“Deglobalization” has entered the narrative zeitgeist. But what’s happening on the ground? This weekly series seeks to answer that question with a round-up of deglobalization developments from the week that’s done.
1. Nikkei Asia reported on October 23 that “Japanese companies are striving to build supply chains that do not depend on China, amid that country’s growing conflict with the US.” The piece cites a “top-secret project” at Honda Motors to minimize Chinese parts in cars and motorcycles. And, most compelling of all, the article points to market incentive for a “China-zero” approach that could suggest Honda’s project is the canary in the coal mine:
The stock prices of companies with a China ratio ranging from under 50% to 75% are currently about 10% lower than at the end of 2009. That is a sharp contrast to the 60% increase experienced by companies with a China share of less than 25%
2. On October 21, Motion Control Robotics broke ground on a 28,000 square foot, multi-million dollar expansion project in Fremont, Ohio. Speaking at the groundbreaking, Governor Mike DeWine described the present as “our time in Ohio:” He noted that US companies are bringing production back into the country, and to Ohio, having recognized that they cannot rely on China-dependent supply chains. Motion Control Robotics’s expansion benefits from the Ohio Department of Development’s Tax Credit Authority.
3. Vesta, a Mexican industrial real estate company, noted in its quarterly report that the current era of deglobalization constitutes an unprecedented opportunity for industrial real estate and business in Mexico: “As advantages for global companies operating in Asian countries erode, interest in reshoring and nearshoring continues to increase.” Vesta has 194 properties in industrial parks in 15 Mexican states; the company’s Q3 2022 operating results showed record highs.
4. General Electric CEO Larry Culp warned on Tuesday that shortages of labor, parts, and raw materials are undermining the ability of GE’s aviation and healthcare businesses to meet demand: “We are carrying inventory and incurring excess cost because of these supply chain issues.” (Similarly, and honorable mention, Tesla is cutting prices in China in response to growing domestic competition as well as that country’s economic slow-down.)
5. A Bloomberg opinion piece by Shannon O’Neil on October 27 argues for “friendshoring.” O’Neil writes that forces of decoupling between the US and China are well under way. For the US properly to benefit from those, it needs to “embrace its neighbors:” She calls in particular for combining North America’s markets through joint industrial incentives, coordinated industrial infrastructure, and greater labor mobility.
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