The trend: US retailers and brands have begun the slow, costly process of shifting manufacturing away from China to avoid supply chain disruptions caused by the country’s stringent COVID lockdowns.
Accelerating an existing trend: While US investment in China was already slowing before the pandemic, that trend accelerated in recent years. For example, US firms invested just $8.4 billion in China last year, which is a significant drop from $13 billion in 2019 and nearly half the high of $15.4 billion in 2012, per Rhodium Group reported in The Wall Street Journal.
It pays to diversify: It has been a challenging period for US companies that rely on Chinese manufacturing. They endured four years of US-China tensions during the Trump administration, and roughly two years of rising supply chain costs and delays. That turmoil has driven several US companies to diversify their supply chain networks.
The big takeaway: The uncertainty that China’s zero-COVID policy poses has brought to light the need for retailers and brands to diversify their supply chains if they want to avoid disruptions.
This article originally appeared in Insider Intelligence's Retail & Ecommerce Briefing—a daily recap of top stories reshaping the retail industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.
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