Will the COVID-19 change the long-term advantages of China’s manufacturing industry?
On April 8th, the World Trade Organization released its 2019 annual trade statistics. The report shows that before the outbreak of the COVID-19, global trade has been already in a slowing trend. Commodity trade had stalled and declined near the end of the year. In 2020, global trade is impacted by the epidemic. And it is expected to shrink by 13% to 32%.
In fact, as a “world’s factory”, the impact of the epidemic on China’s globalized industrial chain and supply chain development is reflected in three aspects: the first one is the import of blocked products which affects the domestic industrial chain. The second one is the shrinks of the external market and blocking of export. There are some regions such as the US and Europe are in this situation. The third one is the restructuring of the global industrial chain during and after the epidemic.
China’s manufacturing model is deeply embedded in the global value chain (GVC) division of labor. The current global epidemic has affected the supply of some foreign raw materials and semi-finished products, which made some of the supply chain and industrial chain in China encounter a shortage of upstream links. The deeply globalized value chain may lead to a supply crisis, which needs to be taken seriously by the Chinese manufacturing industry.
During this period, foreign media reported that the epidemic had an impact on China’s entire industrial chain. Some people think that companies will accelerate the relocation of factories overseas. It is undeniable that in recent years, some international brands andChina local manufacturing companies have moved to Southeast Asia to set up factories. However, considering many aspects, this is a diversified layout for companies, and it cannot be simply understood as a transfer. Experts believe that manufacturing is a system with multiple links intertwined. This complex system determines how long it takes to set up a supply chain in a country or region, and once established, it is sticky. The long-term foundation of Chinese manufacturing will not be affected by short-term fluctuations.
The comparative advantage of China’s manufacturing industry will still exist for a long time. With the gradual improvement of the epidemic, lots of industries in China will soonly restore the production capacity. And the level of economic development will also increase, which will further expand the advantage. At present, no country or regions in the world can give up the Chinese industrial chain or find a complete replacement. Along with economic globalization, China’s global industrial chain will continue to develop.
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