Countries are jostling to grab a piece of China’s manufacturing action as tariff battles and worsening U.S.-China ties jolt companies into reordering global supply chains. Executives are circling the globe looking for factory space or local tie-ups to reduce their dependence on China—and governments are pulling out the stops to welcome them.
Foreign direct investment into China in 2022 fell 43% on the year to $190 billion. And China’s share of U.S. goods imports fell to 17% in 2022, from a high of 22% in 2017.
Rerouting global supply chains away from China won’t be an easy process. Would-be rivals need to overcome challenges such as higher transport costs, outdated equipment and processes and subpar infrastructure. In the competition for a bigger slice of global manufacturing, countries are competing not just on cost and geography, but on who can offer companies the choicest perks while meeting their own development goals.
Cambodia revamped its laws in 2021 in an effort to attract more foreign investment, pinpointing manufacturing in advanced technology, machinery and spare parts, and electronics. Vietnam offers tax holidays to companies willing to invest in poorer areas of the country. India announced $1 billion in incentives to persuade companies to make more computers and tablets in the country. Mexico’s big advantages are its proximity to American consumers and membership in the USMCA trade agreement, which we discuss in Chapter 2.
Classroom discussion questions:
- What does this “reordering” mean for reshoring and nearshoring?
- Who benefits most from the move to expand beyond china?