China may lose Manufacturing Dominance: The Covid-19 pandemic is gradually changing the global manufacturing industry as companies look for alternatives to China as a source of supply. There are early signs that India could benefit from transferring some technology to India. Global companies may adopt a China+1 or China+2 or +3 strategy, as Apple did. However, India faces stiff competition from Vietnam and several other Asian countries. But India could replace China as the engine of global growth.

Declination of China’s Manufacturing core due to Covid

For nearly three decades, the Chinese economy has grown at a nearly double-digit rate. Abundant cheap labor, excellent infrastructure, and a regulated exchange rate make China the world’s workshop. But Covid has significantly weakened China’s appeal as a global manufacturing hub.

“China is losing more manufacturing and export market share in key sectors to Asian neighbors”, with recent “Zero Covid” policies a significant factor leading to further erosion in its long-time dominance of global trade.

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China’s ‘Zero Covid’ policy is a big factor, with the Port of Ningbo, the world’s largest port, the latest to be impacted.

Economic activity in China continues to follow the ups and downs of the pandemic, with outbreaks and slowdowns followed by uneven recoveries. According to Navigating Uncertainty, the latest China Economic Update published by the World Bank today, real GDP growth is expected to reach 2.7 percent this year before recovering to 4.3 percent in 2023, amid a reopening of the economy.

The data indicated a further deterioration in economic conditions as lockdowns in many cities, a crisis in the real estate sector, and weakening global demand
for a bumpy road ahead, despite Beijing abandoning some of the world’s strictest anti-virus restrictions after widespread and rare public protests.

Data from the National Bureau of Statistics (NBS) showed industrial production rose 2.2% year-on-year in November, below the 3.6% rise expected in a Reuters poll and up from 5.0% growth in October. It slowed down, recording its slowest growth since May, partly due to turmoil in main manufacturing hubs Guangzhou and Zhengzhou.

Retail sales fell 5.9% amid a broader downturn in the services sector, also his biggest drop since May. Analysts expected the spending gauge to shrink by 3.7%, accelerating from its 0.5% plunge in October.

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