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Production delocation may make PRC lose $172 bn per year

Jun '20
Pic: Polish Economic Institute
Pic: Polish Economic Institute
The Polish Economic Institute (PEI) recently presented four scenarios for a new pattern of global trade routes resulting from potential relocation of part of production from China to other countries, which is likely to push down China’s gross domestic product (GDP) by as much as 1.64 per cent.

In the version most favourable for the European Union (EU) member states, the greatest beneficiary of delocation would be Poland ($8.3 billion), followed by Germany ($8.3 billion), the Czech Republic ($4.9 billion) and France ($4.3 billion).

In addition to Poland, other major beneficiaries in central Europe would be the Czech Republic ($4.9 billion), Hungary ($2.7 billion) and Romania ($2.6 billion).

In the report titled ‘Trade routes after the COVID-19 pandemic’, experts from the Polish Economic Institute estimated potential effects of partial delocation of production from China based on the characteristics of global trade flows at the brink of the pandemic.

Four scenarios were presented: partial delocation of production from China to Southeast Asian countries and India; ‘national patriotism’–the replacement of part of supplies from China with individual countries’ domestic output; the strengthening of central European countries in their role of ‘the EU’s factory’ through the relocation to their territories of part of EU imports from China; and a combination of the national patriotism and the EU’s central European factory scenarios.

The arrangement of beneficiaries of production delocation from China depends on the assumptions adopted in specific scenarios, the institute said.

The EU member states would benefit the most from a combination of national patriotism and the strengthening of new member states from central Europe (the Czech Republic, Poland, Slovakia, Hungary, Romania and Bulgaria) in their capacity as factories for the EU.

In the scenario assuming a decrease in deliveries of semi-finished products and finished goods from China by 10 per cent and their replacement with domestic output, the greatest absolute benefits would be derived by North American countries, followed by the EU-14, i.e, the ‘old’ EU member states without the United Kingdom, and east and south-east Asian countries.

Depending on the region, it would entail an annual increase in value added creation by 0.2 per cent to 0.48 per cent. In Europe, the effect would be markedly stronger in the new EU member states (EU-13) than in the EU-14: 0.31 per cent and 0.20 per cent respectively.

Fibre2Fashion News Desk (DS)

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