What the fall of the ‘world’s factory’ means for global supply chains

The flag of China is flown behind a pair of surveillance cameras outside the Central Government Offices in Hong Kong
Businesses such as Apple, Dell, Microsoft and Nike plan to shift production out of China - Roy Liu/Bloomberg

China has long revelled in its role as the “world’s factory” but its dominance may be coming to an end.

Amid a rising tide of cost pressures, as well as president Xi Jinping taking a more hostile stance towards the West, chief executives are becoming increasingly keen to shorten their supply chains.

An American Chamber of Commerce survey in August found 40pc of US companies are already redirecting investment destined for China to other countries, or are planning to do so.

However, the US is not alone in moving away from China, as the president of one Japanese chip maker said that exporting from the country is just “no longer viable”.


Already, huge companies such as Apple, Dell, Microsoft and Nike have announced plans to shift production to the likes of Mexico, Vietnam, India and Thailand.

But these are not the only countries set to benefit as companies “nearshore” their supply chains, as the trend is also bringing manufacturing back to Europe.

Space to grow

Industrial real estate companies in central-eastern Europe (CEE), which covers the Czech Republic, Slovakia, Romania, Hungary, Poland, Serbia and Bulgaria, are booming.

Across the first six months of this year, developers rolled out 3.8 million sq metres of industrial space across CEE, according to Cushman & Wakefield property consultants.

Year-on-year, supply in the region expanded by 16pc, while a further 5 million sq metres of industrial and warehouse space is already under construction.

Earlier this year, CTP, Europe’s largest listed industrial developer, announced plans to invest €300m (£260m) in its warehouse portfolio in Poland. In 2023 alone, it will increase its estate by 600,000 sq metres, more than tripling in size.

In August, it also opened an office in Hong Kong to market warehouse space to businesses looking to diversify their supply chains out of China.

Taiwan electronics manufacturer Inventec has leased 52,000 sq m of manufacturing space in the Czech Republic “to reduce risk in the global supply chain”.

A Chinese flag attached to the back of a boat flaps in the wind as cargo containers sit on the dock of Shenzhen Port
Chinese companies are also investing in expanding their supply chains – in particular of EVs – in Europe - Daniel Berehulak/Getty Images

CTP’s chief executive Remon Vos is spearheading his firm’s expansion and is often travelling the world on his private jet, named “OK-VOS”.

“Western companies are saying let’s move production very close to home,” says Tomas Dvorak, senior economist at Oxford Economics. “But it’s still just scratching the surface. In two or three years it will really take off. It could be transformative. Across the region, probably we are talking about millions of jobs.”

“We are seeing more and more inquiries from manufacturers,” says Sally Bruer, head of EMEA logistics and industrial research at Cushman & Wakefield. “We’re talking about big tectonic plates for some businesses. Manufacturing is not a short-term game.”