Chinese firms outpace regional counterparts in ‘de-risking’ supply chains as trend grows in Asia-Pacific, survey finds

Name: Trade ‘only one part of the battle‘ in China-Australia dispute, says legal expert Bryan Mercurio
Uploaded: 2021-05-13T20:30:06.000Z
Duration: 9 min 20 s
Description: Trade ‘only one part of the battle‘ in China-Australia dispute, says legal expert Bryan Mercurio

Poll of 800 business leaders in Asia-Pacific region suggests geopolitical and regulatory risks are overtaking cost as a determining factor

China’s leadership has been very vocal in wanting to diversify supply chains away from risky external environments, with an inward-looking approach

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Many Chinese businesses are sticking close to the reliably large Chinese market as the external environment becomes more hostile. Photo: STR via AFP

Su-Lin Tan

Published: 4:30am, 14 May 2021Updated: 5:21am, 14 May 2021

Mainland Chinese businesses and their Asia-Pacific neighbours are increasingly directing their focus towards supply chains and investments closer to home as fears over trade disputes and protectionism rise, according to a poll by multinational law firm Baker McKenzie.

Among Chinese business owners, most are sticking close to the reliably large Chinese market and opting for nearshoring – using nearby countries for business services and insourcing – or relying on affiliated and in-house suppliers, according to the firm, which compiled the poll results in its “State of Play: Supply Chains and Trade Realignment” report.

For others in the Asia-Pacific region, many businesses have started changing their supply chains by adopting similar strategies of nearshoring, insourcing and onshoring, which is the transfer of supply chains back home from an overseas location.

Both approaches point to increasing protectionism born out of a need by businesses to guard against trade wars and political conflicts.

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Trade ‘only one part of the battle‘ in China-Australia dispute, says legal expert Bryan Mercurio

The survey involved 800 business leaders from across the Asia-Pacific region in the first quarter of the year.

“Collectively, this equals a huge realignment of global supply chains, as companies with operations in Asia-Pacific seek to de-risk their sources of supply, and as geopolitical and regulatory risks overtake cost as a key determining factor,” the report said.

Indeed, businesses in the Asia-Pacific region – pointing to the US-China trade war and the conflict between China and Australia – said that given these trade disputes and protectionism, it will be unsurprising if governments put more emphasis on internal development and prioritise local businesses after the pandemic.