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Production Shift from China to Southeast Asia


The production shift away from China is accelerating due to their restrictive Covid policies. Now even SMEs are looking for alternative supply chains.


Shanghai
Now even SMEs are joining the shift away from China due to their strict Covid policies

The continued business disruption is pushing companies to seek out other markets as supply chain issues continue.


“While global supply chains are beginning to resume normal operations post-pandemic, we’re seeing an accelerating divergence between China’s supply chain and the rest of the world’s”

Benny Wong, Peeba Supply Chain Director


“For example, Japan saw record Covid cases last week, yet that did not lead to a change in its preventative policies, which is good for predictable supply chain operations and general business confidence,” says Mr Wong. “Meanwhile, China continues to clamp down hard when new cases spring up, leading to uncertainty and business disruption that damages the supply chain.”


With approximately 20% of China under some form of lockdown, over 41 cities have been affected. And Shanghai has recently announced yet another round of mass testing, which will only add to the situation.


“It is creating an acceleration of companies shifting production from China to Southeast Asia, where pandemic policies are looser and more predictable.”

Benny Wong, Peeba Supply Chain Director


“This trend was already well underway among bigger brands, but now we’re seeing even SMEs shifting production, and in growing numbers,” he added.


Even though Covid cases are rising across the world (including the US, the EU and Asia), governments are not putting preventative actions in place. Compared to the business disruption experienced in previous years, we are unlikely to see the same disruption in Q3 and Q4 of this year in these regions.


It is now only China with restrictive policies in place. When will they lift?

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