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Will the coronavirus pandemic be the final nail in the coffin for China’s manufacturing dominance?
- While some labour-intensive supply chains and those that target the US market may move out of China, sophisticated manufacturing clusters related to electronics and the internet of things are not easy to replicate quickly
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The Covid-19 outbreak has many speculating whether there will be a mass exit by foreign companies from China after the pandemic. Indeed, the crisis has delivered massive blows to many companies’ supply chains.
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A March survey by the American Chamber of Commerce in South China indicates that all 237 respondents have seen their supply chains affected, and 15 per cent of respondents were already out of some supplies.
Some governments have echoed these concerns. On April 7, Japan unveiled a relief package of almost US$1 trillion, of which around US$2 billion was earmarked to help manufacturers diversify supply chains away from geographical clusters – primarily China – to other nations.
Soon after, US National Economic Council director Larry Kudlow suggested that the White House should “pay the moving cost” of American companies wanting to get out of China.
On April 14, French carmaker Renault put the brakes on its loss-making venture with Dongfeng Motor Corporation in Wuhan, transferring full ownership of its Wuhan plant to Dongfeng. Unsurprisingly, this triggered worries that foreign companies are starting to leave China because of the pandemic.
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