Coronavirus Outbreak will Upturn China’s Supply Chain

• Published Month : Monday, 13 Apr 2020 05:00 pm

China will soon have to see some of the Japanese and the US giants migrating from the country to the emerging giants like India. As the disruptions COVID-19 has caused has hurt the National Security of certain European countries owing to their dependencies over China even for the medical supplies.

One thing that clearly can be predicted is China’s supply chain, which will never be the same as before the pandemic. Recent months have completely disrupted the supply chains affecting a large number of businesses across the world. Unlike always this time the disruptions are caused due to the Chinese virus and not the “tariff man.”

COVID- 19 that had started in Wuhan has shaken the entire world in terms of health as well as money. Thus, several developed economies are planning to migrate their multinationals from China. Moreover, according to certain sources Japan’s government is expected to spend more than of $2 billion towards aiding its giants to leave China. These Japanese multinationals include companies owing to which China is known as a manufacturing hub for decades.

Japan is not alone but is expected to be followed by the United States too with several US companies already moving their businesses to emerging giants like India.

For instance, Apple Inc is one of the giants facing challenges in China that had started with the trade war and now has become worse with Coronavirus Pandemic. Thus the company is expected to move its manufacturing units to other countries like India & Taiwan. However, the lack of robust infrastructure and skilled labor in India might end up taking away this opportunity from India as well.

Will major giants from the US and Japan actually migrate from China, alike previous instances when it was just a topic of discussion?

The answer probably would be Yes as the pandemic will give mathematical data to the board members of these companies. This data will possibly be enough to see the disruption pandemic has caused to the supply chains and is high time to diversify away from China.

Furthermore, several European and the United States were so dependent on the service economy- China that their significant medical devices were also imported from China. And with the pandemic that demands social distancing and lockdown, these countries are suffering the supply shortages of critical medical devices. Thus, the relationships among the countries are frayed.

Although China is trying hard to rebuild its damages caused by the virus, that is not possible this time with ‘National Security’ a major concern. Thus, National Security concerns will soon fuel a massive offshore migration from China is expected. Also, some of the Japanese companies in China cannot be replaced in terms of filling the gap.