According to the Financial Times, the head of the Confederation of British Industry (CBI) revealed that thousands of British firms are cutting ties with China.
Tony Danker, the CBI director-general, said more executives are shifting their businesses from China to other countries. Their moves are partially in response to the further deteriorating relations between the Chinese regime and the West.
Danker said, “Every company that I speak to at the moment is engaged in rethinking their supply chains.”
He added, “Because they anticipate that our politicians will inevitably accelerate towards a decoupled world from China.”
Both candidates for the next British Prime Minister, Liz Truss and Rishi Sunak, promise to be tough on China during their campaign talks.
In Danker’s view, companies restructure their supply chains to cope with the trend as anti-China sentiment is rising in the West. He noted that eliminating China from supply chains “will be more expensive and thus inflationary and will redefine the trading strategy for Britain . . . it’ll be no longer who we sell to but where we source from.”
In addition, Danker said if the West cuts ties with China, the U.K needs to find new trading partners and re-strengthen with old ones, especially those in the EU. He said, “If the political experts and security experts are right, we are all going to need to be good friends again.”
Not just British firms, companies from other countries, especially from the U.S., are now planning to move some or all of their businesses out of China.
For years, cheap labor has been essential for multinationals building their factories in China. But due to the pandemic, executives must consider cheap labor and shipping costs, among other factors.
The Wall Street Journal cited a survey from McKinsey & Co from supply-chain firms’ executives, reflecting that nearly 20% want to shift their production lines to neighboring countries, double from last year. In addition, over 30% have added suppliers from nearby countries, compared to 15% last year.
Bloomberg also shows data backing the U.S. reshoring move. For example, new manufacturing facility construction in the U.S. has jumped 116% over the past year.