As supply chains around the world buckle under the strain of the ongoing Covid-19 pandemic and geopolitical tensions, the dominant narrative in recent months has been of a great shift away from China. However, the opposite is in fact true, according to new research by HSBC.

The latest HSBC Navigator report, titled Growing with China, surveyed 1,100 companies with a turnover of US$5mn or greater across 11 markets – Australia, Canada, France, Germany, Hong Kong, Malaysia, Mexico, Singapore, the UAE, UK, and US – and found that, contrary to some commentary, many companies are in fact increasing their exposure to the Asian giant.

Fully three quarters of companies surveyed say they expect to increase the proportion of their China-based supply chains over the next two years, with more than four in 10 of all respondents saying they intend to increase the proportion by 10% or more.

Meanwhile, despite the combined pressures of the Covid-19 pandemic and rising economic nationalism, 76% companies in the US – China’s biggest trade adversary – say they expect their exports to China to grow. Tellingly, nearly three in 10 (29%) US companies expect growth of more than 20%, ahead of the global average of 21% of companies.

The data also reveals that neither bilateral tariffs nor geopolitics have had much impact on corporate planning. Out of all the companies surveyed, only 22% said that the last two years of tit-for-tat trade tariffs were their biggest challenge to doing business in China and just 21% cited geopolitical tensions. Drilling down to the US, only 25% of companies there cited rising trade conflicts as their biggest challenge – a smaller percentage than their European counterparts (28%). Overall, the need to understand Chinese business culture and Covid-related business disruptions were both regarded by the majority of respondents as more substantial challenges than trans-Pacific tensions.

“The overwhelming impression, both from international companies that sell in China and from those for whom it forms part of their supply chain, is that the country’s combined attractions outweigh the challenges,” the report says.

Reasons given by companies for increasing the China-based proportion of their supply chains were manifold, but were spread evenly between digital opportunities, increasing speed to the Chinese market, growing consumer demand, reducing the cost of overall supply chain, and enhancing supply chain stability.

“Much of the optimism and ambition over the Chinese market is down to the mainland’s early recovery from the pandemic and its relatively strong demand compared to other markets,” says Stuart Tait, regional head of commercial banking for Asia Pacific at HSBC. “The country’s vast market and its unrivalled manufacturing infrastructure remain compelling reasons not just to maintain business with China, but in many cases to increase it.”