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| Author Daniel Case Licence CC BY-SA 3.0 Source Wikimedia Commons |
For the first 20 years after China joined the World Trade Organization in 2001, it was almost instinctive for small businesses in the UK to look to China to outsource their manufacturing. There were many reasons for that. Labour was relatively cheap. Components and raw materials were abundant and locally sourced. Freight costs were tumbling as the belt and road initiative unfolded. There was even talk of London becoming "the Western hub of Chinese finance" (see HM Treasury and George Osborne Chancellor welcomes London renminbi clearing bank 18 June 2014).
As a result, much of my work was connected with China in one way or another. I was asked to review and occasionally draft manufacturing agreements or licences with Chinese manufacturers. I warned clients that their UK or European patents, trade marks or designs afforded no protection against in other countries and urged them to seek legal protection in their principal markets and sources of supply. Quite a few infringing products have been tracked to China, sometimes even by manufacturers that had made the outsourced product under licence.
I have noticed a significant drop in demand for legal services relating to China in the last 2 years and it is not hard to see why. The Trump administration imposed tariffs on Chinese goods. The British government restricted Chinese investment in infrastructure projects such as 5G telecoms and nuclear power. Protracted lockdowns to suppress covid have interfered with production. The Russian invasion of Ukraine and sanctions on Russia have cut overland links to Western Europe. Chinese labour is becoming scarce and hence more expensive as a result of the one-child policy. Spiralling transport costs have eroded whatever price advantage remains. Concern over human rights and worries over a possible invasion of Taiwan has added to a change of attitude towards China. It is hardly surprising that there has been a rethink on outsourcing to that country.
Of course, China remains an enormous market with a faster rate of growth than most countries even now. The best way to supply that market remains through joint ventures with Chinese businesses or licensing. But manufacturing in China to supply the UK or other European markets is ceasing to be feasible. There are alternative outsourcing manufacturers in countries like India, Indonesia and Bangladesh but they are also a long distance away and the manufacturing sectors of Bangladesh and Indonesia are less developed. At a time of rising costs, businesses that can supply their customers from shot supply chains enjoy an advantage.
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