facilities and warned of financial loss. A series of car manufacturers such as BMW, PSA and Toyota also suffered great losses due to disruptions in supply chain in China due to the pandemic.
The world is dependent on China at an unprecedented level. In just 40 years, from a poor country, China has become an important part of the global industrial machine. It makes up a sixth of global GDP and is the workshop of the world.
China's importance goes beyond manufacturing. Its huge population and growing wealth make China a lucrative market for the rest of the world. Consumers in this country buy more cars and smartphones than any other country. Chinese tourists also spend as much as $258 billion a year abroad, nearly double the US, according to the World Tourism Organization.
For many years, multinational companies have had to reconsider their operation strategies in China. Increasing labor costs, fierce competition from local competitors, and unfriendly regulatory systems have made many businesses hesitate. However, the abundant manpower, convenient highways and railways, as well as a huge consumer market make it difficult for them to leave the country.
For companies around the world, the pandemic caused a massive disruption in global trade. It taught them a valuable lesson that depending on one country all the time for everything is bad for business.
A recent survey by supply chain management firm QIMA showed that 95% of US companies questioned said they would diversify suppliers both in and out of China.
But with the pandemic and the continuing trade war between the US and China, a complete break is tough.
Some 87% of the companies surveyed still said mainland China is one of their top three sourcing destinations.
Steven Lynch, chief executive of the British Chamber of Commerce in China, said that for companies who have supply chains and manufacturing operations here, China quickly gave tax incentives and support to businesses to reassure them of their investments.
Meanwhile, China's appetite for high-tech goods is growing when other countries are cutting back.
China has gone from being the world's supplier to also becoming one of the world's most important customers.It's the only economy that's likely to grow this year.
Global trade has been defined by China in the last few decades - and that's not going to change any time soon.
(ASIA PACIFIC DAILY)
