COVID-19: Catalyzing U.S.-China Supply Chain Realignments

Abstract

The COVID-19 pandemic has reshaped supply chain dynamics between the US and China. While China solidified its position as a global supply chain center during the first two years of the pandemic, its COVID-19 restrictions in 2022 quickly shattered the fruits. On the other hand, as bilateral tensions and geopolitical concerns escalated, both nations responded to COVID-19 by looking beyond each other to pursue selective decoupling strategies in critical sectors. This chapter delves into the factors driving these adjustments, including China's imperative to enhance self-sufficiency and the US focus on diversifying its supply chain away from China. Through case studies, including Apple’s supply chain shifts, the chapter illustrates how the pandemic and political factors prompted a realignment of global supply chains and how companies have adjusted to the shifting landscape. In the end, this chapter highlights the enduring shift in perceptions regarding the US-China supply chain relationship even in the post-pandemic era.

Introduction

From consumer electronics to footwear, and now automobiles, the intertwined supply chains between the US and China have been a crucial pillar of the bilateral relationship. However, the COVID-19 pandemic has significantly impacted this relationship, leading to changes with potentially long-lasting effects. This chapter examines the changes to the US-China supply chain relationship that took place during the COVID-19 pandemic to shed light on the well-being of the pair’s political and economic ties. Reviewing a multitude of economic data and policy documents shows an inward-looking policy direction aimed at boosting supply chain security through relying less on the other. This policy goal, along with rising bilateral tensions, has been the main driving force behind both countries’ increased efforts toward selective decoupling in several sectors. Even though elements of a selective supply chain decoupling between the US and China were predisposed before COVID-19, the pandemic provided the political context needed to kickstart such a supply chain movement.

The trend of selective decoupling has now been felt across multiple sectors. American companies are rethinking their future investment plans for China, while Chinese counterparts are expanding production abroad to continue servicing US and Western clients. In particular, Apple’s supply chain shift away from China provided a vivid example of how the pandemic has negatively impacted the bilateral supply chain and how global companies are forced into making adjustments to compartmentalize their supply chains for the two markets. Last but not least, the contentious trend of the US-China relationship will continue reinforcing both governments’ policy tendency to rely less on the other. Equally, the weakened economic relationship may, in return, make the bilateral relationship more vulnerable to political headwinds.

US-China bilateral trade in goods in 2022 stood tall at a record-breaking USD 690 billion (US Bureau of Census 2023). Much of the pair’s respective supply chains have remained interlinked and mutually dependent on each other. Trade in energy commodities, manufacturing, and agricultural products has grown resiliently even amid pandemic-related demand shocks. In particular, since 2020, China have booked significant increases in energy and agricultural imports from the US during the COVID-19 pandemic, partially thanks to the purchasing commitment under the US-China Phase-1 Trade Agreement (USTR 2020). To date, China remains the largest market for US agriculture exports, with approximately half of all its related exports consumed by the populous country (USDA 2023). Additionally, US natural gas exports to China doubled almost every year during COVID-19, while US crude oil exports to the country jumped from 71 million barrels in 2019 to 230 million barrels in 2022 (Fig. 4.1).

Fig. 4.1

US-China energy supply chain bonded during COVID-19

However, momentum grew during COVID-19 for heightened efforts toward selective decoupling in supply chains for critical sectors. This trend accelerated amid concerns over the long-term geopolitical relationship, China’s policy orientation, and regional security. China’s share of total US trade fluctuated significantly during the pandemic (Fig. 4.2).

Fig. 4.2

Bilateral trade fluctuated during COVID-19 and now trends downward

Bilateral trade between the two countries dropped substantially during China’s initial lockdown in 2020 before quickly rebounding as it stabilized industrial production. Despite the high bilateral trade value, China’s share of total US trade began declining in 2022 due to supply chain disruptions under strict COVID-19 control measures. By the end of 2023, China, for first time since 2008, has dropped to the third largest source of US imports (Fig. 4.3).

Fig. 4.3

China fell to the third largest source of US imports

Three factors drove bilateral supply chain adjustments during COVID-19. First, China’s experience with pandemic-related social and economic disruptions convinced policymakers that improving supply chain self-sufficiency was a critical priority for national security. Second, China’s COVID-19 control measures in 2022 caused severe production disruptions globally, leading investors to reevaluate China as a reliable center for global supply chains. Third, escalating bilateral tensions and geopolitical concerns led to a raft of restrictive policies in the US aimed at reducing reliance on China for critical sector supply chains.

Supply Chain Security Equals National Security

The initial COVID-19 outbreak elevated China’s long-term thinking about supply chain self-reliance. Within two months of the nationwide shutdown in 2020, a medical supply shock emerged. China struggled to provide for its own people despite being the world’s largest mask producer and exporter. In early February, the country could only produce six million N95 masks a day, falling far short of skyrocketing demand. Similarly, demand for medical ventilators in Q1 2020 had already surpassed total demand for 2019.

Before COVID-19, China relied on foreign companies such as Maquet for over 60% of its ECMO (Extracorporeal Membrane Oxygenation) supply, a critical medical equipment for treating severe respiratory distress. At the peak of the 2020 outbreak in Wuhan, the city needed more than 5,000 ventilators every day against a daily national production capacity of just 600 devices. Imports of medical supplies and other commodities fell significantly, causing China’s total foreign trade to slump 17% year-over-year in February 2020. Beijing has taken some very extreme measures to navigate through the emergency. Authorities ordered state-owned enterprises (SOE) to shift production lines to make medical supplies. China’s national oil company, Sinopec, quickly pulled together production lines for mask fabrics while state-owned construction companies built makeshift hospitals in a matter of days (Xinhua News Agency 2020).

While China contained the initial outbreak in Wuhan, the pandemic significantly impacted the country’s outbound supply chain. The city was home to many leading automakers and over 500 parts manufacturers who could not ship cars for several months during the lockdown. As the virus spread rapidly in other parts of the world, China again felt the impact on its supply chain. Pandemic disruptions affected the supplies of raw materials, energy commodities, and agricultural products as Beijing watched on closely.

The social and economic disruptions of the 2020 outbreak provided compelling evidence to Chinese leaders about the vulnerability of the country’s supply chain under extreme scenarios. Following the initial success of domestic COVID-19 controls, President Xi introduced the “dual circulation” concept that emphasized the need for cyclical adjustments to the domestic economy (Reuters 2020). Since then, supply chain resilience has become a key feature of almost every major government policy. November 2020 saw China’s chief economic policymaker, Liu He, draft a 5,000-word thesis on the meaning of “dual cycling.” Liu wrote that the COVID-19 pandemic had accelerated the threat to globalization and presented significant challenges to the global supply chain. He added that China must improve domestic economic cycling further amid increased interconnectedness with international circulation (Government of the People’s Republic of China 2020).

In March 2021, China released its Fourteenth Five-Year Plan (14th FYP). The top planning document made supply chain self-reliance a top priority for China’s future development, which was, of course, also a reaction to supply chain disruption during the COVID-19 pandemic (Fujian Provincial People’s Government 2021). In 2021, Beijing kickstarted a campaign to foster a special cohort of companies known as “little giants” to boost supply chain resilience. They received preferential policies and subsidies to strengthen market control or make up for deficiencies across various industry nodes. The “little giants” include China’s cutting-edge developers of medical devices, pharmaceutical ingredients, microelectronics, and advanced manufacturing (South China Morning Post 2021).

China never planned to scale back ties with the global supply chain. The country wrested control of the 2020 COVID-19 wave earlier than the West, with very few cases seen for the remainder of the year while the virus was wreaking havoc across Western countries. China was one of the few countries to maintain functional social and industrial norms that year, with many global companies expanding their China operations in 2020 and 2021 as a result (Fig. 4.4).

Fig. 4.4

China became the global hub for motor vehicle exports

Tesla serves as a prime example of this trend. The Shanghai Gigafactory began operations in the second half of 2019, delivering its first batch of 15 Model 3 electric cars on December 31 2019. At the start of 2020, the factory had annual production of around 150,000 cars. By the end of 2021, this number had increased fourfold to about 750,000 vehicles (Pandaily 2022). In 2021, Tesla delivered 320,000 cars to Chinese customers, meaning that over half of its Shanghai production went to other markets (Tesla 2022).

China’s early success in controlling the COVID-19 pandemic led to a shift in Beijing’s views toward the West. In his opening remarks at the China International Import Expo in early November 2021, President Xi proudly proclaimed China the main defender of global supply chain stability (Chinese Ministry of Foreign Affairs 2021). This period also facilitated the political train of thought that “the East is rising, and the West is declining” (South China Morning Post 2021). The phrase reflected China’s belief that the US and its allies’ failure to quickly control COVID-19 and safeguard their industrial activities might present another strategic opportunity for China.

US Measures to Pull Sensitive Supply Chains away from China

Of course, China’s rhetoric did not go down well in Washington. COVID-19 was a Keisaku slap for US policymaker, forcing them to consider the future of the US-China supply chain from a national security standing point. Furthermore, the 2020 election cycle in the US certainly made China a prime target for political point-scoring. COVID-19 also nullified the two countries’ phase-one trade agreement, the result of a three-year trade war. China never fully met its procurement obligations, citing COVID-19’s impact, while the much-anticipated phase-two negotiations sank to the bottom of the Pacific after Trump lost his re-election bid.

The Biden administration arrived with a clear-eyed vision of Beijing’s ambition and the urgency to take back control of the US supply chain. Shortly after President Biden took office, he signed an Executive Order in February 2021 requiring several cabinet departments to conduct a review of domestic supply chain security. In June 2021, the White House released its 100-day supply chain report covering several major industrial sectors, including semiconductors, large-capacity batteries, critical minerals, and pharmaceutical ingredients (The White House 2021).

The review’s findings highlighted the US overreliance on China for almost all these critical supply chains and hence served as a blueprint for a series of policy measures targeting supply chain dependence on China in these sectors. The White House has since drafted multiple flagship policy pieces to curtail US supply chain dependence on China in these areas.

In March 2022, the US Department of Commerce initiated an investigation into eight companies that manufacture solar panels and parts in Cambodia, Malaysia, Thailand, and Vietnam, including major Chinese players such as BYD, Jinko, New East Solar, and Trina Solar, intending to determine whether Chinese firms were violating US trade laws by circumventing tariffs (US Department of Commerce 2022a). In June 2022, President Biden waived tariffs on solar panels (The White House 2022). This move meant that even if these companies are found to be shipping Chinese components to Southeast Asia, performing minimal processing there, and then shipping PV modules to the US to circumvent the tariffs.

The US Department of Commerce issued a determination on the investigation August 2023 that Chinese companies, including BYD, Trina Solar, and New East Solar were circumventing US tariffs via Southeast Asia. The US commerce department considers shipping cells and wafer to these Southeast Asia countries for assembly as circumventing US tariffs. After President Biden's tariff waiver expires in June 2024, the US will start collecting additional tariffs on exports of these companies to the US from Southeast Asia.

On the other hand, processing China-sourced polysilicon materials, then assembling wafer and cells into modules and exporting to the US does not constitute circumventing US tariffs. In other words, if companies expand their upstream manufacturing capacity in Southeast Asia, they will face lower tariffs when exporting to the US. This would incentivize Chinese companies in the solar product supply chain to shift more of their production outside of China if they intend to sell in the US market (Fig. 4.5).

Fig. 4.5

US imports of certain solar products

In June 2022, the US Customs and Border Protection (CBP) began enforcing the Uyghur Forced Labor Prevention Act (UFLPA). The law mandates the CBP to assume items shipped from Xinjiang to the US from certain entities are made with forced labor, with a particular focus on polysilicon, apparel, and agricultural products (US Department of Homeland Security 2022). Xinjiang produces over half of China’s polysilicon, a crucial raw material for solar panels (Fig. 4.6).

Fig. 4.6

The US is importing less apparel from China

The UFLPA impacted not only the solar industry but also cotton. Xinjiang produces over 90% of China’s cotton, now banned from entering the US unless importers can navigate a cumbersome process to ensure their China supplier is not associated with forced labor. Despite the increased scrutiny on Chinese cotton and apparel, the US still imported 3.4% more clothing from China in 2022 by value compared to 2021. However, this only tells half the story. When measured by volume, US imports of apparel and textiles from China fell 10% annually in 2022. Like their solar counterparts, Chinese apparel and footwear makers have shifted production south. Shenzhou International, the largest apparel and footwear contract manufacturer in China, as well as Nike’s number one supplier, has moved half of its capacity to factories in Vietnam and Cambodia.

In August 2022, President Biden signed the Inflation Reduction Act (IRA) into law. This flagship renewable energy subsidies package includes USD 7,500 per car credit for electric vehicle (EV) makers. The legislation places restrictions on China sourcing in several ways. Firstly, a vehicle is only eligible for half of the total credit (USD 3,750) if its battery components are manufactured or assembled in North America. Secondly, eligibility for the other half depends on the vehicle containing critical minerals extracted or processed in the US or countries with which the US has a free trade agreement. Specifically, after 2023, 40% of an EV battery’s minerals and 50% of its components must come from the US or a free trade agreement country (Phillips et al. 2022).

Finally, starting in 2025, an EV cannot qualify for the clean vehicle credit if its battery contains critical minerals extracted, processed, or recycled by a foreign entity of concern, including China. These restrictions have led Chinese EV battery makers like CATL and BYD to announce plans for facilities outside China (Reuters 2023). The world’s largest lithium battery producer, Fujian-based CATL, has even partnered with Ford to establish a new site in Michigan.

It is important to note that the US treatment of Chinese solar companies, or even the broader renewable energy sector, cannot simply be characterized as supply chain decoupling. Instead, various Chinese companies have decided to take a greater part of their supply chain to the US. For instance, since 2023, JA Solar announced a USD 60 million investment to set up a PV panel production line in Arizona; Longi has announced a USD 600 million joint venture with Invenergy for a new production line with a 5GW production capacity in Ohio. Additionally, Jinko Solar plans to expand production in Florida with a USD 52 million investment. With punitive measures on Chinese exports, the US government has found some success in transplanting the Chinese supply chain to its soil.

The semiconductor industry is perhaps the most heavily impacted by US restrictions. Since the Trump Administration, the US has sanctioned numerous Chinese companies, denying them access to advanced US technology and semiconductor products. The Biden Administration inherited the semiconductor export control regime from its predecessor and sharpened these tools further down the road. The Trump Administration suspended advanced semiconductor exports to Chinese companies like Huawei, ZTE, and SMIC. His administration also convinced Dutch company, ASML, to halt supplying Extreme Ultra Lithography machines, critical for semiconductor manufacturing, to China. While President Biden sanctioned fewer Chinese tech companies than his predecessor, the administration expanded the types of semiconductor technologies covered by US export controls (Table 4.1).

Table 4.1 Chinese entities added to export control list (US Commerce Department 2023)

During the COVID-19 pandemic, the Biden Administration scaled up semiconductor technology export controls to China from technologies associated in the making of 10 nm chips to 14 nm chips, while adding advanced memory chips to the export ban list (US Department of Commerce 2022b). In early 2023, the US successfully convinced the Netherlands and Japan to impose tighter restrictions on semiconductor manufacturing equipment sales to China. Both countries have now issued their own regulations restricting the exports of advanced semiconductor manufacturing technologies to China.

Beyond semiconductors, the US has implemented new export controls on biotech, AI, and quantum computing, resulting in a sharp decline in US exports of advanced tech to China across various categories. To further add to these limitations, the Biden Administration has issued an outbound investment restriction on US investment flows into the advanced semiconductor, quantum computing, and dual-use AI technology in China in September 2023. Data since the pandemic and the intensifying sanctions show a hoarding effect among Chinese companies. Imports of integrated circuits increased significantly until the export ban took effect in October 2022 (Fig. 4.7).

Fig. 4.7

US advanced technology product exports to China

In 2023, the Chinese government issued several rules to strengthen its own export control. In July, the Chinese Ministry of Commerce imposed export controls on gallium and germanium, raw materials used in semiconductors. Chinese companies must now obtain government licenses before exporting them to foreign entities. To be fair, COVID-19 did not create these export controls and incentives for both governments to hold critical supply chains domestically. US export controls and the political urgency in the US to re-onshore its supply chain predate the pandemic. However, COVID-19 provided an acrimonious political context that justified the movement politically.

China’s COVID-19 Control Measures Made Everything Worse in 2022

While the US’s adoption of restrictive policies raised pessimism among global businesses with entrenched supply chains in China, Beijing’s COVID-19 control measures in 2022 gave investors even more reasons to leave. Outbreaks became increasingly difficult to control in practice, resulting in a significant impact on industrial production. China’s zero-COVID policy meant local authorities had to keep tightening controls, inflicting greater pain on daily socioeconomic activities whenever cases started to spiral.

After experiencing quick surges in domestic cases, multiple cities in China entered lockdowns from February 2022. The Yangtze River Delta, China’s largest trade portal, had navigated 2020 and 2021 with little economic cost. However, major cities in the region, such as Shanghai, Suzhou, and Ningbo, entered intensive lockdowns in 2022. Zhengzhou, central China’s manufacturing hub, had to endure repeated extensive periods of lockdown. The Port of Shanghai, the world’s largest shipping hub by volume of commodity shipments since 2010, saw export capacity reduced by 40% during two months of lockdown (Fig. 4.8).

Fig. 4.8

Zero-Covid dragged China’s port handling in Q2 2022

At the same time, US-China tensions only continued to grow during COVID-19. After war broke out in Ukraine, the world became sensitive to the geopolitical scenario around the Taiwan Straits. For China, the US and the West grew more vocal in their support of Taiwan—perceived as dancing around China’s political redlines. Speaker Pelosi’s visit to Taiwan resulted in the suspension of many dialogue mechanisms between the two countries. Beijing responded with launch unprecedented military exercises near the island. In the eyes of many global businesses, this left China more agitated and isolated. At that point, with much of the country forcibly under lockdown, China had reversed its status from an exporter of certainty to a sheer exporter of uncertainty. China’s latest trade data also reflected a weakened supply chain relationship pre-and post-COVID-19. The US share of China’s total exports fell 2.5 percentage points from 17.5% to 15% between 2020 and 2023. This figure was 19.3% back in 2018 (Fig. 4.9).

Fig. 4.9

The US share of China's total exports fell during COVID-19

China reopened in a quick and disorderly fashion in late 2022, hoping to turn the page on COVID-19 and the socioeconomic mess it left. Chinese officials have been interacting with foreign business representatives with unprecedented frequency since the turn of the year. Yet the gesture of kindness is unlikely to reverse the diversification trend. Beijing will find it challenging to prevent the outflow of foreign business-enabled jobs, given that many large global companies have already downsized their China supply chain to mitigate the risk.

The two governments did commit greater efforts in of 2023 to resume engagement with each other. This included visits by multiple senior US officials to China, such as US Secretary of State Antony Blinken and Secretary of the Treasury Janet Yellen. Officials in the US and European countries have coined a new word, “de-risking,” to replace the phrase “selective decoupling” in an effort to ensure that the vast majority of trade with China does not entail risk. Unfortunately, none of these arguments can reconcile with the fact that decoupling has already taken place to some extent.

Nearly half of respondents to a 2022 member survey from the US-China Business Council thought China’s COVID-19 control measures, such as factory lockdowns and related requirements, had adversely affected US companies’ operations to a significant extent. They indicated this would negatively impact future investment plans in China (US-China Business Council 2022, p. 3). Just under three-quarters of respondents believed that COVID-19 control measures had an interaction effect in further complicating the bilateral relationship and raising geopolitical concerns. The logic is simple: the derailment of official and civil engagement since COVID-19 made it much harder to engage in dialogue and reach a consensus.

A 2023 report from the American Chamber of Commerce China (AmCham China) noted that 24% of respondent companies have started or made plans to move their supply chain out of China (American Chamber of Commerce in China 2023). Members also cited worsening US-China relations as the most crucial driver behind supply chain movement.

Case Study: Apple

Perhaps there is no company more representative than Apple when it comes to the movement of a bilateral supply chain. A case study on supply chain adjustments by Apple during the COVID-19 pandemic presents convincing evidence of how companies have aligned supply chain decisions under the expectation of a selective supply chain decoupling. The iPhone maker used to rely on China to manufacture almost all electronic products, but this status was weakened during the COVID-19 pandemic. In its fiscal 2021 (September 2020 to September 2021) annual supplier statistics, published in October 2022, mainland China’s share has decreased within Apple’s global supply chain.

To be fair, mainland China still plays host to the most Apple suppliers globally. In FY2021, Apple had 191 suppliers worldwide. Among them, 150 suppliers had facilities in mainland China while 39 of them were mainland Chinese companies. But there are clear signs of diversification. Apple suppliers have been establishing more facilities outside the mainland. In FY2021, 116 suppliers served Apple by producing in multiple countries, up from 96 in FY2020. Meanwhile, a mere 58 suppliers had facilities only in mainland China, down from 80 in FY2020 (Fig. 4.10).

Fig. 4.10

More Apple suppliers are operating in multiple countries

The US and Taiwan have experienced the largest increase in share of Apple suppliers. In FY2021, 51 Apple suppliers had facilities in the US, up from 25 in FY2020. Similarly, 45 Apple suppliers had facilities in Taiwan in FY2021, up from 26 in FY2020. Outside mainland China, Asia is hosting more Apple suppliers. The number of suppliers with facilities in the region increased to 116 in FY2021, up from 102 in FY2020 and 99 in FY2019. Countries receiving this boost include Vietnam and India. In FY2021, Vietnam hosted 26 Apple suppliers, while India had 11, compared to 14 and 7, respectively, in FY2019. Apple has great ambitions for these two countries. Some speculate that 25% of iPhones and 65% of MacBooks will be produced in India and Vietnam, respectively, by 2025 (TechCrunch 2022) (Fig. 4.11).

Fig. 4.11

Number of Apple suppliers by region

To cope with Apple’s supply chain adjustment, mainland Chinese suppliers have begun expanding their overseas production to serve Apple from outside China. In FY2019, only five mainland Chinese suppliers had production capacity overseas. This number has more than doubled as of FY2021, with a dozen mainland Chinese suppliers serving Apple from outside the country. Lingyi Tech, a precision parts supplier based in Guangdong, has served Apple from facilities in mainland China, Brazil, India, and Vietnam since 2020. Lens Technology, which provides camera lenses and parts to Apple, also started operating in Vietnam in 2020. Shenzhen’s Everwin Precision Technology, added to Apple’s supplier list in March 2021, reportedly started producing precision parts in Vietnam from November 2021. Another of Apple’s battery suppliers, Desay Battery Technology, also began production at its Vietnamese facilities in 2022.

Mainland Chinese suppliers follow Apple because of their dependence on the company’s business. Luxshare Precision, one of Apple’s top precision part suppliers in mainland China, generated 74% of its FY2021 revenue from the company. Similarly, in FY2021, Lens Technology collected 66% of its income from Apple, while GoerTek, which provides Apple with audio components, relied on the company for over 40% of its takings. This dependence makes it hard for mainland suppliers to deviate from Apple’s movements.

US sanctions on China have affected some Apple suppliers, including Nanchang-based O-Film Tech, a supplier of touchscreen technologies. In July 2020, the Trump administration added O-Film to the Entity List due to suspected human rights violations, thereby restricting US technology exports to the company. In practice, the export restrictions imposed on O-Film did not impede its ability to sell to US customers. Nonetheless, Apple still terminated its business relationship with this supplier. Subsequently, Wingtech Technology acquired O-Film’s production lines for Apple for RMB 2.4 billion, with Apple adding it as a supplier in FY2021. By the time the Biden administration lifted sanctions on O-Film in June 2022, the firm’s revenue had plummeted by over half—from USD 7.4 billion in FY2020 to USD 3.6 billion in FY2021.

Yangtze Memory Technologies Corporation (YMTC) is another casualty of US sanctions. Apple had been in negotiations with YMTC to add the latter as a memory chip supplier from 2018 onward. In 2022, YMTC was reportedly close to a deal with Apple. However, YMTC’s state backing ultimately led members of US Congress to openly oppose its inclusion in Apple’s supply chain, citing national security concerns. In October 2022, the US Department of Commerce sanctioned YMTC. Concurrent with the sanctions, Apple reportedly abandoned including YMTC as a supplier.

Conclusion

In retrospect, the COVID-19 crisis has fundamentally underscored distrust and rivalry as the zeitgeist of US-China relations. In the three short years between 2020 and 2023, the US escalated semiconductor export restrictions to China and imposed a regional ban on products affiliated with Xinjiang. In particular, the Biden administration has conditioned domestic industrial subsidies on companies limiting their supply chain reliance on China. On the other hand, in 2022, China’s extensive COVID-19 control measures have disrupted the global supply chain, undermining its credentials as a resilient hub—a status the country had earned through similar control measures.

China’s experience with COVID-19 and the deteriorating US-China relations have prompted the government to prioritize supply chain self-control and security to a whole new level. During the 2023 annual Chinese People’s Political Consultative Conference, President Xi openly named the “US-led Western containment, circumvention, and suppression of China’s development” for the first time and outlined six phrases that characterize China’s foreign policy doctrine. These phrases included “stay calm,” “maintain composure,” “seek progress while keeping stability,” “be proactive,” “unite as one,” and “prepare to struggle” (沉着冷静、保持定力，稳中求进、积极作为，团结一致、敢于斗争). They are being interpreted in the supply chain context as evidence that China has decided to engage in a “struggle” with the US and “proactively” accelerate the development of a decoupling-resilient domestic supply chain and is seen as an acknowledgment that China will have to endure some selective decoupling with the US.

The trajectory of the political relationship has mobilized companies to adjust supply chain reliance on China. Today, companies in both countries are still searching for a new equilibrium for their economic relationship. It will take some time for the full effects of the supply chain movement to unfold and for observers to provide a more accurate depiction of the scale of this supply chain movement. A significant portion of the restrictive trade policies discussed in this chapter have only recently entered their implementation phase. More companies are expected to complete their supply chain buildup outside of China through 2025. Trade and investment data between 2023 and 2025 may paint a grimmer picture on the bilateral economic ties and possibly amid shakier ground for US-China relations.