Across a range of industries – including electronics, consumer goods, automotive, pharmaceuticals and medical equipment – COVID-19 production slowdowns have exposed companies’ overreliance on China in their global supply chains.

Even companies that have shifted production away from China have been affected by their dependence on upstream sourcing of materials and components from the region. 5M+ companies – including 938 firms in the Fortune 1000 – have at least one Tier 2 supplier in China.

The market environment in China has become less attractive over the past few years, with rising wages and taxes, local competitors, a less accommodating government, concerns about intellectual property and long-term competitiveness, the stringent new update to China’s cybersecurity rules, and of course the trade wars and tariffs.

Companies such as Apple, Microsoft and Google are accelerating their efforts to diversify production to other regions (e.g. Vietnam, India, Thailand, Mexico, Brazil). More firms will follow in the aftermath of the COVID-19 as supply chain resiliency rises on the boardroom agenda.

While diversification of supply networks is probably good for businesses, it’s an open question as to whether it’s good for the world. An accelerated decoupling between the US and China carries with it risk and serious ramifications that go beyond the economic.