(Source: Outlook Think Tank 2020-06-08）
Lv Yue
The spread of the epidemic has greatly increased the uncertainty of global economic development. my country's industrial chain has suffered a certain impact and exposed its vulnerability.
Outbreaks of epidemics in China and overseasThe "time difference" will have an iterative impact on China's supply chain. The spread of the global epidemic may further cause overseas demand to shrink, thus causing a secondary impact on my country's export industry.
The stable operation of the industrial chain is related to our country’s economic security. What should China do?
Global economic integration and the development of communication and information technology have given rise to new production and w88 models such as international production segmentation, global procurement, outsourcing, and intra-company w88, which have promoted the continuous extension and refinement of global value chains among countries, gradually shaping a new system of international division of labor and w88.
An epidemic allows us to see the connections between industries more clearly, such as:
Apple Inc.The revenue in the first quarter of 2020 will largely depend on the progress of restoring production capacity of a certain factory in Zhengzhou;
Due to the interruption of parts supply in China, Nissan's Kyushu plant in Japan and Renault's Busan plant in South Korea also successivelyAnnounced temporary suspension of production in early February;
India, the world’s largest exporter of generic drugs, is nervous——70% of raw materials rely on China...
The interlocking relationship of the industrial chain is a double-edged sword.
On the one hand, the division of labor in the value chain closely links enterprises located in different production links. Countries can fully enjoy the specialized division of labor and leverage their respective comparative advantages.
For example, Boeing’s parts and raw materials are distributed all over the worldProduced by 9 countries and 12 companies, 5 companies participated in only one fuselage.
At BoeingAmong the more than 4 million parts of the 787 aircraft, Boeing itself is only responsible for the production of the tail and final assembly. The steps are completed by more than 40 partners around the world - fixed wings from Japan's Kawasaki Heavy Industries, cargo doors from Sweden's Saab Aerostructures, engines from General Electric of Ohio, and so on.
This division of labor model is formed through international w88 networks, and these products originate from“Made in the country” has become “Made in the world”.
Boeing aircraft parts manufacturing plant in Tianjin.
On the other hand, any sudden demand, impact or unexpected risk at any node will be continuously amplified and spread due to the dependence of each link in the chain.
In 2001, after the September 11 terrorist attacks, the United States closed its airspace, which not only disrupted the global aviation industry chain, but also caused the decoupling of a large number of industrial chains that relied on air transportation, severely damaging the international production chain.
In the same year, a huge earthquake occurred in Sendai, Japan. Some Chinese companies that imported Japanese equipment and mechanical, electrical, optical and other parts were greatly affected. These companies themselves areAs a link in the industrial division of labor chain of "Japanese core components - Chinese components and processed products - global market sales", there is no way to find alternative sources of supply in a short time.
The third transfer, we stand in the center of the stage
This oneThe "net" cannot be woven overnight.
fromSince the 1950s, the global economy has experienced three adjustments to the international industrial chain.
In the 1950s, the world witnessed the first large-scale industrial transfer. The United States transferred traditional industries such as steel and textiles to defeated countries such as Japan and Germany. This not only opened up a new growth path for its own development in the following years, but also promoted the economic development of Western Europe, Japan, South Korea and other Asian countries.
In the 1960s and 1970s, the second global industrial transfer was mainly the transfer of labor-intensive processing industries such as textiles from Japan and other countries to some countries and regions represented by the "Four Little Dragons" in Asia. This change still mainly occurs among developed countries and has significant geographical characteristics.
ArrivedIn the 1980s, China’s opportunity came.
The "Four Little Dragons" are gradually carrying out industrial transfers simultaneously with leading economies such as Europe, the United States, and Japan - transferring labor-intensive industries and low-tech and high-consumption industries to developing countries.
The third industrial transfer has allowed China to truly integrate into the global industrial chain and gradually embark on the East Asian industrial chain"C bit".
On May 9, 2020, in the production workshop of the electroplating professional base in Chang'an Town, Dongguan, Guangdong, workers were preparing products to be electroplated.
Why can China do it?
First, it benefits from changes in the external environment.
With the adjustment of the world economic structure, the industrial gradient difference between countries has narrowed, JapanThe "goose effect" has declined, complementarity between industries has weakened, and competition has converged. East Asian economies have gradually formed a segmented, vertically specialized and networked production model with distinctive characteristics.
This production division of labor model initially originated from individual countries in East Asia, but then its focus quickly shifted to the ASEAN region, and then to China, thus forming a complete regional production network.China takes this opportunity to gradually“Overtaking around the corner” Japan and other former core countries have achieved the most important center of gravity in the East Asian production network.
The second is the comparative advantage of labor force.
The abundant low-cost labor force brought about by the "demographic dividend" is usually an entry point for participating in the labor-intensive manufacturing industry of the global industrial chain.
Under the combined effect of the above two advantages, China's manufacturing output value isIt surpassed Germany in 2004, Japan in 2006, and surpassed the United States in 2010 to become the world's largest manufacturing country. China's foreign exchange reserves exceeded 1 trillion US dollars at the end of 2006, surpassing Japan to become the world's largest manufacturing country. A country with large foreign exchange reserves (at the end of 1952, China's foreign exchange reserves were only US$108 million); in 2013, China surpassed the United States to become the largest country in goods w88 (in 1978, our total import and export of goods was only US$20.6 billion, ranking 29th in the world).
China has become a real country“The World’s Factory”.
The epidemic is coming, is China in danger?
EnterIn 2020, the COVID-19 epidemic made the world see the destructive power of the "double-edged sword" of the global industrial chain.
American Johns· Data released by Hopkins University shows that as of around 6:30 on June 3, Beijing time, there were a total of 6,340,811 confirmed cases of COVID-19 worldwide, and a total of 378,359 deaths. The United States currently has more than 1.83 million confirmed cases and more than 106,000 deaths. The global epidemic briefing on the 2nd stated that the new crown epidemic may cause US economic losses of 7.9 trillion US dollars.
Japan and South Korea, which thought they had the COVID-19 epidemic under control,A timetable for resumption of work and production has been formulated at the end of May. However, due to the recent rebound of the epidemic, the prospects are not clear.
What impact will this situation have on China?
On April 20, 2020, at a polymer materials company in Huayingshan Economic and Technological Development Zone, Guang'an, Sichuan, workers inspected the quality of raw materials used for medical testing instruments.
From the supply side of the industry chain,China’s import dependence on Japan, South Korea, Europe and the United States exceeds its export dependence. Its corporate strikes, logistics shutdowns, and export reductions will directly impact the supply side of my country’s upstream raw materials and midstream and downstream finished products. At the same time, it will indirectly impact the production and sales of some industrial enterprises in my country through changes in material supply and prices.
Judging from the proportion of imports and exports, countries and regions currently severely affected by the epidemic have very close w88 relations with China. in the pastIn the past six years, the import w88 scale of these countries and regions in China accounted for nearly 40% of China's total imports. Among them, the imports from Japan, South Korea, Europe and the United States in industries such as transportation, chemicals, medical equipment, and optical watches accounted for more than 50% of my country's imports of goods in these industries.
From the perspective of the demand side of the industrial chain, the global economic downturn will directly affect China's export w88, amplifying the impact of the epidemic on the demand side of the industrial chain.
China’s exports have begun to gradually recover since pressing the pause button. The subsequent factors affecting China’s exports are mainly global demand due to the escalation of overseas epidemics.
Outbreaks in China and overseasThe "time difference" will have an iterative impact on China's supply chain. The spread of the global epidemic may further cause overseas demand to shrink, thereby causing a secondary impact on my country's export industry. Commodities with the highest proportion of China's exports going to affected countries (such as clothing, semiconductors and integrated circuits, optics and precision instruments, chemicals, and air conditioners) will be the first to be affected.
Want to leave? Not that easy
Will "moving the supply chain out of China" come true?
Actually, we have nothing to worry about.
On the one hand, the transaction complexity of most products and services in the global value chain between countries is relatively high. After a long period of adjustment, it is difficult for a large-scale replacement of the division of labor positions of various countries in the global value chain to occur in the short term.
The era of "individual combat" has long passed. Whether it is high-tech chips or ordinary masks, a complete set of industrial ecosystems are needed to support them in order to ensure energy production.
Still taking Apple as an example, currently, the vast majorityThe final assembly work of the iPhone is done by Chinese factories headed by Foxconn, with steps such as manually inserting tiny screws and printed circuit boards,Tens of thousands of experienced assembly line workers are required to work meticulously.
On April 24, 2020, an Apple store in Nanjing. Currently, most of the final assembly work of iPhones is performed by Chinese factories headed by Foxconn.
Samsung, which once moved its supply chain to Vietnam, did not go so smoothly.On October 2, 2019, Samsung closed its last smartphone factory in Huizhou, my country, ending its 30-year manufacturing history in China and relocating its production lines to places such as Vietnam and India.
Mobile phones are produced in Vietnam, but parts are available30% come from China, and the epidemic has put the supply chain in trouble. Samsung's Vietnam revenue may plummet by 50% in 2020. Even the production of Samsung Electronics' new mobile phones will face delays.
On the other hand, it will be difficult for other developing countries to undertake large-scale industrial transfers in the short term.
Our country is the world's largest manufacturing country and has a complete modern industrial system. For example, our country isAmong the 16 manufacturing industries, 12 industries are the "longest" global value chains, which makes my country's global value chain irreplaceable on a global scale.
Other developing countries will find it difficult to undertake large-scale industrial transfers in the short term. Large-scale industrial transfers depend on the economic size, infrastructure, labor scale, education level, industrial agglomeration, etc. of each country.
In terms of manufacturing export scale, according toWTO statistics show that in 2017, my country's merchandise export volume was 1.7 times that of the seven ASEAN countries, and its manufacturing export scale was 2.3 times that of the seven ASEAN countries. From 1952 to 2018, calculated at constant prices, industrial added value increased 970.6 times, with an average annual growth rate of 11%. Assuming that Southeast Asia can grow at the same speed in the medium and long term, while my country grows at a low rate of 5% during the same period, it will take at least 10 years to reach my country's current level.
In terms of labor scale, according to estimates by the International Labor Organization, the size of my country’s manufacturing jobs is about170 million, accounting for 22.2% of all jobs. If this proportion drops to 14.4% (international average), nearly 60 million jobs will be lost. The size of the labor force in Southeast Asia cannot meet demand.
From the perspective of enterprise adjustment costs, infrastructure, industrial systems and business environment are more important evaluation indicators than labor costs in the process of industrial transfer. Factors such as backward infrastructure, imperfect industrial chains, and opaque policy ecology in developing economies in Southeast Asia and other regions have restricted the agglomeration of factors and the formation of industrial clusters.
Refactoring and upgrading, the opportunity has come
Although the international economic and w88 environment will face restructuring and adjustment due to the current global pandemic, China’s early warThe results of the "epidemic" are becoming increasingly apparent, and the current trend of stable economic operation is gradually emerging. This may be a new opportunity for China's economy to climb up the global value chain.
First of all, the supply chain disruption crisis caused by the new crown epidemic has forced the reconstruction and upgrading of China's industrial chain.
As the COVID-19 epidemic spreads, countries have taken corresponding control measures. In the short term, the supply chains of countries such as the United States, Germany and China, which are at the center of the global w88 network, will be affected by control. This negative impact will be transmitted to other countries and regions through the global supply chain network, bringing the risk of supply chain disruption.
At the same time, in the long term, this provides new opportunities for the reconstruction of my country's industrial chain. Promoting the intelligent upgrading, development and reconstruction of industrial chains can improve a country's emergency response capability to market emergencies; multinational companies will have to further consider the potential fracture risks caused by overlong industrial chains and excessive aggregation, thereby re-planning their supplier layout, reducing reliance on a single supplier, and making it more diversified and decentralized.
Secondly, the COVID-19 epidemic has had a negative impact on China’s supply side, stimulating the urgent need to build a core technology supply chain system.
From the supply side of the industrial chain, the COVID-19 epidemic has impacted the import links of many industries in China. Moreover, after the epidemic, from the perspective of supply chain security, many countries will move the industrial chain back to their home countries from China. In addition, the United States set offWith the "anti-globalization" trend of thought, China has to guard against building its own technology supply chain system, which has become an inevitable choice for China.
What is particularly noteworthy is the relocation of strategic industry supply chains in various countries. The world is at the intersection of the fourth industrial revolution and the fifth scientific and technological revolution. The epidemic has brought severe tests to the world economy, and my country's low-cost labor advantage has gradually faded.Technological research and development such as 5G is the key to leading our country to achieve industrial chain upgrading and economic transformation.
What should China do?
Facing the impact of the escalation of foreign epidemics on China’s industrial chain, what should we do?
First, organize active resumption of work and production through domestic enterprises"Emergency domestic substitution".
For imported low value-added intermediate products, China can find or temporarily increase production by resuming work and production“Emergency domestic substitution” meets demand and ensures continuous production chain. For high value-added commodities that are highly dependent on imports, due to their high technological content, they are more irreplaceable. When supply is limited, the pace of technology and product upgrades should be stepped up to catalyze the realization of the substitution process.
Second, for highly irreplaceable and highly dependent products, actively seek new alternative channels in the international market and develop supply sources.
In order to avoid falling into a passive situation, in some supply chain areas where domestic substitution of imports is still difficult, such as the automotive industry, Chinese companies should choose multiple suppliers in the international market and try to locate suppliers in different regions around the world to spread risks.
Look for alternative products as much as possible in overseas markets. Although these alternative products may be technically inferior to leading companies in epidemic-stricken areas, they can alleviate the pressure on the supply chain in the short term and buy time for the upgrading of my country's high-tech industry products.
Third, promote artificial intelligence,The construction of new infrastructure such as 5G and cloud computing provides technical support for building a powerful supply chain emergency response system.
Chinese enterprises must start to take seriously the practical issues of moving towards digitalization and intelligence. Those companies and industries that attach great importance to the development of models such as digitalization and artificial intelligence can recover more quickly and rebound during the epidemic.
Using technologies such as cloud computing and artificial intelligence to build a supply chain information collection platform can effectively solve the problem of lack of channels for enterprises to purchase or sell materials and hindered logistics, promote upstream and downstream enterprises, especially leading enterprises, to pivot, and provide general environmental support for the resumption of work and production.
atUnder the guidance of 5G technology, it is necessary to accelerate the process of digitalization and automation transformation of my country's factory industry, avoid the production pressure on enterprises due to difficulties in resuming work and production, and the rising cost of overseas commodity imports, and ensure that enterprises can use limited manpower and resources to support the smooth operation of enterprises in the short term when facing force majeure emergencies.
Fourth, improve the level of independent research and development and innovation, and take advantage of domestic and foreign epidemicsThe "time difference" extends the domestic industrial chain links as much as possible.
Relying on the national financial support policy, local enterprises should take the initiative to explore and extend to the industry fields at both ends of the industrial chain, increase the market share of domestic enterprises, and take the opportunity to take over the market share of some overseas enterprises; at the same time, develop comparative advantages, realize technological innovation, and then attack overseas markets after the domestic market gradually stabilizes, so as to increase my country's added value in the global value chain.
Fifth, more proactively adhere to the concept of globalization, strengthen international cooperation, and further promote higher-level integration into the international industrial chain division of labor.
First, we must strengthen international cooperation to provide production capacity support and reasonably priced material supplies for overseas anti-epidemic efforts to achieve mutual benefit;
The second is to speed up the resumption of work and production in industries that have a significant impact on the international industrial chain;
The third is to actively support the anti-epidemic work of countries with close w88 relations with my country (such as South Korea, Japan and other countries) and reduce the impact of the epidemic in important trading countries on the upstream and downstream of my country's industrial chain.
(The author is a researcher at the National (Beijing) Institute for Opening up, w88 casino, associate professor, doctoral supervisor, and Ph.D. in economics at the China Institute of World w88 Organization, w88 casino)
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