IS CHINA THREATENING OR SAVING GLOBAL SUPPLY CHAINS?
Editor's note: The Chinese economy has maintained resilience over the past three years despite COVID disruptions. As the coronavirus wreaked havoc across the globe, supplies in China remained stable, which has helped solidify the country’s reputation as a top manufacturing hub. Based on these facts, does it seem like China is really a risk for global supply chains as some Western media have described?
China is causing uncertainty for global supply chains, even posing a threat. This used to be how some western media warned about China’s zero-COVID policy. After China bid farewell to stringent COVID restrictions, those same media have once again embraced such a narrative, citing temporary low activities in the country’s factories and ports in late 2022 amid a surge of COVID cases.
But have they missed something?
During China’s first wave of COVID in early 2020, some western media also questioned China’s reliability in supplying products and components to global consumers and businesses. However, as economic activities went back to normal after the virus was effectively contained, China ended up being a stable supplier when the coronavirus wreaked havoc across the globe. China’s exports reached 17.93 trillion yuan (about 2.77 trillion U.S. dollars) in 2020 and 21.73 trillion yuan (about 3.42 trillion U.S. dollars) in 2021.
Many things could have changed that period, but Chinese economy’s resilience has remained the same.
There are signs that factory activity in the country is quickly recovering, just like how it did in 2020. Since mid-December 2022, production has resumed in more than 90 percent of the manufacturing companies in the northern province of Shanxi. In the southern city of Guangzhou, orders on the truck-hailing platform Huolala surged by more than 50 percent month on month in the first week of December. In the central city of Luoyang, Henan province, normal production levels have been ensured in hundreds of factories during the week-long lunar New Year holiday.
As business people and haulers are able to move around more freely under China’s optimized COVID policy, we have every reason to be optimistic that China will continue to be a reliable supplier. OECD Secretary-General Mathias Cormann said earlier this month that China’s reopening is very positive in terms of making sure the supply chains operate more efficiently and effectively.
Instead of describing China as a risk, probably we need to think about how much stability China has contributed to global supply chains during the pandemic. The Europe-China rail link is a flagship project of the Belt and Road Initiative. At a time when the pandemic caused severe disruptions to maritime shipping and air freight, this rail link served as a trade artery between China and Europe. And this is only one of the many examples. In 2022, China's total goods imports and exports surged 7.7 percent year-on-year to 42.07 trillion yuan (about 6.26 trillion U.S. dollars), hitting new heights.
And China’s attractiveness as a manufacturing hub remains unbeatable.
China boasts a skilled labor force. In other Asian countries, a kitchenware manufacturer can’t efficiently train workers in only a couple of months. By comparison, it takes five to eight days only in China, we’ve learned recently in an article in the New York Times.
Many companies are also unwilling to lose some of the benefits – such as convenience and reduced cost – that they get from China’s industrial clusters, where component suppliers, manufacturers, and service providers in a particular industry concentrate in a specific area. Because of government policy support, there are more than a hundred such clusters in China today.
So, it’s not really surprising when a recent survey by the China Council for the Promotion of International Trade, the country’s main foreign trade promotion agency, showed that nearly 90 percent of the foreign-invested businesses in China plan to maintain their industrial chains in the country.
So, is China a risk for global supply chains? The answer is obvious, isn’t it?