Even before the U.S.-China Trade War and COVID-19 pandemic, there was a lot of discussion about the imminent shift of manufacturing from China to other S.E. Asia countries. Both events would only seem to accelerate and magnify the impact of that type of change. After all, this was a reasonable trend to expect because many of the costs of doing business in China have risen over the last decade as the Chinese economy has grown.
Trying to understand and quantify the real impact of this shift from the perspective of a freight forwarder, we decided to look at container export volumes from Trademining.com as a key indicator. And, looking closely at some year-over-year data (2019 vs. 2020), we made some interesting observations.
The following analysis considers container volume imported to the U.S. from the following countries: China, Vietnam, Taiwan, S. Korea, Hong Kong, Thailand, Japan, Malaysia, Singapore, and Indonesia. There are four key takeaways from the data we think paint a picture of what’s happening in the region as it relates to exports destined for the U.S.
The Data:
First, it seems like the calls that China is fading are premature. China is still by far the dominant exporter to the U.S., with 54% of the total volume shipped from the region. If any country is becoming a challenger to China, it’s Vietnam. Yet, it only represents 19.4% of China’s total YTD in 2020 — that’s up from 13.2% in 2019.
The point is that China is still, and will, continue to be into the foreseeable future the largest and most consistent source of container volume out of Asia. In other words, most forwarders who abandon China in the hopes of big things in other countries will be disappointed.
This idea is reinforced by the following chart, which illustrates how mixed the change in volumes have been looking year over year (from January to May). The growth or decrease by country is varied, with the point being there has not been a wholesale shift from China to all the other countries. Vietnam, Thailand, Singapore, and Malaysia saw solid increases. All others went down.
Interestingly, but perhaps not surprisingly, May 2020 saw widespread year-over-year decreases in container exports to the U.S. (except for Thailand). This is clearly the result of COVID-19’s impact on the U.S., and China’s decrease was, as a percentage, less than most countries in the region.
As a last point, Hong Kong has seen very constant monthly decreases when comparing their container exports to the U.S. in 2020. Perhaps this is an indication of other underlying issues within the country.
In Summary
For all the talk about the trend of manufacturing shifting from China to other S.E. Asia countries, it is happening slowly (if the data is actually suggesting a trend at all). The changes in container volume for most countries (Vietnam excluded) have been about flat. Looking at the region as a whole, however, China is still the main exporter to the U.S by a wide margin.
