Global supply chain continues to shift away from China, but it remains the top sourcing location

American and European companies are gradually reducing their reliance on China, and its popularity as a sourcing market among Western buyers took a hit during the pandemic

As a regional alternative to China, Vietnam maintained its popularity during the turbulent 2020, and this year it was named as a top-three sourcing market by a quarter of respondents globally

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Workers in Vietnam perform quality checks on smartphones. The country was recently named a top-three sourcing market by a quarter of respondents in a global poll. Photo: Bloomberg

Published: 6:30pm, 30 Apr 2021Updated: 6:30pm, 30 Apr 2021

Although China has rebounded relatively strongly from the pandemic, having brought it under control much faster than the West, long-term diversification trends in the global supply chain are continuing to shift away from the world’s second-largest economy, according to a survey of more than 700 firms across the world in March.

In 2019, 96 per cent of US-based companies and 100 per cent of Europe-based companies listed China as one of their top-three sourcing countries, but those proportions respectively dropped to 77 and 80 per cent in the first quarter of this year, according to Qima, a provider of supply-chain-compliance solutions that conducted the survey.

Already shaken by the fallout of the US-China trade war, the popularity of China as a sourcing market among Western buyers took another hit in early 2020 following the initial coronavirus outbreaks and the resulting lockdowns.

But even as companies based in both the United States and Europe are reducing their reliance on the Chinese market, China still remains the top sourcing destination.

For businesses located outside China, more than 85 per cent of respondents listed China as one of their top-three sourcing markets for promotional products, electronic items and toys.

“This suggests that, sourcing-diversification efforts notwithstanding, buyers continue to view China among their most important manufacturing partners and wish to maintain their business connections with Chinese suppliers,” the report said.

It went on to note that a major factor contributing to such decisions is China’s effective response to the pandemic, but other factors include “a long history of cooperation”, “a good track record in quality compared to local competition”, and “China’s progress in ethical compliance compared with other, less mature, sourcing regions”.