HSBC CEO, Noel Quinn, reported a 70% increase in activities supporting Chinese businesses diversifying overseas at the Bloomberg New Economy Forum 2023. This trend is indicative of a de-risking strategy adopted by Chinese firms as they navigate the shift from a global trade and manufacturing powerhouse to an economy driven by services and consumption.
The bank has been aiding importers and exporters in their transition, witnessing a gradual shift of Chinese suppliers extending their supply chains across Asia and beyond. Despite the move to other countries like Vietnam and India, these new factories might still rely on Chinese-made supplies, suggesting that the diversification does not necessarily translate into a loss for China.
Further highlighting the escalating trend of Chinese diversification away from the mainland, Quinn pointed to the Middle East as an emerging key focus. The region, being reshaped by its sovereign wealth funds, has signed $50 billion worth of deals with China in just 18 months. He also referred to an upcoming $2 trillion pipeline of deals that could significantly transform global supply chains.
Quinn emphasized that other Asian countries like Vietnam, Malaysia, and Bangladesh stand to gain from this diversification due to their incapacity to compete with China's established manufacturing and logistics prowess. However, he stressed that despite these shifts, China's market remains attractive due to its expanding consumer class and urbanization.
This diversification trend coincides with China's transition to a consumption-led economic model which requires substantial financial backing during its crucial rebalancing phase. The Rhodium Group report suggests that Chinese firms have been diversifying overseas for years to cut costs while intentionally reducing their real economic exposure without completely severing ties amid rising geopolitical uncertainty in China.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.