As Covid-19 has disrupted the global supply chain, businesses have had to look for new ways to tackle the challenges arising from the coronavirus.

At a thematic breakout session titled “Cross-border Trade Opportunities under the Post-pandemic Era” during the seventh Belt and Road Summit held in Hong Kong, panellists discussed what changes have been brought by the pandemic and how businesses have adapted to them.

The discussion started with some observations shared by panel chair Anson Bailey, the Hong Kong-based head of consumer and retail, ASPAC, at KPMG China. “We’re now seeing Asia scaling up,” he said of exports in Asia.

In the past China had major dominance over the export market in Asia, and while nowadays China is still a leading exporter, Bailey said there is diversification emerging. “We are seeing manufacturing move around the region – South Asia, India, Pakistan, Bangladesh – we definitely see them emerging, but equally across the rest of ASEAN and Southeast Asia as well.”

He also shared what he learned from his clients that many businesses are moving to diversify their operation locations, which he described as “China plus one” or “China plus two”.

Aditya Gahlaut, managing director and head of global trade and receivable finance, Hong Kong and Macau, at HSBC, talked about the emerging trends in the regional trade landscape in recent years, including supply chain management. “What we’re seeing now is, everyone used to focus on ‘just in time; a lot of economists now are talking about ‘just in time’ being replaced with ‘just in case. What that’s doing is lengthening trade cycles.”

The second trend he mentioned is that more corporates want to rationalize their supply chain partners. “I think corporates increasingly want to pay a lesser number of more long-term and strategic suppliers.”

The final trend he mentioned was the growth of the platform economy. “If you look at it from the benefits [it brings to] an SME, it’s good to see the platform economy. SMEs can trade with multiple markets, with logistics being managed by somebody else.”

Clara Chan, CEO of Hong Kong’s Lee Kee Group, the largest non-ferrous metals supplier in Hong Kong and Asia, shared what challenges the manufacturing industry has been facing and how it is coping with them. “During the pandemic time, the manufacturing sector has been suffering a lot from the supply chain disruption. It has been facing a lot of different lockdown situations, and high shipping costs, and, in some cases, maybe the difficulty to find shipping space.”

She said these pandemic challenges provided opportunities for different industries to rethink how they operate their businesses.

“Before the pandemic, it was generally the case to think that a supply chain is more of a linear process. We only deal with our suppliers or customers. But in the past two years, we have given some thought that we actually work as a network. You don’t only look for a supplier or a service provider from the cost point of view, but you will look at it from the risk management point of view, from the efficiency and also partnership point of view.”

Tony Lau, managing director of Fung Omni Services, a Hong Kong-based e-commerce services provider, has seen significant growth in the e-commerce industry during the past two years.

“The Southeast Asian market is growing very fast. Even under the pandemic, we have seen very fast growth – some countries are growing by 25-30%. China has been a little bit stagnant in the past half year or so, but Hong Kong has grown a lot for e-commerce.”

Lau shared the phenomenon that things in the e-commerce industry are starting to converge together in the past two years, which he has never witnessed before.

“You can have one inventory to supply to many different markets, and this is the choice of many brands that we deal with.”

He said that the risks of Covid and border closure are the reasons for such a choice. “If you have an inventory in a flexible place, for example in Hong Kong, you can actually ship to many different countries, including mainland China, Singapore, Malaysia, all the different Southeast Asian countries, and Japan and Korea as well.”

This model can allow more convenience and flexibility in managing the inventory.

Gahlaut shared the latest trends in trade finance, and one thing that corporates are increasingly interested in is availing financing as early as possible in the supply chain.

“Supply chain financing historically has been very post-shipment driven. But what the pandemic led to was challenges for the suppliers in actually securing their supplies.”

He mentioned receiving requests from clients to provide free shipment facilities in a seamless manner to their suppliers, as well as cases where they do scorecard-based lending for the suppliers, factoring in things like purchase order issuances, purchase order-to-invoice conversions, quality returns, etc.

“The technology is able to provide us a lot of information, a lot of data around corporates and their supply chain ecosystems, so that we are able to structure facilities using a much faster way of financing as opposed to balance sheet-based financing,” Lau said.

By Ivy Choi

Asia Cargo News | Hong Kong