Why UK Suppliers will not be exiting China

A viewpoint from Daley Hub

China is very much in the UK headlines again and as ever prevailing opinion is mixed to say the least. As the political classes proselytise about national security concerns versus positive trade relations, not to mention environmental sustainability and global volatility, calls to ‘exit China’ or at least ‘reduce reliance’ surround us like an echo chamber. While it’s perhaps understandable that ‘brand China’ can be met with unease, the reality is that its role in global trade is nothing short of fundamental – and exiting, or even just retreating, is something that for most business is something that is simply not going to happen.

It is not just the fact that China is a big player, or that it is at the helm of three quarters of the world’s battery production and is central to EV development, it is because of its massive, interconnected supply chain. The ports, the clusters of suppliers within a two-hour drive, the engineers who can tool a new plastic mould more quickly and cheaply than most firms can write a Request for Quotation! Unsurprisingly, many companies have engaged research to find potential alternatives with similar capabilities, but it’s important not to forget that options such as Vietnam, Mexico, and India are also all plugged in the same Chinese raw material, component, and capital networks. The Chinese supply chain is an eco-system, and ‘escape’ if that is your aim is likely impossible.

Not that this should necessarily be viewed as a negative, whatever some of our politicians say. Despite its challenges, which can often be mitigated anyway by experience, care, and the willingness to invest time in doing more than just visiting the state-run Canton Fair, China’s evolving positives should be recognised. It is completely dependent on export, giving it vested interest in making international trade work. We are also entering the country’s transition to second generation manufacture, meaning more talent coming back to China with overseas experience and education. Commercially and culturally, the country is more welcoming than ever.

Supply chain is the new strategic engine for growth.

But in the end, trading with China comes down to supply chain. Supply chain used to be a vital but more or less ‘back office’ function. No longer – it can now be the key to whether you can sustain and grow a business at all. People have always talked about ‘resilience’ in this context, meaning capability to withstand specific shocks without too great a disruption. Now resilience is a much more proactive concept – the ability to supply complete continuity, responsiveness, and competitiveness in the face of constant change. Moreover, this new definition means more than physical implementation. It must now include insight, advice, global knowledge – how to negotiate legislative change, tariff uncertainty, market / currency volatility.

China’s dominance in specialist manufacturing has driven investment in state of the art and ever-evolving technology, warehousing, global freight, and customs compliance and ‘last-mile’ delivery expertise, to mention just a few of the critical aspects of modern supply. The infrastructure is therefore unsurpassed.

A recalibration of the relationship

So, rather than looking to retreat, instead think recalibration of the relationship. Consider ways in which to make reliance more flexible, more transparent, and therefore more robust. For trading with China is no longer just about chasing lower production costs. It’s about staying ahead of the game, moving beyond outdated working practices, and ensuring you have done due diligence. At Daley Hub, we refer to this as the 3Ps of supply chain resilience.

• Prediction – encouraging collaborative curiosity between teams – looking out for issues before they become problems.

• Progress – revisiting old lead-times that create challenges with stock, working capital.

• Protection - know about your partner’s ownership, management and processes, and tier two supplier base.

Collaboration moves to co-production.

Getting this to work means shifting from traditional collaboration to true co-production. Daley Hub defines collaboration as ‘independent businesses working together’, and co-production as ‘people from different businesses working as a single team’. Collaboration is easy but not always successful, whereas co-production is harder to achieve, but more fruitful and effective. In Daley Hub’s experience the route to co-production is drawing in everyone concerned, by sharing the story of all the businesses involved. Encourage real connection, and dare we say it, friendship.

At Daley Hub we can make initiatives worthwhile. For more information get in touch.