Lately, there has been discussion around the impact of trade disputes, pandemics and exchange rates on the supply chains of middle-market manufacturers and distributors, as well as those selling products within China. Industry experts Tom Bonney and Jay Boyle assembled their points of view from their respective advisory and accounting work for U.S.-based middle-market businesses and China-based firms.
We begin with a sample of the latest "official" data from China:
A significant shift to home office operations
Very low likelihood. Not in line with the Chinese management style. By late April, 75% of companies were already working onsite.
Politically prioritized and low-value-add supply chains can be moved, but others are much more difficult. The China demand market is a factor; not only the supply side. It's not a "Cheap China play; it’s quality and cost-effective economy of scale; difficult to recreate in other countries.
Other countries also moving supply chains out of China
Not much higher ratio than before the pandemic. Even so, some companies have increased their presence in China during the last couple of months.
A massive exodus of foreign investment
On the contrary, China’s actual utilized FDI increased by 15.8% in July 2020, and there is an expected increase in M&A in the next year. China is now considered much more stable and recovered than other countries.
The National Association of Manufacturers was engaged by the U.S. House of Representatives China Task Force to provide input on key topics such as strengthening manufacturing supply chains in the United States, and promoting workforce development and immigration policies that close the manufacturing skills gap. They also worked together to devise targeted approaches to strengthen national security and promote effective strategies to level the playing field on trade for manufacturers to compete with China.
The recently released task force report includes:
Reach out to Tom Bonney or Jay Boyle to share your thoughts and ongoing perspectives on this topic.
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