US firms increasingly eyeing manufacturing ‘backups’ as China’s zero-Covid policy accelerates reshoring

Vietnam, Thailand, Mexico, India and South Korea are seen as ‘prime candidates’ for a so-called China plus one strategy to diversify manufacturing

Reshoring activities were heavily seen in 2018 and 2019, when the US-China trade war hit American manufacturers with import tariffs of up to 25 per cent

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Apple’s iPhone exports from India reportedly crossed US$1 billion between May and September this year, which was regarded as “healthy growth” in the company’s manufacturing export scale. Photo: AFP

Published: 12:00am, 9 Nov 2022Updated: 9:01am, 9 Nov 2022

American companies are increasingly looking outside China to find a “backup” for manufacturing operations due to their falling confidence with Beijing’s zero-Covid policy, according to a US-based global consulting firm.

The “prime candidates” for a so-called China plus one strategy, which seeks diversification for manufacturers by reducing reliance on China as a production base, include Vietnam, Thailand, Mexico, India and South Korea, according to Chicago-headquartered Kearney.

“This sentiment will continue even if Beijing lifts the zero-Covid policy after a few months because manufacturers are sensitive to unpredictability,” said Shay Luo, a Kearney principal who helped write Kearney’s 2021 reshoring index report.

“Although many of them are speculating what’s going on in China and taking the wait-and-see approach, Covid has accelerated the expansion outside of [the country].”

Kearney’s 2021 reshoring index showed that US imports of manufactured goods from Asia’s low-cost countries and regions totalled 14.49 per cent of its domestic gross manufactured output last year, up from 12.95 per cent in 2020.