The RWI/ISL Container Throughput Index shows severe global trade disruptions hit ports in mainland China at the outbreak of the pandemic. But since then, Chinese ports have rebounded swiftly to pre-pandemic levels, firming despite setbacks in May and December 2020.
On the other hand, ports outside mainland China have subsequently experienced deeper disruptions. While throughput is now accelerating, it still lags that of Chinese ports.
There are barriers to a growing share for Asia ex-China. Significant upfront investments, complex supply chain relations and high intangible asset values may prohibit firms from diversifying their sources of supply in sectors such as electronic equipment or automobiles.
Value chains involving homogenous inputs may become more diverse post-pandemic but highly specialised and complex supply chains are harder to diversify.
For example, the right-shoring of regional supply chains accelerated the integration of the ASEAN Quad (Philippines, Thailand, Malaysia and Vietnam) into the global electronics ecosystem. This, however, has not compromised mainland China’s leadership.
The right-shoring strategy is focused on placement of business processes that provide the optimal combination of cost and efficiency. As a result, the low value-added manufacturing activities will continue to shift to locations among the ASEAN Quad while mainland China ascends the value chain.
More than 45 per cent of export orders of Taiwan-based companies were manufactured in mainland China and Hong Kong in 2020, up 0.7 percentage points from 2019.
According to Nikkei Asia’s analysis, mainland China replaced Taiwan as Apple’s top supplier for the first time in 2020. Among Apple’s top 200 suppliers, 51 were based in mainland China and Hong Kong (compared with 42 in 2018) while Taiwan-based suppliers came in second with 48 suppliers (compared with 47 in 2018).
Mainland China is moving to a new kind of dominance. Its increasingly skilled labour force, access to strategic raw materials and highly developed manufacturing capabilities enable its ecosystem to pivot towards high-tech production with a focus on tech sophistication and cost efficiency.
The resurgence of COVID-19 cases, coupled with relatively slow vaccination progress, has seen many major Asian economies outside mainland China undergo multiple rounds of lockdowns and restrictions in 2021.