News / A wind of change as reliance on China eases, with G2G the next challenge

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A drive to diversify sourcing  – and a booming worldwide e-commerce sector – is set to shake up globalisation and see new tradelanes develop. 

“It has been ‘China to Global’ (C2G) – but the next challenge is Global to Global (G2G),” explained Yossi Shoukroun, CEO of Challenge Group. 

“E-commerce is facing changes; production/origin is moving to South-east Asia, South and North Africa, India and Bangladesh; and China is starting to consume as well, buying from overseas. 

“This means we have to be ready not just for e-commerce out of China, but from the EU, from the US. And other continents too are starting – Africa and South America. We need to adapt. 

“I don’t know if this will mean more balanced trade, but there will be changes. We will see a global answer to markets opening, but we will still see Asia remain dominant in exports,” he said. 

Soufiane Daher, an analyst for McKinsey’s air cargo division, told delegates at Tiaca’s event in Brussels this week that while ‘China+1’ was a definite trend, “it won’t happen overnight”. 

Mr Daher expects 15% to 20% of global trade to shift because of “China + 1” – companies looking to reinforce their supply chains by diversifying production locations. 

“There are shifts happening, but maybe not near-shoring… India will come at the top of the list, as well as Vietnam, the rest of Asia, Poland and Turkey,” he predicted. 

CEO of Airline Network Services Jens Tubbesing agreed: “The notion of China +1 is something we have seen quite a bit – and we will see more”. 

However, he added that e-commerce growth out of China was “rather astounding”, explaining that “business growth without e-commerce would not be there”.  

Wilson Kwong, CEO of HACTL, said e-commerce was really the only sector driving exports from China at the moment. He added: “There is no B2B, it’s all about B2C.”

This booming ex-China e-commerce market has cast doubt on whether companies are ready to decouple with the hub of what secretary general of ICAO Juan Carlos Salazar described as a “highly dynamic and extremely promising sector”. 

Shifting production to other countries will also bring infrastructure challenges, as the “high-end industries that rely on airfreight are hard to move”, explained Mr Daher, but added: “It may not have a negative impact on airfreight, but moving production means a shift in trade flows of both outbound finished goods and the inbound semi-manufactured goods.

“China is a top three exporter for 80% of global airfreight,” he said, adding: “It has taken decades to get there, so we won’t see a shift overnight.”

WorldACD director of product development Rogier Blocq revealed that the Asia Pacific to North America tradelane had seen the biggest decrease in trade this year. 

“Before Covid… we were already seeing companies worried about excess exposure to China and concerned about risks in their supply chains. What has happened is the whole process has been sped up,” economist, historian and journalist Mark Levinson told The Loadstar Podcast Deepdive last month. 

Global strategist at Rabobank Michael Every added, on the podcast, that it was “far too early to think the bonds forged with China over many years are close to breaking, but the political winds are undoubtedly changing”.