The following impact report is part of Global Guardian's 2024 Taiwan Shock Index. To explore and download the map, click here.
Sector Snapshot: Consumer Goods
Sectors Impacted Upstream: Raw materials (fabric, wood, metals, precious metals), and semifinished goods (textiles, furniture components, plastics, electronics)
Sectors Impacted Downstream: Retail, ecommerce, transportation and logistics
A decoupling with China would cause a major shock to the consumer goods sector hitting supply and demand and opening firms up to a number of legal, regulatory, and supply chain risks. The long-term impact of a Taiwan Strait Crisis largely depends on the policy response of the world’s major economies, but major opportunities would exist for firms who enter markets previously dominated by Chinese manufacturers.
Short-Term Impact: HIghly Adverse
- Firms operating in China will likely face intense legal, regulatory, and logistical pressure to reshore or “friendshore” their production to other countries. There would likely be high up-front capital costs involved in relocating production and rebuilding institutional knowledge.
- Firms selling in the Chinese market would be impacted by sinking demand.
- China’s unemployment problem — and overall economic rut — will be exacerbated by a Taiwan Strait Crisis, leading to a massive decrease in discretionary spending. China’s youth are both reliant on the medium-skill manufacturing jobs that would be lost and are the largest buyers of foreign consumer goods.
- Firms that rely on China for both production and consumption — such as cosmetics, over-the-counter medications, and packaged food products — may find themselves squeezed between increased production and capital costs and decreasing revenues simultaneously.
Medium to Long-Term Impact: Moderately Adverse
- The long-term impact largely depends on the policy response of the world’s major economies, particularly concerning sanctions and continued decoupling. It is possible — if sanctions and decoupling are maintained — that the situation never returns to the status quo ante-conflagration.
- No country has the infrastructure, labor pool, and middle-class growth at the scale necessary to replace China’s role in maintaining the availability of cheap consumer goods and demand for middle-range and luxury products.
- A long-term decoupling of the Chinese and global economies would result in a long-term elevation of the price equilibrium for most consumer goods.
- The permanent price elevation could allow firms to profitably enter markets previously cornered by Chinese manufacturers.
- Certain Chinese-made consumer products may not face direct sanctions, but through supply chain disruptions, domestic and non-Chinese foreign consumer goods may become newly competitive.
Businesses that could be directly or indirectly impacted by a Taiwan Strait Crisis should walk through the “what-if,” and explore the various scenarios — including the worst-case — that could arise. Now is the time for organizing tabletop exercises with key stakeholders and established vendors across the organization.
It's essential to develop business continuity plans ahead of time to bolster operational resilience, as well as emergency response plans. Having a robust plan in place that has been effectively communicated to your workforce will ensure your organization is able to pivot and dampen the impacts of what could be the next major geopolitical shock.
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Global Guardian is actively supporting global businesses with business resiliency assessments, contingency and emergency response planning, and tabletop exercises. To learn more, complete the form below to contact Global Guardian's 24/7 Operations Center or call us directly at +1 (703) 566-9463.