Supply chains could return to China amid Covid resurgence in India and Vietnam –

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Supply chains could return to China amid Covid resurgence in India and Vietnam – fr


A worker works on a production line to produce electrical products for domestic and Southeast Asian markets in Hai’an, east China’s Jiangsu Province, March 29, 2021.
Costfoto | Barcroft Media | Getty Images
The resurgence of Covid-19 in parts of Asia could lead to a change in fortunes for China, according to an economist.
Previously, the trade war between the United States and China had caused companies to move their supply chains out of China, thereby shifting their production and distribution networks for products and services. As a result, countries like Vietnam and India took advantage when companies moved to locate in their countries.

But the situation appears to be changing and supply chains could return to China as cases skyrocket in India and Vietnam, according to Zhang Zhiwei, chief economist at Pinpoint Asset Management.

“Before the pandemic, we saw factories leaving China – Samsung, Foxconn these big companies – setting up factories in Vietnam, in India,” he told CNBC “Street Signs Asia” on Monday.
The surge in cases in those two countries has forced factories owned by Taiwanese contract manufacturer Foxconn, a major supplier to Apple, to shut down facilities in India and Vietnam, he said.

“This could put off the offshoring of supply chains for a while. The main problem here is that international travel is suspended, so multinational companies cannot send their staff to India and Vietnam to set up new factories, ”Zhang added.

Cases in India hit record highs in April and show few signs of a significant slowdown – economists have predicted the South Asian economy will likely contract this quarter.

In Vietnam, the northern province of Bac Giang on Tuesday ordered four industrial parks – three of which are home to Taiwan’s Foxconn production facilities – to temporarily close due to a Covid-19 outbreak.

The situation could benefit China, Zhang suggested. However, he stressed that the extent of what China could gain will depend on the duration of the situation in India and Vietnam.

At present, China’s export growth is between 20% and 40% per month, he said. If factories in India and Vietnam return to production very soon, Chinese exports are expected to slow in the second half of the year as companies shift production to those two countries.

“But if the supply chain (in India and Vietnam) is disrupted for a long time, we could see this kind of export growth of 20% and 30% (in China) continue next year,” he said. Zhang said.

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