The process of decoupling from China is clearly underway. During the U.S.-China trade dispute in 2018, the United States raised tariffs on Chinese products and subsequently tightened regulations on advanced technologies, including semiconductors. As concerns grew over supply chains overly concentrated in China during the COVID-19 pandemic, terms like "decoupling," "derisking," and "China Plus One"—referring to securing additional production bases outside of China—became familiar. Global companies have shifted their production bases from China to countries like Vietnam, India, and Mexico, or have built new factories, significantly altering the global production landscape over the past eight years.
Trade statistics confirm these changes. According to the International Monetary Fund (IMF), following a resurgence in U.S.-China trade tensions in 2025, China's exports to the U.S. dropped by about 20% over nine months. This rapid decline contrasts sharply with the period following the initial trade dispute in 2018, when Chinese exports to the U.S. continued to rise for a considerable time. As the U.S. sources some goods from other countries and companies diversify their production bases outside of China, the production and trade structures that once centered on China are indeed changing.
However, I am particularly interested in what comes next. Is the reduction in production leaving China also leading to a decrease in China's supply chain? Recent trends suggest that this is not necessarily the case. Since early 2025, exports of intermediate goods from China to ASEAN countries, including Vietnam, have surged, indicating that some production aimed at export has shifted outside of China following the U.S. tariff increases.
During the renewed U.S.-China trade tensions, while China's exports to the U.S. significantly declined, its exports to ASEAN actually increased. As of August 2026, ASEAN accounted for about 19% of China's total exports, with exports to ASEAN rising approximately 21% year-on-year. This suggests that as new production bases grow outside of China, the necessary materials and components are still being supplied from China.
Yet, this should not be viewed merely as a simple diversion of Chinese products through Vietnam or Thailand to the U.S. The increased use of Chinese intermediate goods, along with the growth of production and value-added in ASEAN itself, complicates this narrative. As the value added by China in ASEAN exports rises, so too does the value added generated by ASEAN in the global value chain. This indicates that as production shifts from China to ASEAN, a new division of labor is forming, with ASEAN emerging as a new production hub while maintaining connections to Chinese materials and components.
We need to reconsider whether we have oversimplified the concept of decoupling from China. If products previously made in China are now being produced in Vietnam, the shift in production bases is evident. However, if a significant portion of the materials, components, and equipment used in those factories still comes from China, it is difficult to claim that the supply chain has fully escaped China. The location of a factory and the supply chain it relies on are distinct issues, and this is a part of the decoupling discussion that we may have overlooked.
Additionally, it is important to recognize that China's role is changing. Historically, China served as the "world's factory," importing materials and components from countries like South Korea and Japan to produce and export finished goods. Now, its role in supplying intermediate goods necessary for production in other countries is rapidly expanding. The increase in China's exports of intermediate goods to ASEAN, Mexico, and Canada compared to before the 2018 trade dispute reflects this shift. Even if the share of finished products exported directly from China decreases, if more Chinese materials and components are integrated into the production processes of other countries, it is difficult to argue that China's influence in the global supply chain is diminishing at the same rate.
Recent trade and investment patterns between China and ASEAN illustrate this trend. By 2025, trade between China and ASEAN reached $913 billion, an 18.2% increase from the previous year, while China's direct investment in ASEAN amounted to $26.2 billion. As ASEAN emerges as a key beneficiary of decoupling and the China Plus One strategy, its economic ties with China are also growing. However, this does not necessarily mean that decoupling has failed, as it is a fact that trade between the U.S. and China is slowing and production bases outside of China are expanding.
The current changes reflect a distribution of production across various regions rather than a complete severing of ties with China. While production is diversifying, China continues to participate in the new production network through the supply of intermediate goods and foreign direct investment. Ultimately, we should assess the extent of decoupling not just by the location of factories but also by how much China's role in the connected supply chains is actually diminishing.
This issue is not just a foreign concern for us. In discussions about diversifying supply chains, we have primarily thought about relocating production concentrated in China to countries like Vietnam, India, and Mexico, and our companies have indeed established new production bases outside of China. However, relocating production bases does not automatically reduce dependence on Chinese supply chains. It is essential to examine where the materials and components used in products come from, who supplies the necessary equipment, and the extent of participation by Chinese companies and capital in local production processes. This is particularly crucial for us, given our long-established production networks with China.
Therefore, what we need is a more nuanced examination of how the structure of supply chains is actually changing in the process of decoupling, rather than merely focusing on the movement of production bases. It does not mean that we must replace all Chinese intermediate goods with products from other countries, but rather accurately identifying which industries and items are genuinely reducing their dependence on China, and conversely, which areas still maintain a high level of reliance. Based on this understanding, it is vital to develop strategies that consider both the competitiveness of our industries and the stability of our supply chains.
* This article has been translated by AI.
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