Well-known Chinese news site Tencent News recently reported that Walmart has announced it is moving procurement center from China to Vietnam.
As a global manufacturing center, China’s labor costs are rising, which undoubtedly brings additional burdens to large-scale retailers. Meanwhile, Vietnam is an emerging manufacturing country with relatively low labor costs and a loose regulatory environment. Thus, Vietnam has become Walmart’s first choice as an alternative to Chinese labor.
China’s status in the global manufacturing supply chain is gradually declining. At the same time, other countries are becoming more important links in a transformed global supply chain. These other countries include Mexico, India, Thailand, Vietnam, etc.
According to the Tencent article, these countries are likely to succeed China and become the next world factory. The impact of Walmart’s departure from China is not only the loss of an important foreign-owned retail system, but more importantly, there is a series of chain reactions that may result from Walmart’s departure. As one of the world’s largest retailers, Walmart has a huge procurement operation. Once Walmart leaves, it will no longer have demand for Chinese suppliers, which may lead to increased pressure on the survival of some small and medium-sized Chinese manufacturers. Also, Walmart has a large number of employees in China, and the departure may result in significant job losses. This will bring pressure to China’s job market and social stability. However, Walmart’s departure will provide more opportunities for Walmart’s rivals to compete for the Chinese consumer market share.
Walmart began to close its stores in China in 2016. Over 130 Walmart locations in China have closed since then.
Source: Tencent News, November 23, 2023
https://new.qq.com/rain/a/20231123A00DCU00