Chinese companies are purging of foreign components from within their supply chains in preparation for a prolonged trade war.
Replacing foreign components with local ones will make the Chinese more resilient to any global economic trade winds.
Industrial self-sufficiency
Beijing is pushing for industrial self-sufficiency under its policy of ‘Made in China 2025.’ President Xi’s ‘dual circulation’ strategy leads China towards economic independence while enabling it to maintain selective global ties.
Industries involved include semiconductors, chemicals and medical technology. Insulating itself from geopolitical blowback has become a priority for Chinese business. Such changes avoid the retaliatory tariffs imposed by Beijing which are as high as 125% on imports from the US.
Impact on suppliers
“Right now, everyone is talking about substitution,” said He Zhixing who works for bearing maker Hunan SUND Technological Corp.
He predicted many customers will switch for good as part of a gradual replacement process.
On the back of the announced trade deal, American manufacturers are reaching out to Chinese businesses to increase sales. Manufacturers in Japan and India are doing the same.
Trump’s tariffs will redouble Beijing’s commitment to its 10-year ‘Made in China 2025’ programme.
Very few other countries could consider embarking on such a localised purchasing strategy. We’ll continue to watch how it unfolds.
