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Demystifying deglobalization: Discussing Asia’s supply chains

Published 12 March 2024

For all the talk of near-, on- or friend-shoring, global supply chains have in fact been expanding, though they’re growing in a different way than before. Oxford Economics and the Hinrich Foundation discussed a deep dive on the subject with the Economic Society of Australia.

In a recent work commissioned by the Hinrich Foundation, Oxford Economics traced the evolution of global supply chain through the lens of intermediate goods trade. 

Oxford Economics’ lead economist Thang Nguyen and the Hinrich Foundation’s research director Chuin Wei Yap sat down with the Economic Society of Australia to discuss some of the team’s key findings. 

Our deep dive found that supply chains aren't shrinking. They'll likely keep growing, though in different ways than they used to, in the shadow of geopolitical tensions and an escalation of industrial policies worldwide.

Catch up on the video recap of the discussion here:

The econometric probe took five years’ worth of data on the intermediate goods trade – the components of modern supply chains, rather than entry-level data on finished merchandise exports that other established sources often resort to – and made some surprising discoveries:  

  1. Asia’s supply chain trade is growing and diversifying, even as the US and China decouple. 
  2. Decoupling remains largely a US-China phenomenon, and to a lesser extent, a China-Japan one.  
  3. Companies are indeed moving to reduce risk and diversify supply chains, but China’s importance as an exporter of componentry has increased in major trading economies, not fallen.  
  4. Supply chain growth has gravitated to 'hotspots' Vietnam, Indonesia, Taiwan, Australia, and India.  
  5. China's reliance on Taiwan for intermediate goods (mostly chips) has risen, not fallen. The geopolitical risks are real, and to some extent separate, but the economic relationship points to the natural bond. There's a lesson in here for Xi, if his people are bothering to pick up on it. 

In short, supply chains aren't shrinking. They'll likely keep growing, though in different ways than they used to, even in the shadow of geopolitical tensions and new rounds of industrial policies worldwide.

View the Deep Dive Report

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