Shanghai, August 18, 2021 — China has strengthened its leading position as the most attractive manufacturing hub globally, according to Cushman & Wakefield’s 2021 Global Manufacturing Risk Index, which assesses the most advantageous locations for global manufacturing among 47 countries in Europe, the Americas and Asia Pacific. China’s preeminence comes amid a wider regional trend of surging activity in Asia Pacific’s largest manufacturing centers, driven by global demand for key products. In the study, China ranks in first place in the key assessment categories of bounce back capability, baseline scenario, operating costs, and geo-political risks.
Dr. Dominic Brown, Head of Insight & Analysis, Asia Pacific at Cushman & Wakefield, said, “As the virus is brought under control and manufacturing centers surge, China has been able to fill the void left by U.S. and European manufacturers, who were enduring their own lockdowns, to capture a larger share of global exports from approximately 13% in 2019 to 15% in 2020. Furthermore, exports from China in Q1 2021 were about 27% higher than Q2 2019, or the equivalent of US$150 billion.”
Tony Su, Managing Director, Head of Industrial & Logistics Property Services, China at Cushman & Wakefield, added, “The impact of COVID-19 has certainly accelerated changes in supply chains that were already in motion prior to the pandemic. In mainland China we are seeing two clear trends underway. Firstly, domestic manufacturers are moving up the value chain, following large-scale investment into the semiconductor, AI and biomedicine sectors. And secondly, lower-order goods manufacturing targeting the outbound market is shifting to outside of the country, predominantly into Southeast Asia nations.”
Cushman & Wakefield’s annual Global Manufacturing Risk Index (MRI) scores each country against 20 variables that make up the three final weighted rankings which cover conditions, cost, and risk. The data underpinning the MRI comes from a variety of reliable sources, including the World Bank, United Nations, Economic Forum and Moody’s Analytics.
Based on the analysis, China took the number one spot across the four key categories, strengthening its leading position as the most attractive manufacturing hub globally.
- Bounce Back Rating: China placed first on the bounce back rating, which measures a country’s ability to restart its manufacturing sector. As business conditions continue to improve and with vaccinations underway, economic growth forecasts are generally being revised upwards.
- Baseline Scenario: China retained the top position on the baseline scenario ranking as it continues to diversify its manufacturing base, moving up the value chain in order to focus on telecom, high-tech (40% of robots produced globally are made in China), and computers. Key manufacturing regions in China include Guangdong and Jiangsu, which focus on electronic components and automotive, while Zhejiang and Liaoning focus on chemicals and natural resources.
- Cost Scenario: While China also retains its lead position in this scenario, Vietnam and India were overtaken by Indonesia which moved up to second from fifth place. India also swapped places with Vietnam to rank third and fourth respectively.
- Risk Scenario: Early and effective lockdown measures to control the first wave of the pandemic helped China’s manufacturing sector rebound after Q1 2020. Strong performance of its manufacturing sector during the rest of 2020 contributed to the first place ranking on the risk scenario. The U.S. and Canada were pushed back to second and third place respectively.
The current pandemic has accelerated the growth of e-commerce while also exposing vulnerabilities in global supply chains. It is imperative for manufacturing companies to reassess current supply chain strategies and infrastructure to improve their resilience and stay competitive.” noted Tim Foster, Head of Supply Chain & Logistics Advisory, APAC, Cushman & Wakefield.
A post-COVID-19 future is likely to see a heavier reliance on sophisticated technologies and tools that facilitate Industry 4.0, as companies seek to stay resilient, ensuring a wider diversification with smaller, geographically distributed manufacturing plants that are more resistant to disruption. With these advances, property developers are challenged to stay ahead, reshaping how facilities are designed and operated as they cater to the expansion of e-commerce as well as adopting a more holistic approach towards ESG considerations to address the growing group of environmentally conscious real estate users.
Looking ahead, ESG due diligence for suppliers will become an increasingly important part of a manufacturers’ risk management. In addition to protecting manufacturers from any losses incurred due to natural disasters, growing consumer consciousness about the impact of certain sourcing practices on the environment is feeding into decision making. In Europe, green consumerism is growing fast with nearly 800,000 products now displaying the EU’s Ecolabel logo. For this reason, Asia Pacific will need to follow Europe’s lead to help maintain the attractiveness of the region and help counter potential decision making to reshore or nearshore manufacturing out of the region.
Download the Cushman & Wakefield’s 2021 Global Manufacturing Risk Index.