• About
  • Contact Us
Logistics Asia
previous arrow
next arrow
  • Home
  • News
  • Carriers
    • 3PL
    • Courier and express
    • Last mile delivery
    • Freight forwarding
    • Multimodal transport
  • Supply Chain
    • AI and data solutions
    • Cold chain logistics
    • E-commerce
    • Risk management
    • Sustainability
    • Warehousing
  • Transportation
    • Air transport
    • Land transport
    • Maritime transport
  • Multimedia
    • Videos
    • Podcasts
  • Contact
No Result
View All Result
  • Home
  • News
  • Carriers
    • 3PL
    • Courier and express
    • Last mile delivery
    • Freight forwarding
    • Multimodal transport
  • Supply Chain
    • AI and data solutions
    • Cold chain logistics
    • E-commerce
    • Risk management
    • Sustainability
    • Warehousing
  • Transportation
    • Air transport
    • Land transport
    • Maritime transport
  • Multimedia
    • Videos
    • Podcasts
  • Contact
No Result
View All Result
Logistics Asia
No Result
View All Result
Home Supply Chain

Can China Accommodate Production Shift From Southeast Asia?

by Team Logistics Asia
June 9, 2021
in Supply Chain, Sustainability
Can China Accommodate Production Shift From Southeast Asia?
Share on FacebookShare on Twitter

The fierce new COVID-19 wave across Southeast Asia – home to about one-fourth of the world’s population – has prompted some manufacturing orders originally sent to the region to shift to China in recent months, in what could be the start of a long-term trend of production relocation as a result of the pandemic, according to factories and industry analysts. 

However, while the backflow underscored China’s stable and complete supply chain that is relatively immune to external uncertainties, thousands of Chinese exporters are now facing a new critical issue: do they have the capacity to fill the supply chain gaps left by Southeast Asian manufacturers? 

Some remain prudent, pointing to the intertwined China-centric supply chain in Asia, with China filling the upstream role and Southeast Asia acting as a manufacturing base, which means the new COVID-19 outbreaks in Southeast Asia could weigh on the capacity of China’s export machines. 

Additionally, the yuan’s recent appreciation is crimping Chinese factories’ profitability as well, weakening their willingness to handle export orders, industry insiders noted. 

Zhang Manfeng, assistant director with the Guangdong Shoe Manufacturers Chamber of Commerce, said that some orders have come back to China from neighboring countries such as India and Vietnam, where the epidemic has disrupted local production. 

Shoe exports from South China’s Guangdong Province – valued at $1.3 billion a year – account for about one-third of China’s shoe exports. 

“This is an emerging trend since last year, but it further accelerated after the new outbreaks in India in April,” Zhang said, adding that new shoe orders have increased 10-20 percent year-on-year since April.

According to industry observers, some plants in Southeast Asia in sectors such as textiles and electronic processing may have to halve their labor forces due to the pandemic, dealing a major blow to their production. If more Southeast Asian countries impose nationwide lockdowns, there will be a bigger hit and a larger shift in manufacturing. 

But Zhang noted that the return of orders is still “limited” because global consumption remains lukewarm due to the pandemic, and new orders aren’t increasing much.

He said that more orders will come back, as Southeast Asia’s industry chains are vulnerable, while China’s is relatively complete and stable after containing the epidemic.

In addition to shoes, China’s leather industry is also seeing an industrial shift from Southeast Asia. 

Chen Zhanguang, secretary-general of China Leather Industry Association, said that there has been a short-term backflow of orders to China, which particularly reflected in the surge in online transactions caused by the epidemic.

Chen added that Chinese leather manufacturing enterprises have the ability to respond quickly to different international customer needs, such as short-term delivery or customized production. They also have the comprehensive advantages like complete industrial chain and infrastructure, strong logistics and transportation capacity, and skilled workers to handle international orders.

Zhai Suoling, manager of a large furniture company based in Dongguan, Guangdong said that there’s been some talk of an industry chain relocation from Southeast Asia, but he hasn’t seen any sign of it yet. “It’s not a short-term phenomenon. It may take some time,” Zhai said. 

Some research institutes predict that some middle- and high-end manufacturers may move back to the Chinese mainland after the worsening coronavirus crisis in India, Vietnam and China’s Taiwan island. They attribute the relocation to the Chinese mainland’s stable supply, the capacity to integrate the value chain, and the government’s ability to prevent and contain the virus in a swift manner.

In the coming months, some Chinese suppliers will be flooded with orders from the US and Europe that would otherwise have gone to Southeast Asia. But that’s a double-edged sword as Chinese plants are only able to meet part of the overseas demand, analysts said.

“Some Chinese export-oriented companies moved out over the past year, amid a tit-for-tat tariff war between China and the US, although they still source the bulk of their raw materials from China. But as long as the US’ tariffs on Chinese products remain in place, it is not a good deal for us to accommodate US orders,” Zhai suggested.

Southeast Asia has become part of the China-centric supply chain. Chinese businesses supply materials and other upstream elements, and Southeast Asia acts as a base for manufacturing. The challenge confronting local supply chains means that the broader China-centric network is only functioning partly, Tian Yun, former vice director of the Beijing Economic Operation Association, told the Global Times.

Zhang said that China’s exports of raw materials for shoe production have slowed as factories in places like India and Vietnam shut down.

“Furniture factories in Guangdong are slashing capacity as they only supply the local market. If overseas orders flow back, we don’t have enough workers or production capacity, not to mention there’s a shortage of electricity,” Zhai noted.

Xu Liping, director of the Center for Southeast Asian Studies at the Chinese Academy of Social Sciences in Beijing, said that Chinese exporters in labor-intensive industries should stay cautious about the effects of industry relocation.

“Their profits are small, and an appreciating yuan could further erode their export profits,” Xu said.

After a rapid rise in the yuan’s exchange rate that sparked widespread concerns, China’s central bank announced plans to raise the reserve requirements on foreign currency deposits for financial institutions by 2 percentage points starting from June 15, a move to cool the yuan’s rally.

Source: Global Times
Tags: ChinaExportsLogisticsManufacturersSoutheast AsiaSupply Chain

Related Posts

China to Build Green Air Logistics Network by 2025

China’s Logistics Chain Back to Normal

by Dafizeck Daud
May 27, 2022

China's logistics industry has resumed gradually as the country tackles shipping bottlenecks amid the latest COVID-19 outbreak, the Ministry of...

Does RCEP Herald a Golden Age in APAC?

Does RCEP Herald a Golden Age in APAC?

by Dafizeck Daud
May 27, 2022

By Audrey Cheong People have been conducting cross-border and trans-continental trade for millennia. From the ancient Egyptians, to the Greeks...

Growing Intra-Africa Trade through Digital Transformation of Customs and Borders

Growing Intra-Africa Trade through Digital Transformation of Customs and Borders

by Dafizeck Daud
May 26, 2022

The digital transformation of customs and borders in Africa could improve efficiencies in processes, such as administration at customs and...

Bridgenet and MKI To Assist Digital Transformation of Businesses in Asia Pacific

Bridgenet and MKI To Assist Digital Transformation of Businesses in Asia Pacific

by Dafizeck Daud
May 26, 2022

Bridgenet Solutions Sdn Bhd (Bridgenet), a subsidiary of Celcom Axiata Bhd, is partnering with MKI IT Solutions (Asia Pacific) Pte....

FedEx and Aurora Expand Autonomous Trucking Pilot Lane Project

FedEx and Aurora Expand Autonomous Trucking Pilot Lane Project

by Dafizeck Daud
May 25, 2022

FedEx and Pittsburgh-based Aurora Innovation Inc., a provider of self-driving technology, announced that they are expanding the pilot collaboration program,...

Load More
previous arrow
next arrow
  • Trending
  • Comments
  • Latest
Infinity Logistics Acquires Glencore’s Unit, Access World for US$177 million

Infinity Logistics Acquires Glencore’s Unit, Access World for US$177 million

February 7, 2022
The Insane Logistics of Formula 1

The Insane Logistics of Formula 1

April 15, 2021
How Container Ports Work: Logistics of Intermodal Transport

How Container Ports Work: Logistics of Intermodal Transport

April 22, 2021
How Drones Could Change The Shipping Industry

How Drones Could Change The Shipping Industry

April 20, 2021
UNICEF Urges Supply Chain and Logistics Industry to Roll Out COVID-19 Vaccines Globally

UNICEF Urges Supply Chain and Logistics Industry to Roll Out COVID-19 Vaccines Globally

From Land to Sea – A Rising Trend Among SE Asia E-Commerce Freight

From Land to Sea – A Rising Trend Among SE Asia E-Commerce Freight

An Integrated Logistics Platform to Penetrate SEA Market

An Integrated Logistics Platform to Penetrate SEA Market

Are We Ready to Ship Billions of COVID Vaccines Worldwide?

Are We Ready to Ship Billions of COVID Vaccines Worldwide?

China to Build Green Air Logistics Network by 2025

China’s Logistics Chain Back to Normal

May 27, 2022
Does RCEP Herald a Golden Age in APAC?

Does RCEP Herald a Golden Age in APAC?

May 27, 2022
Growing Intra-Africa Trade through Digital Transformation of Customs and Borders

Growing Intra-Africa Trade through Digital Transformation of Customs and Borders

May 26, 2022
Bridgenet and MKI To Assist Digital Transformation of Businesses in Asia Pacific

Bridgenet and MKI To Assist Digital Transformation of Businesses in Asia Pacific

May 26, 2022
Logistics Asia

Logistics Asia brings you the latest news, analysis and insights for the logistics sector. We cover logistics-related news in Asia and beyond.

Categories

  • 3PL
  • AI and data solutions
  • Air transport
  • Carriers
  • Cold chain logistics
  • Courier and express
  • E-commerce
  • Editor's Choice
  • Feature
  • Freight forwarding
  • Internet of Things
  • Land transport
  • Last mile delivery
  • Maritime transport
  • Multimodal transport
  • News
  • Opinion
  • Ports
  • Press Release
  • Rail Transport
  • Risk management
  • Supply Chain
  • Sustainability
  • Transportation
  • Uncategorized
  • Videos
  • Warehousing

Newsletter

Subscribe to our mailing list to receives daily updates direct to your inbox!

  • About
  • Contact Us

© 2022 Business Media International. All Rights Reserved.

No Result
View All Result
  • Home
  • News
  • Carriers
    • 3PL
    • Courier and express
    • Last mile delivery
    • Freight forwarding
    • Multimodal transport
  • Supply Chain
    • AI and data solutions
    • Cold chain logistics
    • E-commerce
    • Risk management
    • Sustainability
    • Warehousing
  • Transportation
    • Air transport
    • Land transport
    • Maritime transport
  • Multimedia
    • Videos
    • Podcasts
  • Contact

© 2022 Business Media International. All Rights Reserved.