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Business
Supply chain giant Li & Fung urges US companies to diversify away from China
CKN
2019/06/18 06:07:02
9,400
Li & Fung; supply chain

Jun 18, 2019 (China Knowledge) - Global supply chain giant Li & Fung is now encouraging its American customers to move production out of China as tariffs on Chinese goods make these goods less competitive for US companies.

Last month, the US had increased tariffs on USD 200 billion worth of Chinese goods to 25% from 10% and even plans to extend these tariffs to another USD 300 billion worth of Chinese imports unless Beijing agrees to change some of its trade and industrial policies that the US has claimed to be unfair.

According to Li & Fung which generates 80% of its revenue from the US for its main supply chain business, the current trade war has forced companies to re-evaluate their business strategy and diversify away from China instead of simply depending on one country to be their sole supplier.

Li & Fung had already started to help some retailers to shift production away from China to Southeast Asia where labor costs and environmental standards are lower even before the trade war. However, the current trade war environment has rapidly accelerated this trend and will eventually result in China taking on a vastly different role for US retailers.

Despite this, China still has an important role to play in the global supply chain industry due to its supply of raw materials, production speed, infrastructure and experience in producing general merchandise.

In addition, the current diversification trend is still limited towards US companies with many European and non-US retailers still choosing to purchase from China as the country still remains competitive in terms of its production speed, supply chain length and lead times.

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