Global supply chain shifting: The decoupling from China and the identification of the future role of Vietnam.

Abstract

In the last four decades China made massive progress in integrating in the world economy, achieving remarkable results in its economic development pattern and emerging as a trading nation leader. Through favourable tax and duty policies, cheap labor cost, lack of regulatory compliance and a strong working culture China became the world’s factory and one of the biggest receiver of FDI. Companies from all over the world started to offshoring and outsourcing in China obtaining important economic advantages such as lower production cost and the opportunity of exploitation economies of scale. However this process entirely reshaped the supply chain which became global. While moving production to China has brought numerous benefits for US and European companies, the increase in transport distances has also produced numerous challenges and difficulties many of which still persist. Since the eruption of the trade war in 2018 with the Unites States, China started to lose attractiveness due to the increase of tariff and barriers put on its product and forced many firms to confront issues of vulnerability head on. Nevertheless, the impact and tensions of the Sino-American trade war now seem minor compared to the destruction wrought by the COVID-19 outbreak on supply chains. This work, focusing almost exclusively on the upstream supply chain and work in progress (WIP), intends to investigate the causes that are driving many manufacturing companies in China to re-evaluate their supply chain system, and how their strategies may change in the medium short future. The final aim will be to see if the recent coronavirus pandemic and US-China trade war will visibly change the supply dynamics and understand if the companies will decide to transfer production to their home countries, will remain in China or will choose to relocate elsewhere. In this regard we will analyse the case of Vietnam, one of the main developing countries and the best candidate to become the next logistics hub and production centre in the world.