Although supply chains have likely become too reliant on China, they cannot exclude that nation entirely, says Oliver Chapman, chief executive officer of London-based supply chain consultancy and finance company, OCI. 

Ahead of the November 15 meeting between Joe Biden and Xi Jinping, Chapman issued remarks calling for a thaw in U.S.-Chinese relations. 

“It is vital that trading relationships between China and Western nations improve. For the first two decades of this century, the rise of China and favorable demographics — maybe creating a global savings glut — helped create an environment of weak inflation and thus lowered interest rates,” Chapman said.  

For the next few decades, Chapman added, demographic changes will exert a major inflationary threat. But a reversal in globalization will also lead to less efficient global production, creating inflationary pressure.

“Supply chains must be robust — this has become an obvious lesson of the Ukrainian crisis when frailties in the supply chain were exposed. A robust supply chain is not overly reliant on any supplier or region. And it is likely that supply chains have become too reliant on China,” Chapman continued. 

“But supply chains cannot exclude China. Whilst India and other countries in Eastern Asia, Eastern Europe and Mexico are emerging as alternatives, China remains a critical actor in the global economy. If relationships between Western nations and China continue to deteriorate, then negative outcomes should be expected for supply chains.”