Western companies operating in China are taking steps to insulate themselves from growing tensions between Beijing and the West. The approach, known as “de-risking”, signals a less hostile approach to managing China relations, though companies are still in the process of formulating clear strategies. Some businesses are considering partial divestments or delaying spending decisions, while others are exploring ways to make their China operations serve only the Chinese market. While a small number of companies have announced plans to quit manufacturing in China altogether, most are still weighing their options. The concept of de-risking involves localisation strategies and can take several years to implement. The urgency has increased due to China’s dominance of key supply chains, concerns over a potential conflict over Taiwan, and trade tensions between the US and China. There are signs of production shifts, with European businesses reallocating investments out of China and fewer respondents planning to expand their operations there. US groups have also considered relocating their sourcing outside of China. However, many companies have limited alternatives to China and are therefore focusing on strategies to operate in a higher-risk environment. One common strategy is “China for China”, where operations are reorganised to produce goods solely for the domestic market. This involves localising supply chains and reducing reliance on raw materials from outside China. Some companies are also separating their Chinese IT systems to comply with data protection regulations and address concerns over data theft. Overall, de-risking strategies vary, with options such as “nearshoring” and “friendshoring” becoming more popular. Nearshoring involves bringing production closer to consumers to reduce supply chain disruptions, while friendshoring refers to shifting production to countries perceived to be more friendly to the West. Onshoring, which involves sourcing goods in the same country where they will be sold or used, is considered the most secure but costly strategy.
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