News / Sourcing shift from China is all talk – 'it's a fluidity we have seen for years'

© Sean Pavone

“Colonial arrogance” is perpetuating an increasing belief that western firms can simply “walk away” from China, amid “increasingly muscular” but largely empty political rhetoric.

Secretary general of the Global Shippers Forum James Hookham told The Loadstar he does not buy into the view that there is a trend towards de-globalisation, nor a specific shift away from the people’s republic.

“There is this very colonial view that businesses in the west can snap their fingers and move everything,” said Mr Hookham.

“This may have been the case in the 1990s with China’s production dependent on western technology, but if the west asked China for that tech back, they’d say ‘we scrapped it decades ago’, as they are now on the second or third generation of their own superior technologies.

“The technology, the skills, the people; this is long-established and embedded within the Chinese economy and its economy is very dependent upon having this.”

On Monday, director-general of the UK CBI Tony Danker cautioned against the west’s purported “shift away” from countries, including China, following what he described as an “increasingly muscular” approach towards the country from the west.

However, several sources asked what tough stance he was referring to. Hong Kong-based forwarder Nick Coverdale said the noise was “all talk, and zero muscle”.

Mr Hookham noted: “China survived Trump’s tariffs and it survived other frictions, because China needs American customers, and American customers want Chinese prices – there is this happy co-existence through international trade.”

Nonetheless, there continue to be reports of a production shift from China to South-east Asia.

Hong Kong-based digital wholesale marketplace Peeba said that, while the world was likely to see record Covid cases this winter, it was unlikely to lead to more supply chain disruption – except in China, where business disruption was “driving companies to alternative markets”.

Mr Hookham acknowledged that there was a diversification of business, with companies looking to have alternative sourcing – particularly with China’s ongoing Covid policies. But he said he did not see it on the scale required to mark a substantive shift in the way business would be done; rather that businesses were identifying fallback options in case issues arise.

Mr Hookham said to see it as endemic of a permanent shift was to look at China through an “archaic imperial lens”, viewing the country as a “workshop in the far-flung corners of the empire”.

He added: “These are complex operations, and they are based on the affordability and effectiveness of the market, built around economies of scale and labour and, importantly, recognised for being damn good at what they do.

“There is some movement towards South-east Asia, but it is a fluidity we have seen for years, and any changes are part of the way things are done.

“There are too many factors to constitute an overall trend away from China, rather an increase in intra-Asian connectivity as intermediary processes and sub-assembly occurs within this region.”

Another source told The Loadstar production wasn’t leaving China, but, instead, growing Chinese companies were looking to Turkey and North Africa as production hubs. The source added: “Chinese brands are rising rapidly and establishing manufacturing and distribution platforms in many countries.

“I’m sure this trend will only accelerate as Chinese brands – fashion, automotive, electronics and others – become widely recognised and move up the value chain; supply chains will adapt when all demand cannot be fulfilled by China.”

The source added: “I don’t see China as being ‘let go’.”

Mr Hookham added: “There is an assumption that if western business did just up and leave to go to South-east Asia, Chinese businesses would simply sit and say ‘good while it lasted’ – when this patently isn’t what would happen.

“They would react and would compete with South-east Asia to retain the business before it left – business thinking is pretty universal – they aren’t going to sit passively and accept it.”