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China is losing its grip on global production

The center of gravity of global production is moving away from China.

Why it’s important: Decades of geopolitics built on economic dependence will be affected.

Driving the news: Apple has accelerated plans to move some of its manufacturing out of China as its business is hurt by strict COVID policies, according to a WSJ report over the weekend.

Zoom out: China has also lost ground in the production of other goods.

  • The country’s share of global exports of furniture, footwear and clothing accessories has fallen since 2016, according to recent data from transport economics firm MDS Transmodal, as reported by CNBC.
  • Meanwhile, trade between the US and the EU has increased sharply, and analysts see Mexico and Vietnam as countries that could benefit most from diversifying their supply chains.

What they say: “Everyone is thinking about moving, even if they̵[ads1]7;re not shopping yet,” Anna-Katrina Shedletsky, founder of Instrumental, a firm that analyzes assembly lines for electronics companies, told the New York Times.

The big picture: Beyond the Chinese government’s unpredictable stance on COVID, business leaders and analysts also expect future investments in the country to be at risk due to geopolitical tensions and internal demographic changes.

  • Labor has, for example, become more expensive as the country’s population growth has slowed, writes Elisabeth Braw, senior fellow at the American Enterprise Institute.
  • Beijing’s aggressiveness toward the West and its ties with Moscow have “made leaders nervous that they could be caught on the wrong side of global conflict,” she adds.

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