Introduction
Is nearshoring electronics from China always the right move? The global supply chain is transforming significantly in an era of rapid changes – and driving a huge level of activity in nearshoring. Regulatory adjustments and a strategic pivot towards re-industrialization in America and Europe are redefining the landscape.
In a recent webinar, I talked about these shifts and how they impact electronics companies. I see China as a necessary and capable part of international electromechanical and electronics supply chains. But businesses need to be thoughtful and careful about how are nearshoring, engaging, or dis-engaging from Chinese suppliers to ensure ongoing resilience and competitiveness.
The Changing Regulatory Landscape
In the wake of the pandemic, Europe and America have accelerated a wave of regulatory measures reshaping global supply chains with an emphasis on sustainability, quality, and labor rights and driving nearshoring efforts. Notably, regulations like the Eco-Design and Sustainable Products Regulation are poised to impact thousands of businesses across the US, UK, and Canada. The US is also looking to tighten the de minimis provision, which could impact over $250 Billion in US-China trade. Interestingly, updating this provision could help small and medium-sized enterprises in the US but strain US-China relations even further, darkening the long-term outlook.
This regulatory evolution demands a shift towards more diligent supply chain management practices from Western companies. Emphasizing transparency and accountability, businesses must thoroughly evaluate their suppliers, particularly those based in Asia, to comply with Western standards. This adjustment mandates a thorough grasp of international and local regulatory frameworks. I urge companies to remain agile through continuous learning, audits, and collaboration with regulatory experts to navigate customs, or you could end up with millions of dollars worth of products stuck in customs.
Adjusting to Changes in Chinese Manufacturing
Adapting to the evolving landscape of Chinese manufacturing is crucial for maintaining competitive advantage. Companies must assess their partnerships and contracts to remain compliant and protect their intellectual property. Understanding the nuances of China’s legal system and business practices is essential for successful negotiation and enforcement of contracts.
Contrary to popular belief, China has come a long way in protecting the IP of foreign enterprises. At the same time, Chinese companies are some of the largest patent filers globally. This incentivizes the Chinese government to help foreign companies protect their IP or risk losing foreign direct investment and local jobs.
Protecting your IP in China, however, takes proactive steps. While there are many facets to consider when entering into a contract with Chinese companies, in my experience, having the legal language in Chinese with English for translation purposes will help you 1) better enforce the contract from the start, 2) eliminate any ambiguity about what’s expected by both parties and 3) avoid the need to translate the contract in the future if things ever do turn sour.
Conclusion and Impact on Nearshoring
Especially for the electromechanical sector, knowing how to best utilize China-based supply along with evolving opportunities in Europe, Mexico and the US is crucial. It requires a multifaceted approach that brings agility, cost control and high performance to the full supply chain – this is exactly what I do for my clients.
Author
Andrew Wilson is an expert and consultant in supply chain and operations management. He lived and worked in China from Aug. 2008 to Jan. 2020, including Beijing, Shenzhen, Taizhou and Shanghai. Andrew has assisted multinational corporations in expanding across sectors, as well as co-founded a company that facilitated streamlined supply chains for startups and SMEs in China, raising substantial venture capital and reducing logistics costs.
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