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De-risking from China – An opinion from South China Morning Post

May 19, 2023

The growing tensions between the world’s two superpowers are raising alarm bells with companies that have business interests across the world, says Tai Hui, chief market strategist for the Asia-Pacific at JP Morgan in this SCMP article.

He believes that these shifts in relationships require both governments and businesses to adjust their strategies.

“This is where a flurry of D-words comes into play, including deglobalisation, decoupling, and de-risking. De-risking is perhaps the most popular strategy now since US and European officials have come to realise the reality of trade and investment links with China,” comments Hui.

However, he goes on to list two significant reasons why this will be a challenge:

  • First, China continues to be a critical market for many of these multinational firms.
  • Second, China’s logistics infrastructure remains competitive and allows these businesses to produce at a large scale and deliver on time.
  • China, including Hong Kong, has seven out of the top 10 biggest container ports in the world in 2021, according to the World Shipping Council.

Hui concludes, “A good leader plans for tough times and contingencies while conducting business as usual. Operations in China are already an important component of many international companies. This means that company leaders are more likely to manage the risks to their businesses of operating in China instead of disengaging from the Chinese economy and market altogether.”

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