Intl firms bullish on China-based supply chains

Despite the ongoing COVID-19 pandemic, international businesses are looking to increase the proportion of their China-based supply chains, in addition to strengthening their digital propositions to tap into the Chinese consumer market, according to a latest survey released by HSBC.

China's pivotal role in global supply chains has proven durable, according to the report named Navigator: Growing with China, which was released on Thursday. Among the 1,100 polled companies from 11 key markets, about 75 percent expect sales in or exports to China to grow in the next two years.

More than 76 percent US companies say they expect sales in or exports to China to grow, on par with the global average despite geopolitical and trade tensions. Nearly 29 percent US companies expect growth of more than 20 percent, compared to the global average of 21 percent.

About 75 percent of the interviewed companies, including 70 percent of the surveyed US companies, said they expect to increase their supply-chain footprint in China over the next two years.

Stuart Tait, regional head of commercial banking for Asia-Pacific at HSBC, said that China remains a key supply chain hub for international corporations.

"While other markets have become more competitive in areas such as labor costs, they have yet to reproduce the sophisticated ecosystem that has developed in the mainland. Because China's consumer market is growing by the minute, more international companies are adopting an in-China-for-China strategy whereby they produce goods for Chinese consumers," he said.

While global companies foresee a broad-based recovery across the Chinese economy, they are noticeably more optimistic about the outlook of service industries over the next two years. They also note an increasing interest in the quality of products, with more people placing a premium on advanced technology, safety and longevity.

Businesses recognize that the pandemic has accelerated the pace of technology adoption and that they need to join the race if they are to compete.

About 44 percent of the polled businesses are looking to strengthen their digital presence within China by upgrading their technology or e-commerce platforms. Some 63 percent of respondents say they intend to both use proprietary platforms and partner with local digital platforms. While an overwhelming number of businesses concentrate their sales in first- and second-tier cities, strengthening digital platforms will enable them to tap into the huge consumption potential of the wider Chinese market.