For many businesses, adjusting supply chains in the wake of the coronavirus pandemic means expanding from China, not necessarily leaving, some analysts say.
A key component of that strategy is building flexibility — the ability to switch quickly from different production sources in response to future challenges, Mattios said. "We're not going to see China drying up on manufacturing all of a sudden,“ he said.
"A big of the exporting manufacturing capacity that China had could potentially be shifting out of China, but a lot of the capacity for internal consumption in China will stay in China."The country has also become the largest market in the world for many products such as automobiles, luxury goods and mobile phones, accounting for roughly 30% or more of their consumption worldwide, the McKinsey report added. Ultimately where we're heading to is more fragmented manufacturing — many small factories of the world.Covid-19 has infected more than 5.4 million people and killed at least 345,000 people, including more than 4,600 in China. The pandemic disrupted the global flow of goods, which in some industries was already shifting in light of U.S.-China trade tensions and cheaper labor costs in countries outside China. In an effort to control the virus, more than half of China extended the Lunar New Year holiday by at least a week. Those regions accounted foraccording to CNBC calculations of data accessed through Wind Information. From a business perspective, building resilient supply chains in the wake of the coronavirus also means recognizing that a pandemic could happen anywhere, said How Jit Lim, a managing director with consulting firm Alvarez & Marsal. Lim is based in Shanghai and focuses on supply chain management. He pointed out that a decision to move production requires long-term planning and commitment, and is not something that can happen overnight, especially as businesses try to conserve costs as they struggle in an economic downturn. "China is still a very attractive total supply chain solution," Lim said. "There are very few countries in the world where you can find almost everything you need to build something ... The labor force maturity and the talent pool around is still very attractive in China." Still, a key factor that could affect supply chains is politics, Lim said, noting such changes do not necessarily result in greater business efficiency.Just as some countries are pressuring companies to leave China and return to their home countries, Beijing is building its case for why companies should stay. In press conferences this month, Chinese officials have emphasized the attractiveness of their market to businesses. China's economy contracted 6.8% in the first three months of the year, with exports plunging 11.4% in yuan terms. The secondary, or manufacturing, sector accounted for 27.6% of jobs in 2018, at more than 214 million, according to
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