Chinese Official Calls for Closer Supply Chain Partnerships ‘With All Countries’
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As the U.S. and its allies try to de-risk their supply chains by decoupling with China, Chinese Premier Li Qiang called for more cooperation from Western peers—many of whom are now implementing “China plus one” sourcing strategies or shifting away from the market entirely.
“We are willing to build closer production and industrial supply chain partnerships with all countries,” Li told attendees at the opening ceremony of the inaugural China International Supply Chain Expo (CISCE), adding that the international community must be “more wary of the challenges and risks brought about by protectionism and uncontrolled globalization.”
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Li’s speech came less than a day after President Joe Biden first convened with his newly formed council on supply chain resilience, and two weeks after he met with Chinese President Xi Jinping in San Francisco. During that meeting, the heads of state agreed to resume military-to-military communications, reestablish the presidential hotline between Biden and Xi, and work to curb fentanyl production.
The expo, organized by the state-run China Council for the Promotion of International Trade (CCPIT), runs from Tuesday to Saturday, and is Beijing’s latest bid to increase foreign investment in China, which has dropped to historic lows.
In early November, China recorded its first-ever quarterly deficit in foreign direct investment (FDI), with direct investment liabilities running a deficit of $11.8 billion during the July-September period. That marks the first quarterly shortfall since China’s foreign exchange regulator began compiling the data in 1998.
And this year, Mexico surpassed China as America’s top trading partner, with bilateral trade totaling $263 billion during the first four months of this year, according to the U.S. Department of State.
The value of announced U.S. and European greenfield investments into China—meaning a company establishes a subsidiary in the country and invests in local facilities—dropped to less than $20 billion in 2023, down drastically from a peak of $120 billion in 2018, according to economic research firm Rhodium Group.
An annual survey by the U.S.-China Business Council conducted in June and July showed 35 percent of respondents have cut or paused their investments in China over the past year—a record high and far above the 22 percent who said that in last year’s survey. Of those that reduced or stopped these investments, 73 percent blamed an increase in costs or uncertainties from tensions with the U.S.
And when compared to just three years ago, 83 percent of the 117 respondents—two-thirds of which have operated in China for more than 20 years—said they were less optimistic of the current business climate in China.
Approximately 20 percent of the foreign companies exhibiting at the expo were U.S.-based, according to the CCPIT, with major tech firms including Amazon, Apple, Tesla, Intel and Qualcomm in attendance.
China’s concerns at the event come as fewer Chinese products are entering the U.S. Chinese imports into the U.S. in October totaled 886,842 20-foot equivalent units (TEUs), down 11.6 percent from their highs in August 2022, according to a recent report from Descartes Systems Group.
China represented 38.4 percent of total U.S. container imports in October, the Descartes report said, a decrease of 0.9 percent from September and down 3.1 percent from the high of 41.5 percent in February 2022.
Many apparel and fashion brands have been scrambling in recent years to eliminate goods and raw materials sourced from China from their supply chains, namely due to allegations of forced labor in the country’s Xinjiang Uyghur Autonomous Region (XUAR). Under the Uyghur Forced Labor Prevention Act (UFLPA), U.S. importers bear the burden of proof that their products have not been produced either fully or partly in the region.
The fashion industry’s moves appear to be making an impact. According to the Department of Commerce’s Office of Textiles and Apparel (OTEXA), year-to-date textiles and apparel imports from China through September 2023 tumbled 18.8 percent to 22.6 billion square meters equivalent (SME). The total dollar value plummeted even further—26.8 percent—to $19.2 billion.
Earlier this year, 40 percent of respondents to USFIA’s annual Fashion Industry Benchmarking Study said they sourced less than 10 percent of their apparel products from China, up from 30 percent in 2022 and 20 percent in 2019.
On top of that, 61 percent said they no longer used China as their top supplier in 2023, up from 50 percent last year.
Geopolitical tensions including an ongoing trade war with the U.S. and concerns over a future Chinese invasion of Taiwan also have played a role in the supply chain shift. Since entering the White House in 2021, the Biden administration has kept in place Trump administration-imposed tariffs on Chinese imports.
