Many manufacturing companies are leaving China after the spread of a novel coronavirus across the world, reported by the top news agencies.
China started to grow as a manufacturing giant in the 1970’s when the Western World decided to explore the cheaper labor prices of the country. To facilitate the change, China constructed special economic zones and attracted many companies from the U.S and Europe.
Even fortune 500 companies started to move their facilities in the 1980s. By 2010, one-third of the global manufacturing companies were in China making the country a super nation positioned after the United States.
From shirt buttons to Christmas lights everything was manufactured in this extremely populous country. But in 2020, after the pandemic shook the world things are not same for China anymore.
Why China is Losing the Manufacturing Might?
A Trade War between China and the Trump administration in 2018 was the first event before the pandemic made the global manufacturers reconsidering their position in China. Chinese labor cost was also gradually increasing from $150/year to $14,000/year making it difficult for the manufacturing companies to make a profit from the business.
So many top brands started looking for alternatives like India, Indonesia, Vietnam, and other Asian countries. These countries are trying to use it as an opportunity. Already Samsung decided to move its facilities from China to India in phases.
Japan is also asking its companies to move out of China. Japan already offered $2.2 billion to the companies to make it happen. 50 U.S companies already reported a move from China to other countries in an attempt to change the “one country for goods” term.
Impact of the U.S Security Threat by China
Apart from the COVID pandemic and the trade war, China has been losing many manufacturers due to the blame for security theft in U.S soil. The government of the U.S and the U.K officially banned Huawei, a top telecommunication company in China with the allegation of stealing data for the Chinese government.
The U.K already declared that they will stop Huawei from the 5G transformation project to save the privacy of the country. Such unprecedented retaliation from the Western World might soon change the balance of power in the manufacturing domain.