Middle East companies may look to take a more local approach to production, post-coronavirus, with supply chains from China, in particular, likely to come under more scrutiny, according to David Stubbs, head of market strategy and advice at JP Morgan Private Bank.
The Belt and Road Initiative (BRI), the most ambitious and far-reaching project of its kind, has brought unprecedented potential in cross-border trade and investment between China and the Middle East and Africa region.
According to China Customs Statistics (export-import), China-Middle Eastern countries’ trade volume increased to $294.4 billion by 2019, up from $227bn in 2018.’
However, with the onset of coronavirus, which originated in the Chinese city of Wuhan, has come strict movement restrictions ordered across the globe and a subsequent rethink on supply chains.
Stubbs told Arabian Business: “I think a key trend we will see is a gradual shortening of supply chains around the world as companies realise that they can’t really trust China as a location as much as they thought they could because there was the trade war with the US and obviously the potential health concerns and construction of viruses.
“And furthermore I think you will see a general pressure from governments to companies to build more resilience into supply chains and efficiency.”
At the moment, China is the UAE’s leading trade partner, accounting for more than nine percent of the UAE’s non-oil trade.
However, last month a senior official from the Dubai Future Foundation (DFF) admitted that the country will have to diversify its supply chain beyond China.
Stubbs added: “They (companies) will be asked to bring production closer to home, especially for things which are now deemed essential in a way they weren’t only a few months ago, such as medicines and medical equipment.
“China may not be the workshop of the world that it once was in a few years’ time. It’s a gradual process but I think it’s an important one.”