The ongoing global economic uncertainty has exposed many vulnerabilities with global supply chains. The recent events have even raised doubts over globalisation, with many economies now understanding the fragility of the global supply chains and mulling shifting to a model that is more regionally based.
Keeping this situation at the centre, a World Economic Forum (WEF)’s report, Chief Economists Outlook, outlines the emerging contours of the current economic conditions and pinpoints priorities for further action by policymakers and businesses globally. The report states that the regions most likely to benefit from the global supply chain changes are South Asia, East Asia and the Pacific, Latin America and the Caribbean, and the US.
The report specifically states that economies that are likely to benefit from these changes are India, Vietnam, Thailand, Indonesia, Mexico, Turkey, and Poland. These assertions are backed by the fact that many of these countries have managed to attract substantial foreign direct investment (FDI) in the last few years. For instance, the financial year 2021-22 recorded the highest FDI into India at $83.6 billion. Similarly, in 2021, Vietnam attracted more than $31.15 billion in FDI pledges, 9% higher than the previous year.
China’s prospects to take a hit
The WEF outlook also notes that amid this shift in supply chains, China is expected to be particularly affected. Most of the chief economists surveyed by the WEF say they expect supply-chain restructuring to have a negative impact on China’s economic prospects.
A classic example is the American tech firm Apple, which has plans to diversify its supply chains to other countries with an aim to reduce its heavy dependence on China. The iPhone-maker has been assembling its products in both India and Vietnam for a few years and aims to leverage its presence in these countries and increase the volume of production.
A 2022 forecast by JP Morgan states that the percentage of Apple products made in China will fall to 75% from 95% by 2025. Apple may manufacture one out of four iPhones in India by 2025.
The WEF survey states, “The twin pressures of deepening geopolitical tensions and intensifying industrial policy mean that further adjustments in the global supply chain are almost inevitable in the coming years.”
Read more at: https://economictimes.indiatimes.com/small-biz/trade/exports/insights/global-supply-chain-relocation-chinas-loss-is-india-vietnams-gain/articleshow/100580950.cms
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