The major tremor from COVID-19 would be felt in the global supply chains and country trade relationships, said Moody's Investors Service. In its report, it highlighted that some Asian economies will benefit from the diversification away from China.

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According to the credit rating agency, supply chains will become shorter and less just-in-time, leading to a more fragmented global trade system with a greater range of suppliers for similar products and increased regionalisation of production.

Diversification will aim to reduce reliance on any single supplier, whether a single producer or a group of producers from the same country, while localisation will aim to relocate production close to home markets, said the report.

It feels the key beneficiaries of this fundamental shift would be Asian economies with sound economic fundamentals, reliable infrastructure, sufficient human capital stock, and low geopolitical and supply security risk.

Moody's explained further that the extent of supply chain shifts will vary by sector depending on the overarching consideration of security of supply, with the largest shifts occurring in industries with the greatest strategic significant, such as pharmaceuticals.

The report also highlighted a key point that localisation of production or reshoring will not help the Asian producers. Asian markets ex-China can mitigate differences by offering producers preferential access to the advanced markets, the report added.

First Published:Aug 13, 2020 3:43 PM IST