But few companies seem to want to leave China’s skilled workforce and suppliers of unprocessed materials to move to other countries.
Too much dependence on China leaves global companies open to costly problems during major global crises. The spread of the new coronavirus is one example. In addition, the United States and China have been locked in a trade war for several years. Both countries have raised taxes on the goods they exchange.
The drug manufacturers are a group that is trying to reduce dependence on Chinese suppliers. Industry establishes sources unprocessed materials in the United States and Europe. But the medical device, consumer electronics and other industries continue to depend on China.
Harley Seyedin is the president of the American Chamber of Commerce in South China. He told The Associated Press, “I don’t know of a single company right now that is going ahead with plans to move. ”
The rise of China as a low-cost factory around the world has helped lower costs for consumers and increase profits for many businesses. But this has fueled political tension over lost US and European manufacturing jobs. Governments, Industry Experts Fear Dependence on China Threatened supply chains and national security.
Chinese factories bring together most of the world’s smartphones and consumer electronics. They produce an increasing share of medical equipment, industrial robots and other high-tech goods. The country is also one of the main suppliers of vitamin C and Ingredients for antibiotics and other drugs.
The ruling Communist Party has spent 20 years building ports, stations, communications networks and other systems.
“China still offers unprecedented supply chain for any industry, “said Jit Lim of Alvarez & Marsal, a business consultancy.
Philip Richardson manufactures sound equipment in Panyu, near Hong Kong. He said he had considered Vietnam and other countries. But he said if workers’ wages could be 40% lower, the savings would be outweighed by the cost of losing his network of Chinese suppliers.
“We thought about it for about a minute, and it makes no sense,” said Richardson, who has worked in China for 22 years.
Countries Seek New Supply Chains
In Japan, the government sees China as a direct competitor. Japan is therefore offering $ 2 billion to companies transferring production to the country as part of a virus assistance program announced in April. He also offered $ 220 million to Japanese companies in China if they move to other countries.
The trade dispute between the United States and China has raised concerns about China’s leading position as a supplier of active pharmaceutical ingredients, or APIs. These are the substances used to make medicines and vitamins. Some American experts warn that China could refuse APIs.
In May, the U.S. government awarded a contract worth up to $ 812 million over 10 years to Phlow Corp. The Virginia-based company strives to protect itself from drug shortages by producing the necessary ingredients.
Drug maker Sanofi is also creating an API supplier to reduce dependence on China. Sanofi said the company would be the second largest producer in the world, with annual sales of more than $ 1 billion by 2022.
India and Indonesia have also announced plans to increase their own production of unprocessed drug ingredients. But Sakshi Sikka of market research firm Fitch Solutions said the changes were politically motivated and would drive up costs. China’s position as the largest supplier, he said, is not expected to change soon.
Companies are also increasingly trying to sell to the 1.3 billion Chinese consumers at a time when spending growth in Western countries is weak. Manufacturers of cars and higher-value products are spending billions of dollars to boost Chinese production. For example, German automaker Volkswagen said in May it would spend $ 2.2 billion to buy control of Chinese producers of electric vehicles and vehicle parts.
Instead of manufacturing for export from China, some companies plan to sell within the country. “Now a lot of people are producing” local for local, “” said Jit Lim.
My name is Pete Musto.
Joe McDonald reported this story to the Associated Press. Pete Musto adapted it for VOA Learning English. Mario Ritter, Jr. was the editor.
Words in this story
global – WO. involving the whole world
source -NOT. someone or something that provides what is wanted or needed
consumer -NOT. a person who purchases goods and services
Supply Chain -NOT. the series of processes involved in the production and distribution of a given good or service
ingredient -NOT. one of the things that is used to make a food or product
unprecedented – adj. not found elsewhere
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