Opinion: Will Covid-19 Affect Future Chinese Manufacturing?

With over two decades of experience in both manufacturing and sourcing greeting cards and giftware from the Far East, Greg Warrington, is well placed to share his take on how Covid-19 is likely to affect future manufacturing in China and other Far Eastern countries.

Greg’s greeting card expertise started with Arabesque Distribution (the CD Card Company) in 1993 (for whom he still consults), which led onto him co-owning Chatterbox Greetings (which produced sound chip cards),

Now, as ceo of Sourcing Support Asia (a business he co-owns with his wife, Maranda) which specialises in sourcing giftware, greeting cards, wrap, gift bags and stationery from China and Taiwan, Greg and Maranda act for retailers and distributors, both based in the UK and overseas. Their current clients include Joe Davies (UK), Scribbler (UK), Pavilion (USA), Nordic (Sweden), TSK (Australia), Parnell (New Zealand), Shapiro (South Africa) and Decisions (South Africa).

Above: Greg Warrington, ceo of Sourcing Support Asia.  
Above: Greg Warrington, ceo of Sourcing Support Asia.

Here, Greg shares his opinion on why, despite the current difficulties, China will continue to be a major source of supply for the UK card and gift trade, but believes other countries in the Far East will open up more too on the manufacturing front.

“As the global hub for manufacturing, China’s manufacturing sector has continued to be the major driver of growth in the Chinese economy. Now the second biggest economy after the USA, China is still very much on the rise.

While China will need to manage the impact of the world blaming them for Coronavirus, a trade war with the US and a potential row with the UK/EU over Hong Kong, I think it is unlikely to make a significant difference to the world’s continued reliance on China’s manufacturing capability and low competitive prices.

However, during the next ten years, there are other internal influences that will see China becoming less reliant on its manufacturing base and a much higher reliance on its own economy.

Above: The Thoughtful Words range that is distributed in the UK by Joe Davies was through Sourcing Support Asia.
Above: The Thoughtful Words range that is distributed in the UK by Joe Davies was through Sourcing Support Asia.

This started to become more obvious when China held the Olympics in 2008. With the eyes of the world very much on China, there was a dramatic improvement of how factories treated their employees. This resulted in higher wages, longer holidays and a significant reduction in people living and working in a factory hundreds of miles from their home for all but two weeks a year.

This extra wealth channelling into the world’s biggest population – a staggering 1.5 billion people – is fuelling growth in its domestic market and with that comes higher personal expectations on how to live, work and acquire material possessions.

Not unlike previous manufacturing economies, such as the UK, US, Germany and Japan, a population with more disposable income will see China starting a structural shift to reposition the country as a service-based economy and push the manufacturing sector from low-end manufacturing toward higher value-added production.

This is significant for the card and giftware industry as we would largely be classed in the low-end manufacturing sector. The interesting question here is where will this manufacturing output end up? I think a lot will depend on whether the Chinese business owners drive this move into other Far Eastern countries or whether business leaders look closer to home for low cost manufacturing options.

Personally, I think we will start to see more manufacturing in Vietnam, Thailand, Malaysia and South Korea.

For now though, after a slow start at the beginning of the year, and then a delayed return after Chinese New Year, due to the virus, factories now are up and running and hungry for business.

Above: Greg’s wife and business partner Maranda on the company’s stand at the Canton Fair.
Above: Greg’s wife and business partner Maranda on the company’s stand at the Canton Fair.

There has been a sharp increase in the cost of air freight as there are fewer commercial flights which normally take much of the spare capacity. Courier companies, such as DHL and Fedex also are charging significantly more. So, it’s prudent to plan a purchase quantity sufficient to justify sea freight, where costs are largely unchanged.

The other significant thing is the cancellation of the major exhibitions. Whether buying or selling, all major shows have been cancelled to date in 2020 and at this point it does not look good for the October shows in Hong Kong and Guangzhou.

Like here in the UK, nothing is certain right now, but I have no doubt Far Eastern sourcing and manufacturing for the card and giftware sector will continue, but as to which countries up their game and seize the opportunities remains to be seen.

As the Chinese philosopher Confucius, said: “Only the wisest and stupidest of men never change.” He might have been around in 551BC-479BC, but he correctly prohesised a few things about today!”

Top: Hong Kong has historically played an important role in the UK’s trade with China.

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