BY THANG NGUYEN-QUOC OXFORD ECONOMICSThe Deglobalization Myth: How Asia’s supply chains are changingHINRICH-IMD SUSTAINABLE TRADE INDEX 2023 DEEP DIVE2HINRICH FOUNDATION REPORT – THE DEGLOBALIZATION MYTH: HOW ASIA’S SUPPLY CHAINS ARE CHANGINGBy Oxford EconomicsContentsEXECUTIVE SUMMARY 3INTRODUCTION 5METHODOLOGY 6GLOBAL SUPPLY CHAINS CONTINUE THEIR EXPANSION 2.1 Global IG trade has risen despite a difficult period 7 2.2 Near-shoring has not materialized at the global level 8 ASIA’S SUPPLY CHAINS ARE UNDERGOING MAJOR CHANGES 3.1 China is decoupling – but only from the US and Japan 11 3.2 New supply chain “hotspots” are emerging in Asia 13 MULTIPLE PATHWAYS TO SUPPLY CHAIN RESILIENCE 16CONCLUSION 19ABBREVIATIONS 20 ENDNOTES 21ABOUT OXFORD ECONOMICS 223HINRICH FOUNDATION REPORT – THE DEGLOBALIZATION MYTH: HOW ASIA’S SUPPLY CHAINS ARE CHANGINGBy Oxford EconomicsSince 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.We find that global supply chains have continued to expand, despite talk of deglobalization and nearshoring. Intra-regional sourcing, measured by the share of IG imports originating from countries within the same region, has fallen across most major world regions, suggesting nearshoring may not yet be a prevalent strategy at the global level. Global supply chains have continued to expand, despite talk of deglobalization and nearshoring. Regional sourcing has fallen across most major world regions, suggesting nearshoring may not yet be a prevalent strategy.Executive summaryDespite talk of deglobalization and nearshoring, this study finds that global supply chains have continued to expand.4HINRICH FOUNDATION REPORT – THE DEGLOBALIZATION MYTH: HOW ASIA’S SUPPLY CHAINS ARE CHANGINGBy Oxford EconomicsOn the other hand, we find evidence that decoupling has materialized for China’s trade with the US and Japan – China’s share of IG imports into...
