[eMarketer] US retailers and brands shift manufacturing away from China

US retailers and brands have begun the slow, costly process of shifting manufacturing away from China to avoid supply chain disruptions caused by the country’s stringent COVID lockdowns.

Nineteen percent of US companies cut their investment in China this year, a marked increase from 10% last year, per the American Chamber of Commerce in Shanghai (AmCham Shanghai).

That pullback is one reason that China’s factory activity contracted in October, according to the official purchasing managers index for manufacturing produced by China’s National Bureau of Statistics.

Another measure, which is a subindex of the manufacturing PMI that measures new orders, fell to a six-month low in September.

While US investment in China was already slowing before the pandemic, that trend accelerated in recent years. For example, US firms invested just $8.4 billion in China last year, which is a significant drop from $13 billion in 2019 and nearly half the high of $15.4 billion in 2012, per Rhodium Group reported in The Wall Street Journal.

eMarketer posits that it has been a challenging period for US companies that rely on Chinese manufacturing. They endured four years of US-China tensions during the Trump administration, and roughly two years of rising supply chain costs and delays. That turmoil has driven several US companies to diversify their supply chain networks.

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