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Diversification of supply chains and decoupling from China could be a good opportunity for air cargo – but predictions the country will “fight back” in 2024 echo concerns that global reliance on China might be too deep to reverse.
Last month, The Loadstar reported that a hot topic of conversation among delegates at Tiaca’s executive summit was that supply chain diversification was driving business away from China.
And at the ACE Air Cargo event in Abu Dhabi last week, this echoed as Glyn Hughes, director general of Tiaca, listed “de-risking supply chains” as one of three main aspects that will affect the market next year.
He said: “China manages about 28% of global production today, and we saw during Covid and post-Covid there were huge blockages in global manufacturing. We had the G7 coming out very strongly, saying they wanted to very much focus on the de-risking and diversification of production.
“That is good news for air cargo, because those diversified manufacturing sites will increase the amount of sub-assembly component parts and so on going between the various production locations. That is a positive for the industry – as long as we are agile enough to take advantage of that opportunity.”
Last week, Italy announced it was withdrawing from China’s Belt and Road Initiative (BRI), a global infrastructure development strategy started in 2013 that aims to strengthen China’s connectivity with the rest of the world. Italy was the only G7 country to have joined.
Chris Higgins, commercial director at AFS Global Forwarding, told The Loadstar about his recent trip to southern China, commenting “if you can see blue sky, it means production levels are down”.
He added: “China is in a little bit of a sticky spot and under some pressure to rejuvenate its exports. I think we’ll see, over the next 12 months, China really start to fight back.
“In 2024, there will be more products bought from other origins, but China will find a way to ensure the majority of supply still comes from there… We are seeing Chinese suppliers drastically reduce their lead times on production of goods, trying to incentivise importers to buy from China by speeding up the production element.”
Mark Woodcock, international business development director at e-commerce solutions provider Starlinks Global, added that while he had noticed production gaining momentum in Turkey and India, they were “not going to replace China”.
And Pawan Joshi, senior VP of products and strategy at E2open, told The Loadstar: “We have taken it to a level where it cannot go back; you will always have unique critical sources.”
But he warned that it would be risky to just rely on those and said: “You cannot put all your eggs in one basket. You can call it friend-shoring, you can call it re-shoring or in-shoring, but that balance has to be established.”
Mr Higgins said he had seen increased de-risking of supply chains, adding: “We’re seeing ‘China+many’. We’re quoting our customers a wider range of different origins than ever before.
“Post-Covid, we are seeing customers perhaps set up 5% or 10% of their supply chain outside China, and we’re seeing Vietnam as a big growth area for exports like furniture, phones and textiles.”
Despite this, he said, China could never be fully replaced.
“It is an extremely valuable part of the supply chain – you just can’t get away from it. China is peerless, there aren’t any other export nations that are able to match its quality and pricing.”
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