In the aftermath of Covid-19, companies producing goods realized that globalization has some drawbacks. Offshoring works well when supply chains don’t face true adversities, but fail miserably during a pandemic, or when the key routes such as Panama and Suez Canal suffer disruptions. Needless to say, any geopolitical tension has the potential to bring supply chains to their knees. As a consequence, COOs around the world have started to diversify production, and some clear winners are appearing: in the chart below, you can find responses to a survey where 325 companies doing business in China answer what their plans will be in terms of manufacturing: 40% say they will look for other countries, and of those, Southeast Asia and Mexico are the clear winners (other than the U.S.). Nearshoring or Friendshoring is the new way to go, it seems. In the case of America, plants are being built near the Mexico/US border to avoid disruptions. If this trend continues, it can have a huge impact on the balance of power, at a time where China is shifting its economic machine from Real Estate back into manufacturing.
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Source: AmCham Shanghai 2023. Capital group.
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