The Deglobalization Myth: How Asia’s supply chains are changing

January 9, 2024

Since the early 2010s, rising labor costs in China have caused many enterprises to explore alternative manufacturing bases and sourcing strategies to maintain their competitiveness. More recent disruptions such as the US-China trade war, Covid-19 pandemic, and sanctions on Russia have further prompted businesses to re-evaluate the resilience of their supply chains. Not only do they drive up the cost of trading due to higher tariffs and sanctions, they also added policy uncertainties that hinder the smooth and efficient operation of global production networks. These developments have led to various claims about the demise of globalization, the rise of near-shoring, and the decoupling of China from the supply chains of Western companies.

This report presents an up-to-date overview of global and Asian supply chains and assesses these different claims by focusing on data for bilateral cross-border trade of Intermediate Goods (IG), a granular class of products that more accurately represents supply chain componentry than the final goods used in most other analyses.