(Yang Hangjun) How to deal with the impact of the "globalization" of the epidemic on the global supply chain

(Source: "Guangzhou Daily" Theory Weekly 2020-04-27)

Flexible use of preferential policies, active adoption of new technologies, and optimization of supply chain structures are all effective solutions to deal with the impact of the epidemic.

The current global pandemic is accelerating its spread, and major economies have been greatly affected. This has caused a sharp decline in production and supply and demand capabilities around the world, posing a huge challenge to the normal operation of the global supply chain. The entire supply chain is the entire process from procurement, production, distribution to logistics and sales. Not only are the links complex, but there are many participating roles. Problems at one of the key nodes will lead to the collapse of the entire supply chain. Especially now that the global division of labor is becoming increasingly obvious, and the global supply chain system includes almost all major countries and regions, the negative impact of the epidemic has also been amplified.

So, how to deal with the impact of the "globalization" of the epidemic on the global supply chain? The author believes that we can start from both the government and enterprise levels.

At the government level, first of all, countries should work together to respond to the epidemic and stabilize the world economy. At present, the world is facing the dual challenges of the spread of the epidemic and downward economic pressure. All major economies should unite and cooperate to fight the epidemic, strengthen macroeconomic policy coordination, and strive to maintain the smooth operation of the global supply chain, especially the supply chain of medical supplies for epidemic prevention and control. The special G20 leaders’ summit on COVID-19 held on March 26 is a good opportunity. President Xi Jinping specifically emphasized at the summit that the epidemic has had a comprehensive impact on global production and demand. Countries should join forces to increase macroeconomic policy hedging to prevent the world economy from falling into recession; they must implement strong and effective fiscal and monetary policies, strengthen financial regulatory coordination, and jointly maintain the stability of global industrial and supply chains.

Secondly, the government should focus on helping companies at key nodes in the supply chain resume work and production as soon as possible and introduce policies to stimulate consumption. Although the current overall situation of resumption of work and production in China is good, there are still problems in supply, logistics, corporate capital flow, and sluggish consumption. Under this situation, the national level and various provinces and cities have successively introduced policies and measures to support small and medium-sized enterprises in responding to the epidemic and stimulating consumption. For example, the country has accelerated the construction of new infrastructure and encouraged logistics companies and e-commerce platforms to provide smart logistics services based on new technologies to combat the epidemic. Various localities have introduced subsidies for enterprises, tax reductions and fee reductions, postponement of tax payments, and the issuance of coupons to consumers. The author believes that relevant policies should focus on enterprises at key nodes in the supply chain, such as logistics and transportation enterprises, small and medium-sized enterprises that are resuming work and production, and operating difficulties, and flexibly and accurately support some small and medium-sized enterprises in seeking transformation and upgrading. The current situation of my country's epidemic prevention and control continues to improve. If we can make full use of policies and measures and leverage institutional advantages, it will help turn crises into opportunities, further optimize the structure of my country's industrial and supply chains, and enhance the status and influence of Chinese companies in the global supply chain.

At the enterprise level, first of all, enterprises should quickly clarify the current production capacity and epidemic prevention situation, assess business risks, and make every effort to ensure normal operations. Strengthen epidemic prevention and control from three aspects: people, materials and measures, and reduce the possibility of poor business operations due to the epidemic. Secondly, sort out the upstream and downstream situations, find alternative manufacturers, and repair the supply chain in a timely manner. During the epidemic, suppliers that are difficult to replace should be given as much help as possible to reduce the huge losses caused by the suspension of production due to the collapse of core suppliers. With the current epidemic causing a partial break in the global supply chain, the top priority for companies is to find alternative raw material supply and sales channels and repair the supply chain in a timely manner. Priority can be given to partners with close proximity or smooth logistics to reduce untimely logistics problems caused by transportation controls between the two places.

Finally, companies should adopt online collaboration and online transactions as much as possible. Under the impact of the epidemic, "new infrastructure" has been given more practical significance and value. Enterprises should accelerate their transformation, integrate themselves into the intelligent supply chain based on new technologies such as 5G and AI, adopt digital operation methods that greatly save costs, keep abreast of supply and procurement information, conduct online collaborative operations with upstream and downstream partners, and scientifically and effectively coordinate the information flow, logistics and capital flow of the upstream and downstream supply chain.

In short, ensuring the stable and efficient operation of the global supply chain requires active responses from all countries and participating companies. Flexible use of preferential policies, active adoption of new technologies, and optimization of supply chain structures are all effective solutions to deal with the impact of the epidemic. Countries around the world need to unite and collaborate to fight the epidemic and jointly revive the world economy; at the same time, upstream and downstream partners in the global supply chain need to strengthen cooperation to overcome the difficulties together.

(Author’s affiliation: w88 casino of International Economics and w88, w88 casino)

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