China’s dominant freight role to survive current challenges

2/25/2020

Despite its trade war with the US and more recently the impact of the coronavirus, China’s dominant role as a fulcrum of global supply chains is set to remain intact, according to Essa Al-Saleh, CEO of Agility Global Integrated Logistics.

“One can well understand that the combined effects of these two ‘disruptive’ events have left some shippers scratching their heads in dismay and thinking whether their supply chains are too exposed in China and are considering the relocation of production elsewhere, with perhaps Vietnam and India at the top the list,” he told Lloyd's Loading List in an interview.

“However, China is in a league of its own in many regards. There’s a big ecosystem around the Chinese manufacturing base which would be very difficult to displace. There are the plants, there are supplier clusters in support over there, financing arrangements in place, skills and capabilities on hand, and a cohesive ports infrastructure is at the heart of that. 

“It’s easy to do business there; it’s an extremely attractive package. On top of that, it takes years to make large-scale changes to supply chains. So, I think China’s too important, too big, too entrenched in the supply chain infrastructure and ecosystem to be seriously challenged; but, of course, only time will tell.”

His comments also reflected the findings of the 2020 Agility Emerging Markets Logistics Index, the company’s 11th annual snapshot of industry sentiment and ranking of the world’s 50 leading emerging markets, although that was conducted before the emergence of the coronavirus.

Commenting on how Agility’s customers have “managed” the US-China trade war, Al-Saleh noted: “The consequences of this have been very challenging, and the reality is a lot of customers have moved certain production out of China to avoid the tariffs.

“While these moves would appear to be temporary in nature, we also observe that some customers are looking for longer-term solutions to avoid any issues of this kind in the future. I suppose the bottom line is, if these ‘disruptive’ patterns (in China) continue in the long-term, that would be a cause for worry, and decisions would have to be made.”