Partly thanks to the Covid-19 pandemic, but also to political shifts, the 25-year trend for offshoring has now stalled and that could mean a resurgence in reshoring and a reshaping of the global manufacturing map.
Although the future is uncertain, it seems pretty clear that a lot of companies will need to rethink their supply chains. For some emerging market countries, too, it means a change of tack and perhaps a migration away from the export-led economic model that’s been a defining feature of recent decades.
What this means for China is also an interesting question. Like many others, we’ve been thinking through how the global and financial architecture has begun to change in recent years. Clearly, the US has been the dominant force along with Europe – but, as China has emerged, that’s begun to evolve into this multipolar world where we have three main centres for monetary, economic and currency policy. For many countries it’s become clear that the more important trading political and economic relationship is with China; not the US. It could make for a tripolar world and we think Covid-19 could accelerate that evolution.
Colm McDonagh, head of emerging market fixed income, Insight Investment.