School of business - research
HKBU Business Power Lunch Unveils Geopolitical Risks and Global Supply Chain Shifts
15 Apr, 2024
Amidst Central’s vibrant cityscape, the HKBU School of Business hosted the Business Power Lunch on 10th April, 2024. This research-driven gathering drew in a diverse crowd of business leaders, senior corporate executives, entrepreneurs, and economists across sectors, plenty of whom were distinguished alumni of the School. More than a social event, it was a melting pot of ideas on the pressing global issue of geopolitical risks and global supply chain restructuring.
Prof. Yuk-Shing CHENG, Interim Dean of the School of Business, kicked off the event with his welcome remarks. He shone a spotlight on the faculty’s dynamic response to global changes, embodied by their in-depth research and analysis. These scholarly insights, he emphasised, could provide valuable resources and fresh perspectives for industry practitioners in tackling industry challenges.
Centered around the theme of "Geopolitical Risks and Global Restructuring of the Supply Chain ", Dr. Ting CHEN, Associate Professor and Associate Head (Research), Department of Accountancy, Economics and Finance, took the participants on a journey through the intricate maze of global investment and outsourcing networks. Dr. CHEN presented six key revelations about the U.S.-China Trade War. To begin with, she shattered the myth that the extra tariff from the Trade War had ended in 2019. In reality, the tariffs remained relatively high. Secondly, she underscored the significant impact of the extra tariff on China’s exports to the U.S., causing the share of U.S. imports from China drastically dropped. Thirdly, she challenged the widely held belief that the trade war aimed to reduce the U.S.’s trade deficit and bring jobs back to the U.S. Dr. CHEN noticed that only industries concentrated in the high-tech sector were targeted, suggesting the trade war may be more about containing China's technological competition. Fourthly, she unveiled a surprising observation - it was the U.S. importers, not the Chinese sellers nor the U.S. consumers, who bore the brunt of the extra tariffs. Fifthly, she observed the trade war has not benefited the U.S. labour market. Lastly, she shed light on the restructuring of global wealth due to the trade war, revealing how China has been rerouting their goods through countries like Mexico and Vietnam to keep Chinese products flowing into the U.S.
Dr. CHEN then turned the spotlight on the ongoing restructuring trend of global supply chains. She illuminated the participants with a trio of key terms: 1) reshoring - the return of production to the U.S. by multinational firms, 2) friendshoring - the shift of Chinese suppliers’ production to countries that are considered ideological friendly or allied, and 3) nearshoring - the tactical relocation of production by Chinese suppliers to the neighboring Southeast Asia. She observed that since the onset of the ongoing Russia-Ukraine conflict, the U.S. and other western democratic nations have shown a tendency towards friendshoring. However, China’s investment patterns did not reflect this trend. This suggests that China’s purchasing decisions are driven by necessity and price considerations, rather than political or ethical factors.
In the final act of her presentation, Dr. CHEN shifted the focus to Foreign Direct Investment (FDI). She noted that Chinese firms, when faced with increased tariffs, are more likely to increase their FDI outside of China. Furthermore, cities that experienced higher tariffs and longer lockdowns due to the COVID-19 are more likely to see a relocation of FDI and supply chains. These patterns provide a glimpse into the evolving strategies of firms as they navigate the shifting currents of the geopolitical and economic landscape.
The HKBU Business Power Lunch is a biannual occasion for the School of Business scholars to share latest research insights with senior leaders and executives across industries.
More research insights from the School of Business are available “here”.
