The process of shifting production from China will benefit other Asian countries - Photo: AFP

PhD economics economist Julien Marcilly - chief economist of the French Foreign Trade Insurance Company (COFACE) - assesses the shock of the COVID-19 pandemic to economic activities that have reached a special scale. . Therefore, this unexpected phenomenon leads to overreaction is normal.

Translation affects business strategy

During the COVID-19 health crisis, countries tended to choose a solution to increase protectionism while businesses and even households were revisiting their projected growth or income estimates. Money for backup savings.

This is a short-term chain reaction and takes a long time to clear this reaction.

Answering the newspaper Les Echos (France), chief economist Julien Marcilly said that when thinking about the long-term future, businesses have questioned the shift of value chains from China as well as the degree of dependence of they go abroad.

The COVID-19 medical crisis, just as it was raging in China, showed how quickly a value chain could be disrupted, so businesses had an idea of ​​moving away from China.

In a recent case study, the Japanese government announced that it would support Japanese companies to move their investments out of China to other places without necessarily transferring them to Japan.

The Japanese government has announced support for Japanese companies to move away from China - Photo: SIPA

Shift but still have to depend

In the wave of moving businesses out of China, what is the simplest solution?

Chief economist Julien Marcilly explained, "Ideally, diversify suppliers to ensure that all eggs are not put in one basket. However, it should be borne in mind that even in the case of business relocation, cannot completely eliminate dependence on foreign countries ".

The reason is that the subcontractors are still able to source goods from foreign companies. Thus is no longer a direct dependence, but an indirect dependence.

Countries benefit

Dr. Julien Marcilly proposes that based on the theory of industry specialization, some average emerging countries could benefit from changes in direction.

He stated: "Southeast Asian countries like Vietnam, Thailand, South Korea or Taiwan territory can receive value chains in the electronics industry. Cambodia, Bangladesh and Myanmar have expertise in textiles and apparel and they can strengthen this field ".

In the automotive sector, he said businesses can look to Central European and Eastern European countries, Turkey or even Morocco to find a favorable production environment. Meanwhile, American businesses may choose to invest more in Mexico.

In general, in the electronics field, the process of moving away from China will benefit other Asian countries. In the automotive sector, businesses can build facilities right in their own area.