Li & Fung urges US clients to shift away from China as ‘all eggs in one basket can be dangerous’

The supply chain shift away from China is benefiting countries like Vietnam, Bangladesh, Indonesia and India, says CEO Spencer Fung

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Li & Fung supplies apparel, accessories and other products to global retailers. Photo: Reuters

Published: 7:35pm, 17 Jun 2019Updated: 3:20pm, 18 Jun 2019

Global supply chain giant Li & Fung is encouraging its American customers to shift production away from China as tariffs from an escalating trade war make Chinese-made goods more expensive for US companies.

“What we think now is that no matter if there is a deal or not, people should diversify out of China ... you cannot put all your eggs in one basket. It is very dangerous,” said chief executive Spencer Fung at a press conference on Monday.

The 113-year-old Hong Kong company supplies apparel, accessories and other products to global retailers. It generates nearly 80 per cent of its revenue from the US for its main supply chain management business.

In May, the US increased tariffs on US$200 billion of Chinese goods from 10 to 25 per cent and plans to extend it on another US$300 billion of goods later this year unless Beijing agrees to change its trade and industrial policies that US President Donald Trump claims are unfair.

Spencer Fung, CEO of Li & Fung, said his company’s customers have begun to diversify supply chains away from China. Photo: Nora Tam

Fung said that the trade war is broadly forcing people to rethink their business strategy and diversify away from China.

Li & Fung has already helped some retailers start to shift away from China to Southeast Asian countries before the trade war started because of increasing labour costs and Beijing’s focus on hi-tech investments. But the US-China trade war is rapidly accelerating the trend and changing China’s role for American retailers.