(Yicai Global) June 8 — China will continue to maintain its commanding position in the global supply chain over the long term, despite Covid-19 outbreaks, rising labor costs, and other factors, according to UBS Securities.
Some multinational companies have shifted production out of China in recent years, a move that was further fueled by recent lockdowns in the country in response to a Covid resurgence. But in a report released yesterday, UBS Securities said China’s dominance in manufacturing will not change, given its large consumer base, advanced infrastructure, efficient logistics system, and skilled workforce.
China was still the world’s largest shoemaker last year, for instance, despite footwear businesses moving production to Southeast Asia over the past decade, according to the report by the Chinese joint venture of Swiss investment bank UBS. And the willingness to shift production out of the Chinese mainland has fallen to 41 percent from 58 percent over the past year, according to research by UBS Evidence Lab.
China’s foreign direct investment climbed 15 percent over the past decade, supporting UBS Securities’ opinion. FDI growth in other Asian countries was higher than in China, but considering the country’s high base, the increase was still significant.
As China ramps up investment in key tech sectors along the supply chain, opportunities will arise in areas such as auto production, automation, fifth-generation technology, artificial intelligence, drones, and in emerging industries such as water management, recycling, clean energy, and cutting carbon emissions, the report said.
China’s complete and large-scale manufacturing supply chain is irreplaceable in terms of mid-stream production and intermediate products, the report said. Apple moved some low-end manufacturing units to countries with lower costs, but it has also added new Chinese suppliers that make more knowledge-intensive intermediate products with higher added value, such as optical components, sensors, and connectors.
Editor: Futura Costaglione
