An employee inside Ferrara Manufacturing makes masks during the coronavirus pandemic in New York City. Ferrara Manufacturing has shifted from production runs for top fashion lines to producing medical gowns and face masks to combat the spread of COVID-19. (Photo by Noam Galai/Getty Images)

Businesses across the US are converting their production lines to produce masks and medical equipment in the fight against the coronavirus pandemic. The shortage of supplies, exacerbated by China's efforts to stockpile medical equipment before alerting the world to COVID-19, has highlighted the public health and national security vulnerabilities inherent in global supply chains.

In a new policy memo, Hudson Senior Fellow Dr. John Lee outlines how the US can repatriate critical supply chains from China, from medical equipment to sensitive technologies targeted in the CCP's Made in China 2025 plan. Below, we've highlighted five major future trends from Dr. Lee's memo.

Next week, join us as Walter Russell Mead sits down with Jake Sullivan, advisor to Vice President Joe Biden; for an update into US investigations of the Assad regime's chemical weapons use with Ambassador James Jeffrey and Deputy Assistant Secretary Thomas DiNanno; and don't miss this week's conversation with Congressman Jim Langevin on the pandemic's impact on the US armed forces. 

Our Decoupled Future: 5 Trends 

A look at likely future trends as the US repatriates supply chains from China in critical sectors, from Dr. John Lee's new policy memo, "Decoupling the US Economy from China after COVID-19."

1. A North American Production Zone may emerge:

Advancements in automation make it far more feasible to locate supply chains in North America when producing products for US customers. The emphasis will be on encouraging advanced manufacturing plants to be based in the US – by far the world’s largest domestic consumption market. This will create more highly-paid and skilled jobs in manufacturing services, logistics, marketing, etc., where much of the value will reside and be created. The result could be an emerging North American production and assembly zone for an increasing number of merchandise goods designed to serve North American consumer markets.

2. China's access to foreign markets will be reduced:

China’s access to markets in North America and Europe is becoming more restricted, and firms will likely be denied access to essential inputs such as big data from those markets. For most of the sectors targeted in China's Made in China 2025 plan, lack of access to these large foreign markets will impede the development of local Chinese clusters (a concentration of locally connected businesses, suppliers and associated institutions) in those sectors, and simply dominating the Chinese market will not allow for global growth.

3. Listed Chinese companies will face greater legal oversight: 

Chinese firms are increasingly dependent on international sources of finance, and the US’s deep and diverse capital markets most of all. Chinese firms gain access to US capital through listing, but the Public Company Accounting Oversight Board currently has no right to examine the books of Chinese firms or the sources of financial information presented by these firms.

This gives Chinese firms the benefit of accessing the world’s deepest financial and capital market without being accountable to the regulatory or legal oversight that is applied to all other companies listed on US exchanges. 

4. Chinese access to foreign innovation will be increasingly limited:

Chinese innovation in the Made in China sectors has depended heavily on joint ventures with foreign firms. One estimate is that about 80 percent of private sector R&D money spent in China in 2015, was by non-Chinese multinationals. In addition to concerns about IP transfers and theft, tariffs levied on China-based firms make it commercially less attractive for foreign-invested firms to base operations in China when the next or end destination for their product is the US.

5. Sensitive university research will feature greater safeguards:

Further restrictions on visas for Chinese researchers and tertiary students to US institutions in fields such as aviation, robotics and advanced manufacturing are likely. There are currently around 370,000 Chinese students enrolled in US colleges and universities when there was only just above 98,000 a decade earlier. Beijing has long carried out a systematic program to acquire expertise from US and global institutions to advance industrial plans such as Made In China 2025 and enhance its military capabilities. 

Quotes have been edited for length and clarity

Go Deeper: Hudson on Repatriating Supply Chains