China Covid-zero strategy will continue to constrict supply chains from the world’s most important producer for some time, an expert explains in the following Bloomberg essay:
The ‘Mother of All’ Supply Shocks Lurks in China’s Covid Crackdowns
The paradox of China’s aggressive “Covid-zero” strategy is that although it helps contain the virus spread, to do so usually requires significant disruption or lockdowns as authorities limit the movement of people. The repeated mandatory testing of whole cities can interrupt [businesses] and production, although nothing to the extent seen in places like the U.S., where the omicron wave caused an estimated 5 million people to stay home sick last week.
That risk of disruption for factories is already prompting companies to spread their risk by ensuring they have alternative production facilities, according to Stephanie Krishnan, a supply chain expert at IDC in Singapore. “We are starting to see companies mitigating risk, seeing where they can increase capabilities for production of different products in different factories so they can shift that around,” she said.
Krishnan doesn’t see an end to the global supply crunch anytime soon and cautions it could take several years for the snarls to unwind. [Emphasis added.]
If true, that would leave a pretty big opening for some enterprising businesses to bring some manufacturing back to the USA. Constrained supply from China will drive prices up, potentially enough for these businesses to get a foothold. Selling “made in the USA” might be enough to keep them going.
One key would be to exceed the quality of Chinese competitors.
If true, that would leave a pretty big opening for some enterprising businesses to bring some manufacturing back to the USA. Constrained supply from China will drive prices up, potentially enough for these businesses to get a foothold. Selling “made in the USA” might be enough to keep them going.
…
—Peter
It’s been tried before, the Chinese just lowered their price long enough to put the competition out of business. Without legal requirements to buy from US producers (difficult?) lowest price wins. It also takes a very long time to open a mine these days and Rare Earths are really messy. Investors have been burned waiting.
Tim
People also ask Why does China have a monopoly on rare earths? China leveraged its lax environmental laws by way of an indirect ecological subsidy in the rare metal industry. However, the turning point came in 2010 when the world realised that China had a crippling monopoly where it could punish any country by controlling the supply of the rare earth metals.Mar 13, 2021