- 70% of respondents find lockdowns in China to be the biggest global event impacting businesses in 2022
- 88% of respondents fear that the biggest impeding factor for businesses in 2023 will be inflation and recessionary fears, followed by ‘implications of war’, ‘impact of COVID in China and ‘worker strikes’
- 60% of respondents believe continued lockdowns in 2023 will impact businesses financially, and production-wise, and will also lead to a loss of global contracts/partnerships
Hamburg, 09/01/2023: The US is set to emphasize more on ‘friendshoring’ in 2023 by relocating supply chains to countries that are ‘friends’ or allies of each other as observed in Container xChange’s Container LogTech predictions report for 2023 released today. The objective seems to be to prevent countries – especially China and Russia in the case of the US – from using their market advantages in key raw materials, foods and products.
To avoid lockdown-related delays in manufacturing and shipping, companies will move away from the highly globalized supply chain models of the pre-pandemic times. In the future, more companies will adopt near-sourcing, nearshoring, and reshoring trends to bring their manufacturing hubs closer to their end markets. These new sourcing strategies will aim at rebalancing supply chains by deleveraging from areas of concentrated production activities and spreading them over a range of countries to increase flexibility and resilience.
For example, Apple wants to reduce its dependence on producing iPhones in China and exploring India as an alternative is an example of that. Same with Foxconn expanding production facilities in Vietnam. However, it will take several years to move capacity out of China. The US itself continues to depend on China for hundreds of critical goods including textiles, chemicals and electronics.
“The overall outlook for the year 2023 remains gloomy. Europe is hit hard with an all-time high inflation; China struggles to cope with the virus and the US continues to witness hinterland transportation challenges and labour unrest. Most of these challenges will stay in 2023. Consumer confidence will pick up, but it really depends strongly on whether we witness more disruptions in the coming times.” said Christian Roeloffs, cofounder and CEO, Container xChange, an online container logistics platform.
Trade with China to become “Trade with China+1”
“Due to all the lockdowns – which have economic and human-rights impacts – the risk to dependency has become especially apparent. The Russia-Ukraine war has exacerbated this realization – Do you want to be dependent on a country that doesn’t share your values? My forecast is that there’ll be a recalibration from stakeholders based on shared value chains, but that the dependence on China will still be there. The dwindling dependence will be a gradual thing as it can’t happen overnight, so there certainly won’t be a mass pull out at least not in 2023.”, Mike King, Podcast Host & Editor, The Loadstar.
Companies looking for sourcing alternatives will not diminish China’s vital role in global manufacturing in 2023. We will witness a gradual shift from industries relying solely on China for production capacity and skilled manpower. As the years move on, manufacturing and production companies will diversify and spread their businesses to ‘China+1’ or other viable locations in the region such as India and Vietnam.