Multinational firms are finding it hard to let go of China
Few jobs are guaranteed to turn hair grey faster than running operations for a multinational business in China. Diplomatic spats and consumer boycotts are hazards of the job. A zero-covid policy that causes intermittent local lockdowns, such as the one that recently began in the southern city of Guangzhou, has disrupted supply chains and made the country inhospitable to foreign managers. A fractious workforce is adding to the woes. On November 23rd a riot erupted over pay and working conditions at the main factory that makes Apples iPhones in China. In a survey by the European Chamber of Commerce in China, 60% of members reported that the business environment has become more challenging.
One solution for international firms is to rely less on China for manufacturing. Some have been diversifying supply chains away from the country. Companies including Apple and Hasbro, a toymaker, have spread production to Vietnam and India, where wages are lower and the operating environment is less likely to induce a migraine. Bangladesh and Malaysia are becoming more attractive to clothes-makers. But for many multinationals China is more than just a cheap place to make things, and therein lies a less tractable problem.
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