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More firms leaving PRC may weaken expansion: S&P Global

May '20
Pic: Shutterstock
Pic: Shutterstock
Supply disruptions and geopolitical tensions are likely to hasten the migration of manufacturing out of China as concerns about risks of production concentrated in one country rise, according to S&P Global Ratings, which recently said the relocation may weaken China’s economic expansion, but it growth would still be stronger than those of most other economies.

“While absolute growth rates will moderate, we believe China’s economic performance will continue to be a key sovereign credit support,” S&P Global Ratings credit analyst Tan Kim Eng said in an article posted on the company website.

China’s growth performance is consistently above other economies of its income level. “We estimate China’s average real GDP per capita growth over 2014 to 2023 to be close to 5 per cent annually,” he said.

As the COVID-19 pandemic comes under control, some governments would introduce rules and 

That should encourage foreign producers to continue to access the Chinese market, the ratings agency said.

In the past few years, the manufacturers that had moved elsewhere owing to rising costs and US-China tensions have not materially slowed China’s real GDP growth,” Tan wrote.

China’s domestic demand is one reason foreign manufacturers might continue to produce in the country and help cushion its economy, S&P said.

However, the pandemic exposes the vulnerability of nations that are heavily reliant on China for laws that encourage the production of certain items within their borders, but China would retain its manufacturing prowess, given its competitiveness and its strong domestic demand, S&P said.global sourcing and production, it added.

Fibre2Fashion News Desk (DS)

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