A survey indicates that China's role as a global supplier is "critical," and completely decoupling from the country may not be feasible.

• According to Allianz Trade, global firms are not fully decoupling from China, which is making Chinese companies more optimistic about an increase in trade exports.
• In China, over one in ten exporters to the U.S. anticipate a more than 10% rise in exports.
• While companies may not completely separate their supply chains from China, diversification remains a possibility.

Despite being a vital supplier globally, completely separating from China in trade remains challenging, according to a report by Allianz Trade.

Although there are discussions about disconnecting and reducing risks with China, European businesses are optimistic about their prospects in the country, with nearly 40% of companies in Germany and Spain and more than 30% of firms in France anticipating an increase in their supply chain presence in the country.

According to the report, only 27% of U.S. companies surveyed were planning to expand in China.

According to Ana Boata, Head of Economic Research at Allianz Trade, European companies are less concerned than U.S. firms, as stated in the report.

Over 3,000 companies in China, France, Germany, Italy, Poland, Spain, the UK, and the U.S. were surveyed about their expectations for global trade in 2024 by Allianz Trade.

The survey revealed that over one-third of respondents intend to expand their presence in China, while just 11% plan to reduce it.

The Allianz Trade report stated that China remains a vital global supplier, and completely disconnecting from it appears challenging, if not unattainable.

In China, companies are becoming increasingly hopeful about exporting to other countries.

In China, over one in ten exporters to the U.S. anticipate a more than 10% rise in exports.

According to the report, other countries mostly expected a 2% to 5% increase in exports, but this country's exports rose by more than expected.

In the survey, Chinese exporters are more optimistic than other countries, according to Francoise Huang, senior economist for Asia Pacific at Allianz Trade.

Due to the global trade recession that occurred last year, which negatively impacted overall exports, our survey respondents may be particularly optimistic this year.

Diversification is inevitable

While companies may not completely separate their supply chains from China, diversification remains a possibility.

Huang stated that companies seeking to diversify their supply chains are concentrating on the Asia Pacific region, particularly ASEAN, which is a 10-member Southeast Asian trade bloc.

In 2024, exporters may be more optimistic, but they are also more concerned about geopolitical risks, input and labor shortages, and financing.

The report stated that 31% of respondents ranked transport risks among their top three concerns, while 28% cited the risk of input shortages as their top concern.

A majority of U.S. exporters who source from China are open to exploring diversification options in Asia-Pacific and Latin America.

The report stated that relocating within the same region and nearshoring are the preferred trends, with only 5% of respondents believing that reshoring trends will reverse in the next two years, while nearly 30% expect it to increase.

The Russia-Ukraine conflict remains the greatest geopolitical risk for companies to disrupt supply chains, while the trade war between the U.S. and China is the most significant threat to firms with extensive supply chains and more than half of their foreign production.