Three-Way Pact Seeks to Reduce China Supply Chain Dependence

Japan, India, Australia join the crowd in seeking to capitalize on trade war

By: Neeta Lal

Signs are starting to appear that the breakdown in multinational supply chains that began with US President Donald Trump’s trade war with China is accelerating, with India, Japan and Australia launching a multi-pronged initiative aimed primarily at correcting the asymmetry in China’s favor.

A combination of factors is at work beyond rising tariff costs, including the Covid-19 pandemic and a growing realization by multinationals that supply chains need to be more flexible, leading to a third of companies moving their sourcing and manufacturing activities out of China or planning to do so in the next two to three years, according to a recent survey from analyst firm Gartner Inc.

Vietnam, Mexico, and Bangladesh have all been beneficiaries of the shift, in addition to India, accelerating a trend that began more than a decade ago as China itself has increasingly moved up the value ladder, watching low-tech, low-skill, and often polluting industries move. Some of those companies, in fact, have been Chinese ones seeking to escape rising domestic labor costs and stiffening environmental laws.


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