2024 Market Outlook – Navigating transitions. Seizing opportunities.
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US is importing more from low-cost Asian countries
Breakdown of US imports from Asian countries (%)
8.5%
9.4% 4.2% 5.2% 6.9% 7.1%
9.5%
9.7%
10.3%
4.7% 5.3% 6.2% 5.8% 3.7%
5.6% 7.6% 6.3% 4.7%
5.9% 8.1% 5.0%
5.1% 8.7% 5.5%
7.5%
7.9%
8.2%
9.8%
10.6%
11.8%
65.6%
59.0%
56.2%
53.5%
50.7%
2018
2019
2020
2021
2022
China (incl Hong Kong)
Vietnam India
Taiwan
Malaysia
Thailand
Others
Source: Eastspring Investments, 2022 Kearney Annual Reshoring Index
CHINA IS REBALANCING, NOT RETREATING --------------- Despite the challenges, China is unlikely to lose its manufacturing edge. Decoupling from China will be a daunting task for multinational companies given the country’s excellent infrastructure and connectivity, and extensive networks of reliable suppliers. Besides, China is also moving up the manufacturing value chain facilitated by huge investments in technology, big data, robotics, and artificial intelligence. Manufacturers also locate their factories in China to tap into China’s big consumer market more easily.
India is yet another beneficiary of the supply chain relocation given that its labour cost is almost one-sixth that of China. The Indian manufacturing sector is already seeing robust growth and increasing FDI. Over the longer term, continued reforms and the revival of private capital expenditure will be key in sustaining India’s growth. There are early signs of private capex recovery in industries such as cement, residential and commercial real estate, industrial machinery, and electronics. All said, we do not expect China to be decimated by the supply chain relocations, but we do see friendshoring and nearshoring creating outsized opportunities for domestic manufacturers and suppliers in some EMs. However, a point to note is that it will likely add to inflationary pressures for global consumers.
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