贸易战阴影下全球供应链重新部署-上海美国商会-2019.5-40页.pdf

www.amcham-shanghai.orgFEATURES P.05PwC on redeploying MNC supply chainsPOLICY P.21George Magnus on Chinas economic and industrial policy challengesMEMBER NEWS P.32Highlights of the AmCham Shanghai 2019 Pirates BallJoin our WeChat:The Journal of the American Chamber of Commerce in Shanghai-Insight May/June 2019INSIGHTTENSIONSTARIFFSCOSTSRETHINKINGSUPPL Y CHAINSCHINAOPPORTUNITYMay/June 20193FEATURESamcham shanghai PresidentKer gibbs VP of Administration&Finance helen renVP of Operations shilPi bisWasDirectorsCommittees Jessica WuCommunications&Publications ian DriscollGovernment Relations&CSRVeomayoury TiTi baccamTrade&Investment Center leon TunginsighTEditor Doug sTrubContent Manager Juliusz mosoniDesign gabriele corDioliPrintingsnaP PrinTing,inc.insighT sPonsorshiP (86-21)6279-7119story ideas,questions or comments on insight:Please contact Doug strub doug.strubamcham-shanghai.org insight is a free monthly publication for the members of The american chamber of commerce in shanghai.editorial content and sponsors announcements are independent and do not necessarily reflect the views of the governors,officers,members or staff of the chamber.no part of this publication may be reproduced without written consent of the copyright holder.shanghai centre,suite 568 1376 nanjing West road shanghai,200040 china tel:(86-21)6279-7119 fax:(86-21)6279-7643 www.amcham-shanghai.orgspecial thanks to the 2019 amcham shanghai Presidents circle sponsorsINSIGHTThe Journal of the American Chamber of Commerce in Shanghai-May/June 2019FEATURESMNC Supply Chain Redeployment Under the Shadow of Trade War PwC looks at how companies are adjusting supply chains in an era of tariffs Four Forces Shaping Change in Chinas Food Supply Chain IGD on four trends impacting food and grocery supply chains in 2019 and beyondMitigating the Risks of Supply Chain Disruption in ChinaThe rules of the game have changed.Are you doing enough to protect your company?Moving Out of the Middle Kingdom:Manufacturings ASEAN Migration Tractus Asia looks at ASEAN supply chain alternativesOn the Front Lines of the Shift Q&A with Dan Krassenstein on his experience with Asian supply chain shiftsOutside the Box With FedExs Eddy Chan on managing a logistics companyPOLICY PERSPECTIVESRed Flags on the HorizonGeorge Magnus answers questions on Chinas economy and industrial policyChinas Innovation Policy and the Quest for Semiconductor AutonomyQ&A with Dieter Ernst of the Centre for International Governance InnovationChina and the Middle-Income Trap Can China escape the middle-income trap?212528MEMBER NEWSBoard of Governors Briefing Notes from the March and April board meetingsAmCham Shanghais 2019 Pirates Ball Highlights from this years charity ballEvent Report Recap of selected events from the past two monthsMonth in PicturesSelected photos from the past two months AmCham eventsWeekly Briefing Bits&BobsIrreverent takes on the news 3132343638050911141719www.amcham-shanghai.org4The world is anxiously awaiting the final outcome of the U.S.-China bilateral trade talks.Most analysts believe there will be an agreement in the near future between the two countries that will address bilateral trade imbalances and structural issues in China such as market access and IP protection.One ramification of the U.S.-China trade tensions is a reassessment by multinational compa-nies of their global supply chains.In recent decades China has become the worlds factory by developing critical manufactur-ing capabilities and first-class infrastructure for global supply chains.As a result,MNCs rely on China for manufacturing ranging from iPhones to aircraft engines.“Made in China”has become a ubiquitous label not only for consumer products but also for industrial products sold around the world.Following the punitive tariffs imposed by the U.S.and China as a result of long-standing disagreements in the bilateral trade relationship,some MNCs are reeval-uating their supply chains to determine if they should develop an alternative to current strategies that rely too heavily on China.China has seen significant increases in labor and other costs over the past few years.Its competitive advantage in low-cost labor is disappearing.Some MNCs that rely on labor-intensive manufacturing such as shoes or garment manufacturing have al-ready moved their factories to more afford-able countries such as those in Southeast Asia and South Asia.However,for MNCs that require an ecosystem of efficient and innovative suppliers with skilled labor and modern infrastructure,moving their supply chains away from China is no easy decision.Take Apple as an example.While Apple products are mostly developed in Califor-nia,the company relies on an ecosystem of global suppliers that provide stellar products and services within tight timeframes at a cost that represents the best possible value to its customers.Over the years,China has become the most critical source of suppliers for Apple products such as iMac,iPad and iPhone.In fact,out of Apples top 800 suppliers around the world,380 are located in mainland China,including 29 owned and operated by Foxconn.Headquartered in Taiwan,Foxconn Tech-nology Group is a major electronics contract manufacturing company for Apple.Since 2001,Foxconn has built 29 factories in main-land China to make Apple products,among others.The bulk of Apples iPhone line,for instance,is made by Foxconn in mainland China.Foxconns first mainland factory was in Shenzhen.With nearly half a million em-ployees,it created an entire city called Fox-conn City.As an OEM,Foxconn combines manufacturing efficiency with innovation.It is able to make high-quality Apple products with relatively low costs and thin margins.Thats why Apple suppliers in mainland China add only about 5%value to an iPhone when it is shipped to the U.S.,while the rest of the added value goes to Apple and its suppliers in the U.S.,Japan,Germany,etc.Such value is why OEMs in mainland China are hard to replace.While one may argue who is the winner or loser in global supply chains,there is no doubt that Apple and its shareholders are winners;Foxconn and its 29 manufacturers in mainland China are winners;the 380 suppliers in mainland China that make Apple products are win-ners;and of course,consumers around the world including those in the U.S.who love iMacs,iPads and iPhones are winners.Foxconn has a factory in India to make iPhones and,according to press reports,plans to increase its production capacity in India.While Foxconn may wish to diversify its production from China,it would be hard to relocate its 29 factories from China to low-er-cost countries because those countries may not have adequate infrastructure,skilled labor,and an ecosystem of capable suppli-ers to meet Apples stringent requirements for quality,service,efficiency,speed and flexibility.It would be inconceivable for many of the 380 Apple suppliers in mainland China to relocate to other countries,at least not in the near future.The Apple suppliers would only consider relocation if the alternative is feasible and offers better commercial terms.There are millions of suppliers in China like Foxconn that play an integral role in global supply chains.They have been inte-grated into global supply chains as a result of globalization,and they are making pos-itive contributions to the world economy.While MNCs may want to consider diversi-fication as a supply chain strategy,it would make no commercial sense to arbitrarily“decouple”China from global supply chains.This issue of Insight focuses on the topic of supply chain strategy under the current U.S.-China bilateral trade tensions.Several experts offer their analyses of and insights into the subject.I hope our member com-panies find the information helpful as they prepare themselves for a new era of U.S.-China relations.IChairmans nOTEERIC ZHENGChairman of The American Chamber of Commerce in Shanghaimay/June 20195FEATURESBackground and impactMarch 22,2018 marked the start of the U.S.-China trade conflict.About$250 billion worth of exports from China to the U.S.have been impacted by the additional 10%tariff,which may increase to 25%if negotiations fail.Consequently,multinational cor-porations(MNCs)whose business models include making their prod-ucts in China and selling them to the U.S.,have been hit heavily and urgently need to find ways to work around any tariffs.As the latest tariff list drafted by the USTR illustrates,a wide range of products are included.In terms of percentage of exports to the U.S.in 2017,figure 1 shows that trans-portation and its accessories,elec-tronics and medical devices,and plastic goods are the industries that exported the greatest portion to the U.S.Therefore,these sectors are more likely to face challenges.Trade data shows that in 2017,the U.S.exported around$130 billion worth of goods to China while receiv-ing over$500 billion worth of goods from China.Given the imbalance of trade volume,China is unable to match the tariff dollar-by-dollar,and thus has been seeking qualitative ways to respond.Figure 2 shows re-sponses from over 430 MNCs about barriers they have experienced be-sides the added tariff.Supply chain redeployment andits applicabilityTo avoid the heavy tariffs levied by the U.S.as well as qualitative restric-tions imposed by China,one solution is for MNCs to redeploy their supply chains.Interviews with executives of U.S.companies that are considering moving their factories out of China show that ASEAN countries with cheap labor costs and lower exposure to risk from international trade disputes have become the ideal locations to which to redeploy supply chains(figure 3).Some American fashion brands and some electronic component compa-nies have moved parts of their supply chain to ASEAN countries.The magni-tude of the shift is reflected in ASEAN countries export volumes;one exam-ple being Cambodias shoe exports,which increased 25%YoY.But relocation is not without risk.Since joining the WTO,China has MNC Supply Chain Redeployment Underthe Shadow of Trade WarSteven Zhong Partner,PwC Management Consulting.Steven Zhong is a partner in the PwC operations&supply chain consulting prac-tice in China.He has served predominately global and China leading retail and con-sumer product companies in the areas of bu-siness strategy and operating model develop-ment,growth and profitability improvement,end-to-end operational efficiency improvement,omni-channel and digital operations,M&A,etc.Figure 1.Export volume of industries impacted by U.S.tariffs(in thousand USD)Spacecraft and accessories 1,259,668 3,671,259 34.3%Railway vehicle 3,185,704 10,971,030 29.0%Vehicle and accessories 15,135,660 67,417,698 22.5%Plastic goods 15,768,677 71,308,640 22.1%Electronics 107,119,534 600,292,224 17,8%Optics,medical devices 9,659,616 70,815,864 13.6%Vessels and accessories 119,954 22,908,494 0.5%Industries Exports to U.S.Total Exports U.S.PercentageSource:WIND,PwCFigure 2.Non-tariff barriers experienced by MNCs30.00%25.00%20.00%15.00%10.00%5.00%0.00%27.10%23.10%19.20%14.80%5.60%5.10%3.90%Source:AmCham Shanghai&AmCham ChinaIncreasedinspections(tax,environmental,HR,etc.)SlowercustomsclearanceOthercomplicationsfrom increasedoversightSlower licensedapprovalIncreaseddifficultycompletinginvestment dealsProductsrejected bycustomsRejectedlicenseswww.amcham-shanghai.org6become the center of world manu-facturing,and has invested heavily in logistics infrastructure and cultivated a highly efficient and effective work-force over the years.Figure 4 com-pares Chinese labor productivity and that of the top four ASEAN countries:one Chinese worker can manufac-ture about the same value of goods as four workers from four ASEAN countries combined.Besides labor productivity,infra-structure is another key variable in the production equation,and ASEAN countries also fall behind China in this category.The World Bank ranks over 160 countries in terms of their logis-tics performance in six categories,and Chinas infrastructure ranks far ahead of all ASEAN countries(besides Sin-gapore,which is not a typical manu-facturing country like other ASEAN countries).Other category rankings are included in the chart below,and the overall landscape is clear:from a cost-performance perspective,China still leads the world in manufacturing,and any redeployment without a care-ful assessment of impacts may result in slower customs clearance and de-livery times,lower quality goods,and a less productive workforce.In addition,an aggressive supply chain relocation to ASEAN countries may drive up the cost of labor and production,further shrinking the benefits of relocation.Certainly,the impact of the trade conflict and the allure of cheaper labor costs in ASEAN countries have given MNCs reasons to consider redeploy-ing their supply chains,but problems related to ASEAN countries logistics and productivity as well as the risks that come with the redeployment may force executives to think twice before taking action(figure 5).Ways to play:Check these boxesbefore departureRedeploying ones supply chain away from China is not a“one size fits all”solution.As such,the following is a set of topics/concerns companies should pay attention to,should they decide they need to redeploy:1.Selective redeploymentLow-tech goods and low-value manufacturing supply chains would be the easiest and the least im-pacted redeployment.Key consid-erations include,but are not lim-ited to,costs of relocation,access to suppliers,labor market(size,wages,skill development),sup-porting industries,logistics and in-frastructure,and the tax and regu-latory regime.However,supply chain redeploy-ment of high-tech manufacturing and categories such as machinery,transport,and IT would be more difficult.China has invested heavily in infrastructure to ensure the qual-ity of high-end products(in 2017,China invested 19.36 trillion RMB in manufacturing,exceeding all ASEAN countries combined).Since customers expect top quality from high-end products,ASEAN coun-tries may be unable to meet their expectations.2.Beware of implicit influencesRedeploying a supply chain away from China could result in retaliatory actions at the MNCs expense.China could use its bargaining power to prohibit an MNCs prod-uct sales in China,and many other actions listed in figure 2,should the MNC decide to relocate its supply chain.To counter these influences,MNCs could export semi-finished China-made products to other coun-tries without heavy U.S.tariffs,and re-export to the U.S.after completing assembly/production.This action re-quires the value portion of the prod-uct made in China to be less than that of the finishing countries,and therefore requires calculated supply chain deployment.3.Favorable policiesASEAN countries have different trade policies and terms with other countries,and MNCs should identify favorable policies and take these into consideration.For example,certain imports from Cambodia are granted zero tariffs by the U.S.,and Vietnam just signed a bi