The evolving global economic landscape and increasing revulsion against human rights abuses are reshaping long-standing dynamics and presenting new geopolitical risks. This shift is exemplified by Apple’s decision to move a significant portion of its iPhone production from China to India, Vietnam, and other markets, as well as the growing reluctance of other multinational firms to operate in China.
According to an expert on trade and financial markets, the principle of evolving comparative advantage, combined with political pressures, is behind Apple’s move. Reports indicate that Apple produced $14 billion worth of iPhones in India in the past fiscal year, sparking speculation about the company’s reduced focus on China. Other technology firms, such as Dell and HP, have also expanded into alternative markets like India, Vietnam, and Mexico.
While concerns about human rights abuses in China, including the alleged genocide of the Uyghur minority, have gained attention, economic factors are driving Western companies to shift production. Higher wages in China compared to countries like India and Vietnam have made it more cost-effective to relocate production. Additionally, tariffs imposed by former President Trump and continued by President Biden have made exporting from China less attractive.
Uncertainty surrounding the supply of critical components to China, as well as the Chinese Communist Party’s unpredictable policies, are also deterring multinational enterprises from operating in China. The CCP’s failure to protect intellectual property rights and its questionable management of domestic companies add to the risks associated with doing business in the country.
Despite China’s economic growth outpacing that of the US, the risks posed by the CCP’s policies and actions are causing concern among corporate leaders. This has led to some multinational firms reconsidering their operations in China and exploring opportunities in other markets.
The combination of economic and political factors is driving a shift in the global business landscape, prompting companies to reassess their operations in China and seek alternatives in more favorable environments. In fact, the concept of “China plus one” has been gaining traction for over a decade as business leaders sought ways to diversify their supply chains in response to increasing labor costs in China compared to other markets, as stated by Mr. Tang. The situation escalated with the Trump administration taking office in January 2017 and the subsequent trade war intensifying in the following year.
“Due to political and cost pressures, transitioning to countries like Vietnam or Thailand became a natural choice. Once the momentum builds and media coverage increases, the shift becomes more evident,” Mr. Tang shared with The Epoch Times. He also noted that this shift was already in progress before 2018 but went unnoticed by the public. Humanitarian concerns and pressure from politicians and NGOs further fueled this transition.
According to Mr. Tang, this trend, exemplified by Apple’s move to India and other tech giants’ relocations, can be attributed to various factors. For instance, Dell announced its plan in 2022 to shift at least 20% of laptop production to Vietnam, while HP redirected its focus away from China, opting for Mexico for commercial notebooks and Thailand for consumer laptops.
Mr. Tang highlighted Mexico as an example of “near-shoring,” leveraging the United States-Mexico-Canada Agreement (USMCA) that replaced NAFTA in 2020, to enhance supply chain resilience.
The political implications of these shifts are not lost on Beijing, with concerns of potential retaliation looming large, Mr. Tang emphasized. Beijing perceives these moves as a critique of its human rights violations and anti-democratic practices disguised as economic strategies.
Despite the benefits of de-risking from China through friend-shoring or near-shoring, Mr. Tang underscored that it comes with its own set of risks. For instance, Beijing imposed a ban on the importation of chips from Micron Technology in May 2023, affecting a significant portion of the company’s revenue. Additionally, reports of Chinese officials no longer using iPhones led to a decline in Apple’s shares in September.
As tensions between China and the US escalate, Mr. Tang expressed hope for a peaceful resolution to avoid further deterioration. He emphasized the importance of maintaining open and fair dialogue between the two countries to prevent potential conflicts. Addressing income inequality is crucial for both governments to alleviate tensions stemming from uneven economic benefits.
The Department of Commerce did not respond to requests for comment at the time of publication. Please rewrite this sentence.
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