HKUST Business Review

Shift in Economic Relationships This situation is forcing businesses to develop greater adaptability as international trade becomes more fragmented and more regionalized. In due course, this will lead to new importance for certain trade routes and a marked shift in economic relationships. With that in mind, countries in Southeast Asia and beyond can seize the chance to become key players in a fast evolving trade and finance ecosystem. Vietnam, Cambodia and Bangladesh stand out in this respect. Perhaps seen as peripheral players by some, they are now poised to be manufacturers and intermediaries at or near the center of a complex regional trade network. "The advent of the internet and e-commerce has also changed the way goods are made and sold,” Fung said. In essence, the supply chains that bring consumer items from the factory to a store overseas are no longer linear processes. Instead, they have to be dynamic, responsive systems able to adapt quickly to any change in market demand. The introduction of AI as a tool is helping to refine real-time tracking, predictive analytics, and operational flexibility. "The supply chain is no longer a chain; it is actually a loop," Fung said. That is because consumer data now flows back instantaneously into the design and production cycles. If necessary, order number, styles and colors can then be adjusted accordingly before shipment, which is a significant advance on traditional manufacturing techniques. "American industrial workers feel they have been left out of globalization," Fung said. This sentiment has fueled political thinking that now seeks to challenge and disrupt existing trade frameworks and will compel businesses everywhere to develop strategies that prioritize resilience, or just survival. “They are voting for policies that promise to bring jobs back,” Fung said, highlighting how social dynamics are an integral part of economic transformation. New Path for Emerging Economies In China and across Asia, that process has already seen major exporting companies diversify by manufacturing in multiple countries in order to mitigate potential risks and keep prices reasonable for consumers. What comes next is hard to predict, but it seems that few economists would bet on the likelihood of low-cost production lines returning to the US in the near future. Even so, Asia’s emerging economies still stand at a critical juncture. They must trust in the strength of regional trade, look for growth opportunities in new markets, and hope that higher domestic consumption in China can replace lost sales in the US. "If China can increase consumption even by 10%, it would be transformative for the global economy," Fung said. "Companies must not resist change, but embrace it. The best way to deal with uncertainty is through diversification.” To achieve that will require investment in technology, flexible production models, and a scientific approach to managing supply chains. In each of these areas, universities can contribute, not just as centers of learning and research, but also by disseminating relevant knowledge where it can have most impact. About the HKUST Li & Fung Supply Chain Institute The HKUST Li & Fung Supply Chain Institute accelerates the creation, global dissemination, and practical application of new knowledge for managing tomorrow’s supply chains. The supply chain is no longer a chain; it is actually a loop. Dr. William Fung Group Deputy Chairman of the Fung Group and Advisory Board Chairman of the HKUST Li & Fung Supply Chain Institute HKUST Business Review 20