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  • InduQin

China’s manufacturing mojo isn’t easy for rivals to take away

There’s been a lot of talk of shifting manufacturing supply chains away from China. Other countries want to cut their dependence on the world’s biggest factory floor, wary that Beijing is wielding too much power over the global economy. Replacing China, though, isn’t all that easy. Making highways and production lines that work like clockwork, with tightly-knit networks of suppliers, is a gargantuan task.

Over the last two decades, Beijing pampered global manufacturers with its meticulously built-up infrastructure and copious industrial supplies. The country’s hold on production processes, even in sectors it doesn’t dominate, meant it rapidly grew in importance. The debt state-owned firms took to build highways ensured that logistics and supply chains run smoothly. China, no doubt, has a lot of economic imbalances, but its dominance in the world economy won’t change any time soon.

Countries from the US and India to Vietnam and Indonesia are trying to present themselves as alternatives. The $53 billion Chips Act was an attempt by the White House to reclaim chip making, as is the national blueprint to build a lithium-ion battery supply chain by the end of the 2020s. For electronics, Vietnam has been hailed a viable option. Even Indonesia, the biggest producer of nickel, a critical component of electric vehicle (EV) batteries, wants to move up the ladder and capture the value additions from a global shift to EVs.

Parts of the supply chain may shift away from China, but for now, no country can come close to building the intricate network of factories across such a broad range of sectors. Switching agreements and suppliers isn’t an overnight process, nor is setting up operations that have been in place for years.

Vietnam makes a good test case. Just as Apple’s suppliers such as Hon Hai Precision Industry Co, better known as Foxconn, plan to expand capacity there, sending industrial land prices to new highs, global manufacturers are finding that Vietnam can be easily ensnared by shortages. Right now, building materials like aluminium window sills, abundant in China, are hard to come by.

This is because Vietnam, along with the rest of Asia, imports a lot of basic industrial products such as chemicals and plastic, from its northern neighbour. Even though its economy has been open since March, as long as China continues with covid-zero lockdowns, the Southeast Asian nation will continue to suffer from supply chain bottlenecks. Vietnam’s PMI suppliers’ delivery times index, which captures supply chain delays, remained in contraction in July.


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