Companies are continuing to shift their supply chains away from Chinese resources, a trend that began during the pandemic and grew after the war in Ukraine.
- Investment banking firm Citigroup says that its clients are continuing to move away from China and expects that this trend will continue for years, Bloomberg reports.
- Global supply chains have shifted since the pandemic and were further upended by the war in Ukraine. China’s Zero-COVID policies further extended supply chain disruptions.
- Citigroup executives anticipate that chip manufacturing will continue to move away from China. Vietnam and Mexico are already beginning to benefit from the shift, Bloomberg reports.
- The electronics industry has relied on relatively unchanging supply chains for decades, but the growing tension between the U.S. and China is causing companies to reconsider their options.
- Zero-COVID policies in China also highlighted for the world how much the world relied on China.
Why it’s news
China remains the largest nation by population and the second largest economy (behind the U.S.) and has had steady GDP growth over the past few decades. It is a manufacturing giant and now, with the recent end of Zero-COVID policies, it is likely to see an economic turnaround.
But as a nation, China is facing challenges on multiple fronts. Earlier this year, China’s National Bureau of Statistics announced the first population decline since the Great Leap Forward. Though now mainly lifted, China’s Zero-COVID policies brought parts of the nation to a grinding halt, affecting its overall economy. Adding on growing tension with the U.S., internal turmoil and protests, and tension with Taiwan, China has many difficulties to address.
China’s economy is under growing pressure, and investors fleeing the nation alongside manufacturers could spell trouble for its overall economy.
In December, the International Monetary Fund (IMF) scaled back its predictions for China’s economic growth. COVID lockdowns and real-estate struggles in the country largely drove its decision.
Adding to China’s ongoing woes, recent reports have drawn criticism about the country’s state media and its involvement in COVID-19.