Will companies really ditch China?

As the coronavirus pandemic has plunged much of the world economy into turmoil, you've probably heard a lot about what might happen to "supply chains," the vast networks of manufacturing and shipping that help create and deliver all those plastic toys, iPhones, cars, pills, pants, yogurt, and N95 face-masks you've been waiting on.

The future of global supply chains is an especially important question for China, the world's manufacturing powerhouse. Some countries and companies now worry about relying too much on any single supplier for consumer and medical goods, let alone one where the government hid the first evidence of what became a global pandemic and sometimes enforces trade and investment rules in seemingly arbitrary ways. The US-China trade war — and the vulnerabilities it reveals for manufacturers — certainly don't help.


So, as foreign companies worry about whether continuing investment in China is a good idea, many countries are offering themselves as attractive alternatives.

Here's a look at three of those alternatives... with one big caveat.

India. Prime Minister Narendra Modi has long sought to boost his country's lagging manufacturing sector. Now New Delhi is redoubling its efforts to lure factories out of China, reaching out to firms directly, easing foreign investors' access to land, and even in some cases loosening labor regulations. India's fast-growing population of young people —workers and consumers — makes for a potentially attractive alternative to aging China. But Modi has a problem. His continued fondness for high tariffs as a way to protect local industry, and his decision to opt out of a major China-led Asian trade pact, limit his country's appeal for other Asian countries. After all, companies may want to leave China, but they still want preferential trade arrangements with the rest of Asia's massive consumer market.

Vietnam. As labor costs in China have risen over the past decade, some manufacturing has already relocated to Southeast Asia. Vietnam, which has streamlined trade and investment rules and concluded a free trade deal with the EU, is one of the biggest winners. In the six years to 2019, it alone absorbed almost half of all US manufacturing that left China, according to a study by Kearney, a consultancy. Now, having managed both the public health and economic aspects of the coronavirus pandemic well, the country is looking to benefit from a further exodus from China. But as some experts have pointed out, the country's relatively small (and aging) population, as well as its own dependency on Chinese imports, may limit its longer term appeal.

US. The Trump administration has seized on the economic fallout of what Trump calls "the China virus" to intensify its calls for American firms to bring manufacturing "back" to the US from China. Trade Representative Robert Lighthizer recently wrote that the age of "lemming-like" offshoring is now over. Data backs up his claims: The "Reshoring Index" in that same Kearney report, which measures the movement of manufacturing from Asia to the United States, found the largest reshoring jump on record in 2019. But making things at home is one thing – making them with human hands is another. As we've written, many companies are looking to automation to bring manufacturing closer to their home markets while also keeping costs down. That lessens the vulnerability of production to pandemics and tariff wars, but it doesn't do much for jobs.

Is China too big to fail? China still has huge advantages. First, rearranging supply chains isn't like changing table settings – it takes time to reorient billions of dollars in investment and infrastructure. Second, and more importantly, China has a billion consumers. It used to be that foreign companies wanted to be in China mainly because it was a cheap place to make things for export. But as China's own population has gotten more affluent (lifting more than 500 million people out of poverty will do that), the country is itself a leading consumer market for European and US firms. That makes decisions to leave the country much harder.

How much material do we use to send a package? Too much. Does recycling help? Yes – but not really. Packaging material often accumulates as waste, contributing to its own "polluting weight." To solve our packaging dilemma, Finland came up with RePack: a "circular" solution for the reuse of material.

Learn more about RePack in Eni's new Energy Superfacts series.

A steady increase of violence in the Sahel region of Africa over the past eight years has imposed fear and hardship on millions of the people who live there. It has also pushed the governments of Sahel countries to work together to fight terrorists.

The region's troubles have also captured the attention of European leaders, who worry that if instability there continues, it could generate a movement of migrants that might well dwarf the EU refugee crisis of 2015-2016.

But is Europe helping to make things better?

More Show less

Ian Bremmer's QuickTake:

It's Monday, coronavirus still going on. Plenty to talk about.

I mean, I guess the biggest news in the United States is the fact that we still don't have any stimulus going forward. I mean, now, keep in mind, this is on the back of an exceptionally strong initial US economic response, over 10% of GDP, ensuring relief for small businesses, for big corporations, and most importantly, for everyday American citizens, many of whom, large double digit numbers, lost their jobs, a lot of whom lost them permanently but didn't have to worry, at least in the near term, because they were getting cash from the government. Is that going to continue?

More Show less

Lebanon's government resigns: Lebanon's government resigned on Monday over last week's twin explosions at Beirut's port, which killed at least 160 people and shattered much of the city's downtown areas. After promising a thorough investigation into why dangerous explosives were stored at the port so close to civilian areas, Prime Minister Hassan Diab said he would step down in solidarity with the people." The people in question are furious. Thousands of Lebanese have taken to the streets in recent days demanding "revolution" and the resignation of a political class whose corruption and mismanagement had plunged the country into economic ruin even before last week's blasts. The international community, meanwhile, held a conference on Sunday and pledged $300 million in humanitarian aid to rebuild battered Beirut, with aid distribution to be coordinated by the UN. But the attendees, which included US President Donald Trump, the European Union, and the Gulf Arab states, said that the funds would not be released until the Lebanese government reforms its bloated, inefficient, and corrupt public sector. So far, Beirut's power brokers have resisted change. As rage on the streets intensifies — with angry protesters swarming the city center and setting public property and government buildings ablaze even after cabinet members resigned — it remains unclear who will run Lebanon going forward and guide the country's rebuilding process.

More Show less

"There have been more than 500 deaths of healthcare workers that we know of in this country and more than 80,000 infections of healthcare workers … These are mind-boggling numbers." Former CDC director Dr. Frieden on how the United States is failing the heroes who are fighting COVID-19 on the frontlines. The fact that many still don't have access to basic personal protective equipment this far into the public health crisis is not just unacceptable. It's a symptom of how deeply flawed our healthcare system is as a whole.