According to a trade research by Allianz Trade, efforts for a complete decoupling remain “difficult, if not impossible,” with China continuing to be a “critical supplier” to the global economy.

European businesses are optimistic about their prospects in China despite discussions of decoupling and derisking from the nation; over 40% of German and Spanish businesses and over 30% of French businesses anticipate growing their supply chain presence in China.

This is supported by the research, which found that just 27% of American businesses asked intended to grow into China.

According to the survey, which was lead by Ana Boata, Head of Economic Research at Allianz Trade, “European companies are clearly less worried than U.S. firms.”

More than 3,000 businesses in China, France, Germany, Italy, Poland, Spain, the UK, and the US were asked about their expectations for international trade in 2024 as part of the Allianz Trade study.

According to the trade study, over 33% of participants want to expand their presence in China, whilst just 11% indicated they would reduce it.

According to the Allianz Trade research, “China remains the world’s critical supplier, from which a full decoupling seems difficult, if not impossible.”

In the meantime, businesses in China are becoming more confident about exporting to foreign nations.

In China, which is the second-largest exporter of goods to the United States after Mexico, more than one in ten exporters predicted a rise in shipments of more than 10%.

According to statistics from the study, this is greater than other nations, where most anticipated a 2% to 5% growth in exports.

“As compared to other countries in the survey, Chinese exporters exhibit greater optimism,” stated Francoise Huang, senior economist for Asia Pacific at Allianz Trade.

“Overall, exports suffered last year due to a global trade recession.” Thus, we believe that survey participants are especially upbeat,” Huang stated.

Businesses may not be able to fully detach supply chains from China, but diversification is still a possibility.

Huang stated, referring to the 10-member Southeast Asian trade bloc, “Companies that are looking at diversifying their supply chains are looking at the rest of Asia Pacific, with a good focus on ASEAN.”

According to the research, while exporters may have more optimism for 2024, they are also more worried about the geopolitical environment and the potential consequences of labour, funding, and input shortages.

Risks associated with politics and protectionism were cited as the top concerns by almost 73% of those polled. According to the research, 28% of respondents mentioned the risk of input shortages, and 31% of respondents ranked transport concerns among their top three risks, indicating that exporters are still concerned about supply chain disruptions.

In their efforts to diversify, 48% of American exporters that either produce in China or have suppliers there said they would take Latin America and the Asia-Pacific region into account.

According to the research, “reshoring and moving within the same region seem to be the preferred trends.” It also stated that just 5% of respondents believed that reshoring trends would reverse in the next two years, while almost 30% expected an increase.

Trade battles between the United States and China pose the greatest danger to businesses with extensive supply chains and more than 50% of international manufacturing, while the Russia-Ukraine war remains the top geopolitical risk that businesses anticipate impeding supply networks.

(Adapted from CNBC.com)

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