The Emerging Of Close Produce Model In Global Manufacturing – Analysis

By Zhao Zhijiang

The impact of the wave of de-globalization on global trade is most directly felt, but its influence on the production and layout models of multinational companies is even more profound. During the peak of globalization, multinational companies focused on “profit” and pursued profit maximization. However, the global market no longer exists as it once did, and outdated theories are simply ineffective. Therefore, adjustments are inevitable.

The question is, how should these adjustments be made? Based on research on the changes in global market space and tracking the process of de-globalization, ANBOUND has proposed a new theory for multinational companies, namely “close produce”. This theory represents the restructuring and re-layout of large multinational corporations. Regardless of the company, even if they do not adopt this model now, they will eventually follow its path. While supply chain layouts in the future will still prioritize “profit”, “resilience” will be even more important.

The global supply chain restructuring and the widespread adoption of the close produce model by multinational companies are actually not favorable to China’s development. This is their voluntary adjustment, driven by an internal motivation to distance themselves from the Chinese market, which can even be seen as another way to explain “decoupling”. Of course, some Chinese companies expanding overseas are also adopting the same model to expand their growth space. However, geopolitical pressures between the U.S. and China, as well as other factors will create significant uncertainty, disrupting the growth of Chinese companies overseas.

I. Supply Chain Adjustments of Multinational Corporations in the Era of De-globalization

The statement “globalization is dead” is not an exaggeration, but an objective reality.

As early as the beginning of this century, when protests against the World Trade Organization emerged around the world, a senior researcher at ANBOUND predicted that an era of fragmented global space had arrived. The world would become increasingly regionalized, the United States would move toward isolationism, and geopolitical crises would arise globally. Unfortunately, such predictions have now become a reality. The U.S.-China trade war in 2018, the global lockdown caused by the COVID-19 pandemic in 2020, the Russia-Ukraine conflict in 2022, the Israel-Hamas conflict in 2023, and Donald Trump’s second term leading the U.S. toward isolationism are all clear examples of this.

Multinational companies that are accustomed to the benefits of globalization are the ones that struggle to adapt to the changes in the world order. In the past, multinational companies centered around “profit”, aiming for profit maximization and engaging in production and layout on a global scale. This was also the core idea of mainstream economic and supply chain theories. For example, Canadian economist Stephen Hymer and his American mentor Charles P. Kindleberger believed that multinational companies could leverage their monopolistic advantages in advanced technologies, industrial organization, and other areas to earn excess profits through direct foreign investment. Whenever the production costs in a particular place or region were lower, these multinational companies were highly motivated to set up industries and production there. Following this theory, during the peak of globalization, multinational companies made huge profits. Particularly, the period from the end of the Cold War in the 1990s to the outbreak of the financial crisis in 2008 is often referred to by some scholars as the “golden age” of multinational corporations and supply chains. In less than two decades, political barriers between nations were eliminated, and political barriers were dismantled, paving the way for markets to play a decisive role in global industrial and supply chains. The result was the combination of low-cost labor from developing economies with abundant capital from developed economies, leading to production, with products easily crossing borders multiple times. From a business perspective, this meant that multinational companies could allocate resources globally based on economic costs.

However, times have changed, and the world today is vastly different, now heavily constrained by factors such as geopolitics. Multinational companies, in their pursuit of extreme cost-efficiency and profit, are now facing attacks. Take the Red Sea crisis, which stemmed from the Israel-Hamas conflict, as an example. According to The New York Times, many companies are facing difficult decisions: If shipping companies want their vessels to use the Red Sea route, they risk being attacked by Houthi militants from Yemen and must pay significantly higher insurance fees. Alternatively, they could take a detour around Africa, adding over 6,400 km to their journey, which would increase travel time by 10 days and consume more fuel. Both options are less than ideal and raise costs, which will ultimately likely be passed on to consumers in the form of higher prices.

Therefore, multinational companies have started to realize that the traditional production and supply chain theories are outdated and need to be adjusted. Even professors from business schools, who have long been secluded in their ivory towers, admit that de-globalization has dismantled the classic textbooks used in classrooms. Companies need to change their models to adapt to the new global economic situation, and multinational production has evolved from a purely corporate behavior to a spatial production behavior constrained by complex spatial factors. In this process, geopolitical costs within transaction costs have risen significantly, and changes in costs due to spatial conflicts and contradictions have made geopolitics a risk factor that needs constant adjustment. Geopolitics now drives and even determines changes in overall costs. If companies only consider “profits” without focusing on “resilience”, then in today’s era of de-globalization, multinational corporations not only fail to make profits, but also cannot ensure their sustainable operation.

Based on tracking research and analysis of the de-globalization trend, researchers at ANBOUND believe that there will be three significant changes in supply chains:

First, supply chains will be shortened. In the new geopolitical and geo-economic environment, long supply chains represent uncertainty and high risk, making security and stability a higher priority than cost. Consequently, shortening supply chains has become a key trend in supply chain restructuring.

Second, supply chains will place greater emphasis on regionalization. As supply chains face disruptions, distance from customers and markets introduces new risks, with companies potentially losing orders due to rising uncertainties. In response, global supply chains will likely be regionalized, forming multiple, distributed regional supply chain systems that cater to local market demands.

Third, supply chains may become more selective. What was once a straightforward business model is now heavily influenced by geopolitical factors, including national security, alliances, ideology, values, and human rights. As a result, we are likely to see the emergence of selective supply chains in the future, where such factors shape global industry networks.

In fact, since the Obama administration began promoting “nearshoring” and “friendshoring”, some multinational companies have already been taking steps towards “shortening” and “regionalizing” their production layouts. This shift is also closely tied to the United States’ desire to reduce its dependence on China. Mark Green, a member of the U.S. House of Representatives’ Subcommittee on Western Hemisphere, Civilian Security, Migration, and International Economic Policy, once proposed the “Western Hemisphere Nearshoring Act”. Green claimed that the bill would achieve three goals at once: reducing America’s reliance on Chinese manufacturing, creating more jobs and economic growth opportunities in Latin America and the Caribbean (LAC), and alleviating the immigration crisis at the U.S.-Mexico border by reducing the number of illegal immigrants. Most importantly, this initiative would provide the United States with an effective path to counter China’s growing influence in LAC. As for “friendshoring”, it is designed to achieve the aforementioned objectives. The term “friend” refers to countries that share similar values with the U.S., including traditional allies. In this way, multinational companies have more options: they can establish supply chains in LAC or set up production in European countries like Denmark and Sweden, which are closer to the U.S. East Coast.

Some viewpoints suggest that, despite the U.S. vigorously promoting “friendshoring”, Chinese capital still plays a crucial role. In early September 2023, at the annual meeting of the Federal Reserve Bank of Kansas City held in Jackson Hole, Wyoming, research presented by experts showed that despite changes in global trade patterns, the U.S. supply chain remains heavily dependent on China, albeit in a less direct manner. The dependence on Chinese supply chains has shifted from being overt to covert, but the path to fully breaking this dependency remains difficult. As a result, some commentators argue that whether it is “decoupling” or “de-risking”, and whether outsourcing is “nearshore” or “friendshore”, the U.S. and the West will not be able to truly break free from their reliance on Chinese supply chains, hence that this policy is unlikely to have a fundamentally “negative impact” on China.

However, a senior researcher at ANBOUND stated that the process of de-globalization will be very long and complex, and the adjustments in industrial chains, as a manifestation of this fundamental trend, will not follow a simple, linear path. It is crucial to summarize and analyze the stage-specific characteristics. Regarding the current wave of industrial chain adjustments, the most effective way to summarize its phase characteristics is not simply “nearshoring” nor just “friendshoring”, but rather “close produce”, which combines certain aspects of both and presents a highly diversified form, a concept introduced by ANBOUND in August 2022. It serves as a macro tool for understanding and analyzing the adjustments in industrial chains within the de-globalization process.

II. The Basic Theory and Core Principles of “Close Produce”

“Close produce” refers to the deployment of major component industries around central markets and centers of productivity, forming a production system that is as closely integrated as possible. The term “close” here has two aspects, namely spatial and social-environmental. It means that companies should choose to deploy and organize production in regions with minimal conflict and contradictions.

While multinational companies in the past prioritized “profit”, under the “close produce” theory, businesses must now strategically organize around three core factors: technology, capital, and consumption, all with the goal of reducing overall production and operational costs.

(1) Technology as the core to reduce monopoly costs: As global competition intensifies, advanced technology plays a crucial role in leading the way and enhancing the comprehensive strength of multinational companies. On one hand, it helps businesses improve production processes and equipment, increasing production efficiency; on the other hand, it enhances product design, improving product quality and added value. However, the current global level of technological monopolies continues to rise, hindering the multinational flow and global sharing of advanced technologies. According to data analysis from 2004 to 2017, Associate Professor Lu Bing of the Beijing Normal University and his collaborators found that, compared to other products, high-tech products are more concentrated in certain countries, exhibiting higher levels of monopoly. This concentration has shown a self-reinforcing trend in recent years. For example, even in the past common bicycle production, there is a monopoly on gear mechanisms, with just two companies controlling the market. In semiconductor production, apart from the absolute monopoly of high-end photolithography machines, there are also numerous technological monopolies, such as photolithography resist chemicals, which are mainly monopolized by two companies from the U.S. and Japan. Therefore, multinational companies need to organize around the core of technology, focusing not only on their own technological research and innovation but also on strengthening cooperation with countries that possess advanced technologies. The goal is to narrow the gap with technological hubs as much as possible, maximize sustained technological leadership, and reduce monopoly costs.

(2) Laying out surrounding the core of capital to reduce financing costs: This not only allows for broader financing channels, including stock issuance, bond issuance, etc., but also access to more financial support, thereby beneficial for global business expansion, research and innovation, and other strategic investments. However, in recent years, the global capital allocation pattern has become rather different due to dramatic changes in global conditions. Data shows that as of February 2025, the stock market capitalization rankings of various countries and regions are as follows: the United States with USD 60 trillion, ranked first; China with USD 10 trillion; Japan with USD 6.5 trillion; Hong Kong with USD 5.4 trillion; India with USD 4.5 trillion; the UK with USD 3.2 trillion; Canada with USD 3.2 trillion; Germany with USD 2.5 trillion; Australia with USD 1.6 trillion; and South Korea with USD 1.6 trillion. At the same time, the overall scale of global capital flows has shrunk. From 2022 to 2023, global capital inflows, compared to 2017 to 2019, dropped from 5.8% of global GDP to 4.4%, or from USD 4.5 trillion to USD 4.2 trillion. The trend of capital outflows follows the same pattern. In addition, the allocation structure of global capital has also undergone dynamic changes. From 2022 to 2023, the U.S. attracted 41% of global capital inflows, while its outflow share rose from 14% to 21%. China’s capital flow decreased significantly, and the capital flows of financial centers also dropped sharply. Therefore, in the future, multinational enterprises will need to take various measures for industrial layout based on the new trend of global capital allocation, shortening the distance to the capital core and reducing financing costs.

(3) Laying around the core of consumption to reduce logistics costs: This can make product sales more effective. Since products can reach consumers more quickly, it reduces distribution costs and time. On the other hand, it helps companies better grasp market dynamics, understand changes in consumer demand, and technological shifts, enabling the adjustment of production and marketing strategies when needed. However, more critically, this can significantly reduce the enormous costs of transportation and storage. During the era of globalization, global shipping costs continue to rise due to increasingly expensive human resources, threats from wars and conflicts, and rising port and canal tolls. The impact of geographical distance on costs has never been as significant as it is today. On February 6, Maersk released its 2024 financial report, reporting a revenue of USD 55.48 billion, an 8.65% year-on-year increase, and a net profit of USD 6.23 billion, up 59.47% compared to the previous year. It is worth noting that even though the Red Sea crisis is easing due to changes in the situation between Israel and Hamas, Maersk and other container shipping giants remain cautious about returning to the Red Sea. Many European shippers still refuse to ship goods via the Red Sea due to security concerns. Therefore, the layout around the core of consumption has become an inevitable choice for multinational enterprises for safety and stability reasons.

In addition, “close produce” has four other conditions: (1) Ideological emphasis on the same type of people; (2) Market space emphasis on consistency; (3) Logistics costs being relatively low; (4) Proportion of production costs in total costs being reduced.

Considering the first condition, in recent years, as a set of values and ideas, ideology has gradually gained prominence worldwide. As it stands, ideology is manifested in the rise of nationalist thoughts, driving a broader politicization, securitization, and ethnification, becoming an objective fact that all countries and companies must pay attention to. Nationalism emphasizes the protection of national and ethnic interests and seeks equal economic rights and independent development. Economic nationalism is reflected in economics characterized by trade disputes and regional economies, and cultural nationalism is characterized by the protection and revival of national or local cultures. Meanwhile, political nationalism, marked by national division and ethnic opposition, is also on the rise, further strengthening economic and cultural nationalism. The experiences of Chinese companies in India serve as a clear example of this. A well-known Chinese mobile phone brand was forced to negotiate with a local Indian company to sell the majority of its shares and form a joint venture to comply with India’s “government requirements”. In 2023, India’s law enforcement agencies arrested several senior executives of the Chinese mobile company’s local office on charges of “money laundering”, including the temporary CEO and CFO. Such experiences mean that the global industrial layout in the future will largely have to be based on ideology, or else various uncertainties and risks will arise.

Taking the U.S. as another example, IMF First Deputy Managing Director Gita Gopinath pointed out that in recent years, geopolitical risks have risen, and the free flow of capital and goods is facing increasing threats. Geopolitics has widened trade rifts between groups. It has also caused the fragmentation of global supply chains, which in turn affects global trade and investment activities. According to WTO statistics, in the first half of 2023, the share of intermediate goods trade in global trade, which serves as an indicator of global supply chain activities, was 48.5%, 2.5 percentage points lower than the average of the previous three years. According to UN polling results also indicate that the proportion of parts trade between the U.S. and countries with similar political views fell to 73% in 2020, but this figure rose to 74% in 2022 and reached 77% in 2023. The WTO warns that signs of global supply chain fragmentation have begun to appear and will continue to pose a threat to global trade.

Looking at the second condition, the market order and value principles followed by both parties are similar or the same, especially in terms of law and finance. In recent years, due to differences in market and value principles, legal risks for enterprises have become increasingly common. These risks mainly fall into four categories: (1) Market access risks, including tariff barriers, environmental standards, and the like; (2) Tax compliance risks, involving tax disputes and penalties; (3) Intellectual property management compliance risks, including accusations or lawsuits related to intellectual property infringement; (4) Human resources compliance risks, including labor contract disputes and project management issues.

To provide an example, according to data cited in the Blue Book on Overseas Rights Protection of Chinese Enterprises (2023-2024), U.S. regulatory authorities have detained 9,791 batches of goods, with a value of approximately USD 35.6 billion, including electronic products, textiles, footwear, clothing, and industrial and manufacturing raw materials. It should be noted that countries around the world are at different stages of economic development, resulting in different legal systems and financial environments. Among them, the First World, primarily developed countries, has already established relatively complete legal systems and formed relatively open financial environments. The Second World, mainly developing countries, has established numerous legal systems but with more government control. The Third World is advancing industrial internationalization processes, with fewer legal and financial restrictions. The Fourth World, on the other hand, is relatively least developed in terms of legal and financial environments. Therefore, in the future, multinational enterprises will tend to choose countries or regions with market principles and orders that are similar to their own in order to reduce various risks, whether visible or hidden, in their production and operations. This will, in turn, create the basic conditions for a common market when globalization rises again.

From the perspective of the third condition, based on the aforementioned factors, multinational companies may choose locations as close as possible to significantly reduce logistics costs. In recent years, with changes in the global economic situation, international logistics costs have experienced dramatic fluctuations, even showing a continuous upward trend. This is mainly due to increasingly expensive labor resources, threats of war and conflict, as well as various fees such as port and canal passage fees, ship maintenance fees, cargo insurance fees, and fuel costs. The impact of spatial distance on costs is becoming more and more significant. Therefore, multinational companies are bound to lean towards selecting countries or regions that are as close as possible. The United States promotes ‘nearshoring’, encouraging manufacturing to concentrate in North America through agreements such as the United States-Mexico-Canada Agreement (USMCA) and the Inflation Reduction Act. Mexico benefits from these policy advantages and has seized development opportunities. Domestic manufacturing continues to experience high growth, with exports significantly increasing and becoming the largest source of goods imports for the United States. From 2021 to 2023, Mexico’s foreign direct investment (FDI) inflow grew at an average rate of 8.6%, mainly flowing into sectors benefiting from the global industrial chain restructuring, such as transportation equipment, metals, computer equipment, and chemicals. In 2023, the share of FDI inflow into manufacturing industries was 41%, 13%, 9%, and 8%, respectively.”

Looking at the fourth condition, production costs are placed last because smart factories are becoming increasingly common, which has led to a significant decrease in the proportion of labor costs in the total cost of finished products. In the past, one of the main considerations for developed countries to transfer industries to underdeveloped or developing countries was the cheap labor costs. However, as these underdeveloped and developing countries’ economies have grown, their labor costs have risen year by year, significantly narrowing the gap with the labor costs in developed countries. Data shows that labor costs in China have now risen to about three times those of countries like Vietnam, Thailand, and India. At the same time, labor costs in Southeast Asia have also been rising. Since last year, countries like Vietnam, the Philippines, Thailand, and Malaysia have all raised their minimum wage standards. Starting in July of last year, Vietnam’s national minimum wage increased by an average of 6%. In major cities like Hanoi and Ho Chi Minh City, workers can now earn a minimum wage of VND 4.96 million (about USD 190) per month, an 80% increase compared to 10 years ago. Vietnam has set minimum wages in four regions, with wages in large cities being over 40% higher than in the least developed areas. Thailand plans to raise the minimum wage to THB 400 baht (about USD 11) per day, which is about a 14% increase from the current 300-350 baht. This new minimum wage means workers’ monthly salary will be at least around USD 230. The Philippines has raised the minimum wage in the Greater Manila area since last summer, from PHP 610 (about USD 10.5) to PHP 645, a 6% increase, with a monthly salary of around USD 240. Malaysia already raised its minimum monthly wage from MYR 1,200 (about USD 254) to MYR 1,500 (about USD 340) in 2022, a 25% increase. It should be noted that while some analysts in these countries view wage increases positively, multinational companies may hesitate to establish operations locally in order to save costs. For example, business communities in Vietnam have indicated that due to concerns about rising labor costs, more and more companies are considering moving to areas outside the major cities, leading to instability in business development.

At the same time, with the rapid development of modern internet technology and artificial intelligence, smart factories are becoming increasingly common. Traditional manufacturing powerhouses like Germany and the U.S. have made many explorations and practical attempts based on the concept of smart factories. China, along with other global industrial manufacturing giants, has also strongly promoted this development, introducing various digital development plans and documents. This has greatly facilitated the expansion of the scale and scope of global smart factories, further reducing the demand for labor.

In the context of de-globalization, close produce represents a global production and supply chain layout and organization model that is different from the profit-centered approach of the past. Multinational companies will make remarkable reorganizations and realignments in the global market. This will be a significant structural adjustment and is likely to be accompanied by technological advancements, such as the establishment of more intelligent, labor-saving super factories. This adjustment is inevitable and may induce responses from the capital markets. Therefore, as a trend that has already occurred, it is crucial to pay attention to it and take prompt action.

III. The Impact and Lessons of Close Produce to China

The global supply chain restructuring and the increasing adoption of the close produce model by multinational companies are actually not beneficial to China’s development. This can be viewed from two aspects. The first is from the perspective of multinational companies. This is a voluntary adjustment on their part, driven by an internal motivation to distance themselves from the Chinese market, which can even be seen as a form of ‘decoupling’ from another angle. For example, a number of foreign automotive companies are withdrawing from China. While many believe this is due to geopolitical factors, it is also the result of the ‘close produce’ reason. These companies no longer need to “exchange market access for technology” familiar to China. Instead, they are reorganizing their production methods around new production hubs.

The results of foreign companies adopting the close produce model are already evident. Taking the U.S.-China relationship as an example, China has long been the largest source of imports for the U.S., but this situation has changed. Data from 2024 shows that Mexico has surpassed China for the first time in 20 years, becoming the largest official source of imports for the U.S. In 2023, the U.S. trade deficit with China significantly narrowed, with imports from China dropping by 20% to USD 427.2 billion. While U.S. consumers and businesses have shifted to purchasing auto parts, shoes, toys, and raw materials from Mexico, Europe, South Korea, India, Canada, and Vietnam, a closer examination of trade relations among the U.S., China, Canada, and Mexico reveals an inverse correlation. As the U.S.-China trade relationship declines, trade between Canada, Mexico, and the U.S. is rising. This has effectively created a large “close produce” zone, effectively creating the world’s largest industrial park that can evade geopolitical influences, making it a haven for manufacturing. Despite tariff pressure being applied to Mexico and Canada following Trump’s second term, it is clear that, as neighboring countries, these three nations will increasingly integrate their supply chains and production layouts in the future, leaving little to no opportunities or space for China.

It has almost been a month since Trump took office as the President of the United States. Amid the intensifying competition between the U.S. and China, researchers at ANBOUND have found that multinational companies that have yet to adopt the “close produce” model are now considering or accelerating the implementation of this strategy. According to a survey released by the Conference Board earlier this year, by the end of 2024, 85% of global business executives plan to make significant reforms to their supply chains, a 15-percentage-point increase from the previous year, and significantly higher than the levels at the beginning of the pandemic. The survey also shows that 45% of global CEOs believe trade wars represent the biggest geopolitical risk in 2025, a figure that is double that of the previous year. Among them, U.S. executives stand out with 47% listing trade wars as their biggest challenge.

Dana Peterson, the Conference Board’s chief economist, noted that “there were a lot of executives, particularly CEOs, focused on changing their supply chains . . . it’s returned to the top of the agenda”. The survey by the Conference Board found that executives from Southeast Asian companies are the most concerned about supply chain risks, with 90% of them planning to implement changes. In addition, 34% of business executives plan to use artificial intelligence to optimize supply chain performance and tracking capabilities, while also strengthening supply chain diversification. Recently, Taiwan’s regional organization on economic development announced that it has launched several countermeasures and through the Taiwan External Trade Development Council (TAITRA) and the Industrial Technology Research Institute (ITRI), it will actively assist companies in adjusting their supply chain and investment strategies to ensure stable development.

The organization stated that it will offer customized services to Taiwanese businesses looking to reorganize their operations overseas. For Taiwanese companies considering relocating their factories to the U.S. or shifting part of their production processes to Southeast Asia, India, and other countries, the organization will provide relevant information and insights into target markets, including potential states for U.S. investment, local investment laws, market opportunities, and assistance in finding business partners. For those deciding to convert part of their production capacity to supply local markets, it will provide information on local laws and help find potential partners. It will also establish task force teams at its overseas units in the U.S., Canada, Mexico, Southeast Asia, and South Asia, working with the main office to provide consultation and immediate services to affected businesses. Additionally, it will set up a direct service hotline. Furthermore, it plans to establish a “Taiwan Investment and Trade Center” in the U.S. to assist Taiwanese businesses in evaluating the investment environment in U.S. states, supply chain relocation options, and local partner networks. It is understood that many Taiwanese businesses are also producing AI servers or related components in Mexico to be closer to the U.S. market. Some sources report that two Taiwanese companies are planning to move their production lines out of Mainland China. This highlights the need for China to pay close attention to the risks previously warned by ANBOUND’s researchers, that Mainland China may not be part of the new global structure in the restructured globalization. This is, to some extent, caused by “close produce”.

The second aspect is viewed from the perspective of Chinese companies’ overseas operations. “Close produce” is also a supply chain model highly favored by many Chinese companies expanding abroad. To some extent, policymakers also encourage businesses to adopt this approach. A report from Bloomberg in September last year cited sources revealing that the Chinese government strongly advised the country’s automakers to ensure that advanced electric vehicle (EV) technologies remain in China to prevent competitive pressure on the Chinese automotive industry after the loss of the industrial chain. The report stated that relevant departments encouraged these automakers to export component assembly kits to their foreign factories, meaning that key automobile parts would be produced in China and then sent to target markets for final assembly. Chinese automakers were also told not to invest in EV-related projects in India, to protect proprietary technology in China’s EV industry and reduce regulatory risks. Furthermore, manufacturers wishing to invest in Turkey were instructed to first notify the Ministry of Industry and Information Technology, which oversees the EV industry, and relevant foreign affairs departments. In fact, Chinese EV companies, from BYD to Chery, are finalizing plans to build factories in countries such as Spain, Thailand, and Hungary. It is reported that neither the relevant authorities nor the car companies have responded to requests for comment. Bloomberg’s analysis, however, believes that this will have a significant impact on the global transfer of automotive manufacturing technologies, especially presenting major obstacles for emerging countries like India. Bloomberg’s report perfectly illustrates the two key features of the “close produce” model: First, in this model, the production of key components is crucial, and these components will be organized in a systematic way; second, “close produce” means that businesses should choose to deploy and organize production in areas with minimal conflict and contradictions.

BYD can be considered one of the most representative enterprises in China practicing “close produce” models. On July 9, 2024, the Turkish government announced that BYD plans to invest USD 1 billion in building a factory in Turkey with an annual production capacity of 150,000 vehicles, set to start production in 2026. Data summarized from relevant research indicates that, as of last July, BYD’s overseas layout and production capacity plans include 150,000 units in Thailand, 300,000 units in Uzbekistan, 150,000 units in Brazil, about 150,000 units in Hungary, 150,000 units in Turkey, with operations spread across Southeast Asia, Central Asia, Central America, South America, Central Europe, Southern Europe, and Eastern Europe. These factory-building plans highlight BYD’s overseas expansion strategy and indirectly reflect its pursuit of a “resilient” supply chain. Analyses show that, for example, BYD’s strategy in Asia focuses on countries with relatively stable domestic politics and strong automotive industry ecosystems. Among Southeast Asian countries, Thailand, in particular, has experience as Toyota’s industrial base in the region, with a well-established industry chain. The Uzbekistan factory not only supplies the local market but also covers Central Asia and, with the Belt and Road railway, it also supplies the Russian market to the north and Iran and other Arab regions to the south. The company currently has no plan to set up factories in Japan and South Korea in East Asia, nor is there a need for them, as Chinese production capacity can cover these regions. This way, its layout in Asia is relatively complete. Though some regions have slightly insufficient capacity, this can be addressed by expanding production.

Regarding its market in the Americas, in February 2024, there were reports that BYD was considering building a factory in Mexico. The Wall Street Journal analyzed that such plans indicate that, despite the risks, the enthusiasm within China’s automotive industry for expanding into North America is rising. Manufacturing cars in Mexico for the U.S. market would allow automakers to avoid the hefty import tariffs they would face when directly shipping cars from China to the U.S. At the time, BYD stated that the company had no urgent matters regarding new markets to announce. However, by mid-2024, BYD confirmed that it had identified potential factory locations in Mexico and was close to finalizing its decision. Yet, the resurgence of Trump in the presidential race significantly disrupted BYD’s plans. Since the second half of 2024, reports have indicated that BYD has abandoned its search for a factory site in Mexico. Although BYD issued a statement saying it had not delayed its decision to build a factory in Mexico, it seems the company’s “Mexico plan” has effectively been put on hold. At the same time, in an effort to align with the new U.S. administration, Mexico has introduced a series of policies aimed at blocking Chinese companies, including BYD, from entering the local market. These policies target not only Chinese automakers but other industries as well. Since 2024, Mexico has imposed tariffs on Chinese steel and low-priced clothing. At the end of last year, Mexico even “raided” markets where Chinese vendors gathered to sell goods. The newly-elected Mexican president, Claudia Sheinbaum, has promised a series of measures to support local manufacturing. It is foreseeable that Mexico will introduce more protectionist policies regarding Chinese and other Asian products. In other words, the path of “close produce” for Chinese companies in Mexico is facing significant obstacles due to the geopolitical tensions between the U.S. and China. This unfavorable trend for China is likely to manifest in other parts of the world as well.

IV. Conclusion

“Close produce” is a new theory and concept for multinational corporations, with a wide-reaching impact. Today’s multinational companies no longer only pursue “profits”; “resilience” is equally important. Specifically, in the context of de-globalization, the organizational methods and strategic directions of multinational corporations’ global layouts focus on systematically addressing three core areas: technology, capital, and consumption, so as to reduce overall production and operational costs. With the deepening of geopolitical tensions and advancements in technology, structural adjustments in multinational companies are inevitable, and these changes will be reflected in the capital markets.

When it comes to China’s development, on one hand, the withdrawal of multinational companies and global adjustments may weaken China’s position in the restructuring of globalization in the future. On the other hand, the process of Chinese companies implementing “close produce” will be influenced by factors such as U.S.-China geopolitical pressure. As this trend has already emerged, for China, it would be crucial to monitor the situation and take appropriate actions and countermeasures.

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• Zhijiang Zhao is a Research Fellow for Geopolitical Strategy programme at ANBOUND, an independent think tank.