Recently, there is a very lively voice in the international community, which believes that with the surge in confirmed cases in India and Southeast Asia, manufacturing may further return to China. Some phenomena are reflected in trade, and there is also the fact that manufacturing is returning.
So, is this wave of resurgence of manufacturing orders a trend or temporary? How do foreign trade professionals view this return flow? What’s behind the reshoring of manufacturing?
India’s chemical fiber orders are returning in large quantities
China is India’s third As a major trading partner, the ferocious epidemic has directly impacted India’s supply chain. India’s manufacturing industry has declined sharply since the end of March.
Especially in the Indian textile industry, due to the high COVID-19 infection rate in textile factories, most of them have stopped working and reduced production. As a result, a large number of Indian textile orders have returned to China, especially chemical fibers.
In this wave of returning orders from India, the products are mainly mid- to low-end, with profit margins of around 10%. Since the profits of the textile industry are not high, domestic factories are willing to take orders as long as they can absorb them.
The reason why this order can be returned smoothly is that European and American countries currently do not have exclusive policies towards China for chemical fiber textile products except cotton fabrics, which in terms of policy makes it difficult for orders to be returned ” convoy”.
Related company sources revealed that although domestic chemical fiber supply currently exceeds demand, domestic factories do not increase prices when receiving return orders from India.
Moreover, peers do not believe that the reshoring will continue and will not become a trend.
There are two reasons:
First, the epidemic is not expected to last long in India because the vaccine has been released and large-scale It is only a matter of time before we can vaccinate and control the epidemic.
Second, and more importantly, a large number of mid-to-low-end textile orders were previously transferred from China to India, mainly due to the procurement transfer of international manufacturers driven by the European and American governments. This wave of backflow is due to the epidemic causing Indian factories to be unable to deliver on time. These European and American manufacturers had no choice but to transfer orders to China. Once the epidemic improves and Indian textile production resumes, these orders will still flow to India.
Industry insiders expect that the Indian textile industry will recover in half a year. In the future, India will supply mid-to-low-end products to the world: while China’s textile industry will move towards the high-end, and most of the previous relatively mid-to-low-end production capacity will seek transformation or extinction.
Vietnam orders return
Southeast Asian countries were in the first wave of the new crown epidemic At the time of the outbreak, prevention and control were generally in place, and there was no alarming growth curve in confirmed cases and deaths. However, in the new wave of epidemic that has rapidly escalated since May, Southeast Asian countries have been affected one after another.
As the “star” in Southeast Asia in undertaking order transfers, Vietnam has also lost its position. The Vietnamese Minister of Health announced at the end of May that a new mutant strain of the new coronavirus was discovered in Vietnam, which is a mixture of mutant strains previously discovered in the United Kingdom and India. This hybrid of mutated strains is “extremely dangerous,” is more transmissible and can spread rapidly through the air.
Due to epidemic prevention needs, Bac Giang Province in northern Vietnam has temporarily closed 4 industrial parks until further notice. Three of them have Foxconn factories. Bac Ninh Province, where Samsung Electronics’ production base is located, also implemented a curfew on May 25. The shutdown of factories has hindered Vietnam’s domestic production capacity and caused serious economic losses.
In order to prevent the epidemic from affecting production, many companies and manufacturers in the manufacturing industry are now planning to move production lines back to China, where epidemic control is more effective.
Behind the resurgence of orders
In fact, since 2020, The spreading overseas epidemic has begun to force manufacturing orders to return to China. Among the reasons for the reshoring of orders, China’s strong value chain integration capabilities play a key role as a raw material supplier.
Data is the best proof. Last year, China became the world’s largest inflow of foreign capital, reflecting China’s strong advantages in the security and stability of its industrial and supply chains.
The epidemic has had a huge impact on the global economy. Companies and consumers in various countries will be more sensitive to prices, and cost will be an important consideration when making choices.
But back to the micro level, the recent increase in freight costs and the continuous rise of the RMB have impacted the exports of foreign trade companies to a certain extent. It is even more difficult for foreign trade companies to control costs. .
With the return of orders, foreign trade companies should not “make a lonely profit”. </p
