ASEAN Businesses Facing Shortage of Chinese-Made Components: Contingency Plans

February 10, 2020 Posted by ASEAN Briefing Written by Dezan Shira & Associates Reading Time: 2 minutes

China’s Coronavirus outbreak has impacted businesses throughout ASEAN being able to obtain supply deliveries. There are a number of issues ASEAN businesses face with supplies from China at this present time:

When Will My China Supplier Return To Production?

This varies on a national basis in China. Some factories return today, Monday 10th February. However, travel restrictions still in place can be expected to slow their initial ability to resume production by about 20-30%. This article explains what dates which regions in China can be expected to resume operations: China Factory Reopening Schedules. However, logistics and shipping companies will also not return to full capacity operations for about another month. Delays will be inevitable.

Applying Force Majeure To China Production Contracts

It may be necessary to invoke force majeure clauses with your China suppliers to protect both your business and theirs and to allow renegotiated terms or cancellation. This article explains the details: Coronavirus in China: Applicability Of Force Majeure

Looking At China Alternative Suppliers And Manufacturing

A longer-term strategy may be to reduce dependency on China and to look at replacing part or all of your China production elsewhere. Many foreign investors in China have moved part of their production facilities to Vietnam for example. This also applies to ASEAN based companies who are not looking to supply the domestic China market. ASEAN, of course, has a Free Trade Agreement with China, as well as with India, in addition to Japan, South Korea, Australia and New Zealand.

That means both expanding your existing ASEAN manufacturing base could be a suitable alternative, as could perhaps taking advantage of other ASEAN locations, in addition to India, which has an additional attraction in being a low-cost manufacturing base as well as possessing a significant domestic consumer market.

This article Relocating Your China Sourcing And Manufacturing To Asia: Procedures & Choices contains a great deal of content, including about ASEAN import-export procedures, establishing a business in Indonesia, Philippines, Singapore, Thailand, & Vietnam as well as India, and also has links to numerous complimentary downloads.

Our firm has 12 offices in China, three in India and another 12 across ASEAN. We can provide assistance throughout the region. ASEAN based businesses looking for assistance or news about the situation in China may contact us at asean@dezshira.com for assistance.