Manufacturing backflow highlights resilience of the Chinese economy: China Daily editorial

Due to the United States' tariff threats and intensified geopolitical tensions, some multinational companies shifted their production and sourcing away from China last year, opting to invest in Southeast Asia as part of a "China plus one" strategy.

This approach, aimed at diversifying supply chains by expanding operations in other lower-US-tariff countries, seemed a sensible choice given the increasingly complicated global trade situation. However, many companies are now reversing course and bringing manufacturing back to China, according to a Reuters report on Monday.

The reasons are rooted in economics: China offers skilled labor, extensive supplier networks, reliable power supply and the ability to fix problems quickly. As Washington extended its tariffs to a wider range of countries, the US tariff "advantage" some Southeast Asian countries once enjoyed has narrowed or disappeared.

Supply chains are complex systems, and replicating China's industrial ecosystem is not easy. Citing the example of a major customer who shifted orders to India but has since returned with new orders after encountering problems there, Heather Kuang, vice-president of Dawang Metals, a China-based metal casting company, told Reuters that "China's supply-chain advantage is still too great, and it is difficult to replicate domestic production elsewhere".

Access to reliable power supply has become as critical as price, especially after the Middle East crisis tested the energy reliability of manufacturing bases. "In case of any crisis, the Chinese production plants will be the most stable plants you can use," Stanislaw Krykun, CEO of Poland-based packaging company DST Pack, was quoted as saying.

The industrial backflow to China represents a market endorsement of the country's core industrial strengths. Unlike economies that primarily offer low land and labor costs, China possesses the world's most comprehensive and integrated industrial ecosystem. This includes clustered industrial facilities, complete upstream and downstream support services, efficient nationwide logistics networks and a mature and efficient workforce.

While factory buildings and equipment can be rebuilt or moved elsewhere, the decades of accumulated industrial support capabilities, supply chain collaboration and skilled labor resources aren't easily replicated anywhere else. The production instability and delivery delays experienced by some companies that relocated have further underscored the robust competitive advantage of China's industrial sector.

The August data underscore China's industrial resilience. Industrial output of major enterprises rose 5.2 percent year-on-year, accelerating from July's 4.5 percent. Manufacturing grew 6.1 percent year-on-year. Within that, industrial robot production surged 34.6 percent, lithium-ion battery output jumped 57.2 percent, and 3D printing equipment rose 29.9 percent. This is not a low-cost labor story. It is a high-technology manufacturing story.

Trade tells the same story. In August, China's trade in goods totaled 4.65 trillion yuan ($687 billion), up 19.8 percent year-on-year — the third consecutive month it was above the 4.5 trillion-yuan mark. Exports rose 18.6 percent year-on-year; while imports increased 21.7 percent. Both have now posted double-digit growth for four straight months, reflecting the resilient support of China's comprehensive industrial system for foreign trade, as well as the strong boost provided by technological innovation capabilities to foreign trade.

Meanwhile, imports have outpaced exports for six consecutive months, a sign that China's economy is rebalancing toward internal consumption and industrial upgrading rather than relying solely on export-led growth.

China's economic resilience stems from structural advantages: a full-spectrum industrial system, an enormous domestic market, complete industrial ecosystems and continuous innovative momentum. The US tariff policy — an attempt to reshape global industry and supply chains through administrative fiat — defies market logic, drives up production costs worldwide, fuels economic uncertainty, and hurts others without benefiting itself.

Despite external pressures, China continues to play a major role in global industry and supply chains. The six networks being promoted by the Chinese government — spanning water, power grid, computing power, communications, urban underground pipelines and logistics — will further drive industrial and technological upgrading and strengthen economic resilience.