As Bain vice president Jerry Mattios noted, supply chains were disrupted at the beginning of the year due to the shutdown of the Chinese economy, which led to numerous disruptions.
Therefore, the main issue for international corporations, he predicted, would be to increase production sustainability. And this also means the search for new countries and regions for opening factories.
According to the expert, an immediate decline in production in China should not be expected, but most of the capacities working for export can be removed from the country. Growing domestic demand will be able to support the economy, since the PRC will keep its production in any case.
Jeet Lim, Managing Director of Alvarez & Marsal Consulting, confirmed that moving production is a long process and China is still a very attractive place to set up factories. However, due to the situation with coronavirus and political pressure, efficiency for companies may be relegated to the background.
Last week China for the first time refused set targets for GDP growth for the current year. Beijing acknowledged that the coronavirus pandemic forces a number of factors to be taken into account, the effects of which are difficult to predict.
In 2019, China’s GDP grew by 6.1 percent – this is the minimum value for 29 years. One of the main problems was the trade confrontation with the United States. In January, the parties signed the first part of a comprehensive deal, but in recent weeks, media have reported that Beijing may log off from the agreement, because it did not receive any benefits. US also ramping up pressure to China, including toughening the conditions for entering American exchanges for Chinese companies.