Coronavirus: most US firms not switching sourcing from China

29 April 2020

Almost three quarters of US firms sourcing from China have no plans to find alternative suppliers outside the country as a result of coronavirus, according to a survey.

The poll, conducted by American Chamber of Commerce organisations AmCham China and AmCham Shanghai, found 72% of companies had no plans to relocate sourcing, while 24% said they would adjust to partial sourcing outside of China. Only 4% said they would move operations out of China or to other parts of China.

More than eight in 10 (84%) had no plans to move production or supply chain operations to other regions or other parts of China.

And 68% of respondents saw a return to normal activities in China within the next three months.

A further 28% believed it would take between three and six months to achieve the return to normality.

“In contrast to some global narratives, our China-based data suggests that the majority of our members will not be packing up and leaving China anytime soon,” said Alan Beebe, president of AmCham China.

“Of course, certain companies in certain industries may diversify away from China or even expand manufacturing operations in the US given the current climate. But this is a costly, time consuming, and largely irreversible process.”

Almost half (44%) of respondents thought it would be impossible for the two economies to decouple, down from 66% in a 2019 survey. However, 20% thought that the coronavirus pandemic would accelerate the process of decoupling.

Roughly half of firms were running below normal capacity, with 68% reporting that demand for products and services was below normal.

Only 16% of respondents believed the coronavirus pandemic would have a strong impact on imports, while 36% said it would have a limited impact.

Almost one in 10 (8%) thought the outbreak would have a strong impact on exports while 44% believed it would have a limited impact on them.

However, 40% of those canvassed believed that demand for their products would be lower than normal, and 28% thought it would be significantly lower than normal.

Logistics was ranked as the biggest supply chain challenge over the next month by 40%, while 28% picked suppliers not operating at normal capacity as the biggest challenge, and 24% ranked insufficient labour as the greatest problem.

Two linked surveys were conducted by the chambers with PwC China on the supply chain impacts of the coronavirus outbreak and trade disputes on US companies operating in China.

The most recent survey was conducted in March 2020 with of 25 of the 70 companies that answered the first survey, conducted in October 2019.

The first survey showed that 90% of US companies’ supply chains were affected by the US-China trade dispute primarily through diversification of supply base, risk management, and cost control.

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