The countries with which China has the closest economic relationships are Western, including America, South Korea, Singapore, Japan and Germany and China’s export industries remain highly dependent on Western demand.
Cutting ties with China would be unthinkable for German industry, the chief executive of Mercedes-Benz said recently.
Ola Källenius said cutting ties with China was impossible and the major players in the global economy are so closely intertwined that disengaging from China makes no sense.
In 2000 China was the biggest trading partner of only a tiny number of countries, while today it is the biggest partner of more than 60.
In 2005 China was ascendant in 42% of 120 global manufacturing industries and by 2019 that figure had grown to almost 70%, while the share of export markets that China dominated tripling over the same period, to a third.
In the decade before President Xi came to power the share of Chinese goods exports that were destined for the EU, Japan and America had fallen from 50% to 39%, but it has stabilised since then as alternative trading relationships are simply too small to replace the huge markets of America, Europe and Japan.
While there has been a trend to move production away from China, evidenced by the recent transfer of iPhone production to India (which has been beset by persistent quality issues) and despite companies including Apple, Samsung, Sony and Adidas shifting some production out of China, it only represents an incremental shift.
The absolute scale of production in China is so huge, that even if Vietnam and India grew their production by a bigger percentage than China, the relative scale means that there is still a huge proportion of the global supply chain reliant on China.
The shape of US trade is definitely evolving, with the share of imports from India and Thailand rising 5% and 4%, year over year.
The diversifying growth in production around south-east Asian countries including Vietnam and the growth in emerging markets, including Africa and Latin America, is something we monitor continuously, to support our customers evolving sourcing strategies, but China remains the primary market for all sorts of products.
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