The global shutdown brought about by the epidemic has affected all aspects of social life. The market generally expects that the negative impact of the epidemic on the global economy will exceed the 2008 financial crisis and approach the Great Depression of 1929. As the epidemic intensifies, discussions about how the epidemic will affect socio-economic politics are coming in one after another. Among them, the view of “de-globalization” is particularly striking.
At present, the issue of “de-globalization”, which is hotly debated by Chinese public opinion, is largely related to the issue of “decoupling” or “de-sinicization” of the West and China. Many people expressed concern about “de-globalization”, in fact they are worried about the negative impact of “de-sinicization” on China’s own interests, and such concerns are not unreasonable.
In fact, in the first two years of the Sino-US trade war, there was a “de-Sinization” speech. So, will the pandemic of the epidemic eventually lead to “De-Sinization”? In the post-epidemic era, in the face of the downward trend of the global economy, what can companies and individuals do?
Supply Chain Vulnerability Guided by Globalization
Compared with the early stage of industrialization, the global product supply chain is becoming more and more complex and networked. The continuous refinement and tightening of the global supply chain and industrial division seem to have led to a reduction in the global economy’s resistance to risks. Under the impact of the epidemic, the highly globalized industrial chain appears fragile.
Taking the global auto industry as an example, two weeks after the “Fengcheng” of Wuhan, Hyundai ’s factory in South Korea was shut down. The reason is that a parts supplier in Qingdao has less than 15% of workers after the Spring Festival, and South Korean car manufacturers across the sea finally stopped production.
Behind the fragility and complexity of the supply chain is the pursuit of productivity and economic benefits. Different economies have different comparative advantages in production and sales. Taking iPhone as an example, the suppliers of screens and cameras are in South Korea and Japan, assembled in China, stocks are listed in the United States, and sales are all over the world. All countries in the industrial chain and the capital groups behind it benefit from this.
The fundamental reason why China can become the world’s factory lies in China’s low overall production cost and high production efficiency. In the past 20 years, Western companies have entered China on a large scale in order to reduce production costs and explore new markets. China has gradually become the core of the global supply chain. Today, China’s GDP accounts for nearly 20% of the world’s total. According to a recent survey by a German company, four-fifths of the world’s largest companies rely on Chinese suppliers. It can be said that China ’s becoming a factory in the world is not a sensible plan for anyone, nor is it the policy of any visionary leader, but the result of decades of global market economy evolution choices and China ’s own organic growth.
Not only has China been a big mask-producing country for a long time, but it has also shown a strong capacity explosion during the epidemic. In just one month from early February to early March, China’s daily mask production capacity quickly climbed from 10 million to 100 million. In the pharmaceutical field, China’s API production accounts for 60% of the world’s total, affecting the production of large global pharmaceutical companies. China’s ventilator production capacity is relatively small, but its proportion has reached one-fifth of the world.
The pain caused by the epidemic, coupled with the long-term lack of political mutual trust, Western countries began to produce anxiety. This has forced Western countries to think about the fragility and complexity of the supply chain, and hopes to move some of their production capacity out of China in the future to diversify risks.
At the White House New Crown Virus Epidemic Information Conference on March 31, Trump stated that he would “build the United States into a fully independent and prosperous country: energy independence, manufacturing independence, economic independence, and national sovereignty independence.” Immediately afterwards, the White House National Economic Committee Director Larry-Kudlow stated that US companies could be encouraged to relocate by repatriating expenses.
Some time ago, in response to the epidemic, Japan ’s Ministry of Economy, Trade and Industry announced that it had specifically listed 243.5 billion yen (approximately RMB 15.8 billion) from the “Reform Supply Chain” project to fund Japanese manufacturers ’withdrawal of production lines from abroad To diversify production bases and avoid over-reliance on overseas supply chains.
Can the supply chain be successfully “de-Chinese”?
The impact of the epidemic on the global supply chain has made countries pay more attention to local suppliers and forced companies to restructure the original industrial chain. At the same time, shortages of important materials such as medical protection and ventilators have given developed countries a clearer understanding of the possible consequences of the “hollowing out” of manufacturing.
But if you want to “de-Chineseize” the supply chain, you will inevitably be “constrained” by various factors in the short term.
First of all, the epidemic situation is still raging around the world, and the fight against epidemic is still the primary task of most countries in the world. At this point in time, it is an impossible task to start “de-Chineseization”. Currently, 90% of US masks are imported from China, and Chinese mask production capacity accounts for about 50% of global mask production. In addition, there are 21 Chinese ventilator manufacturers, accounting for about 20% of global production capacity. In Europe and the United States, the current gaps in materials for epidemic prevention such as ventilators, masks, and protective clothing are all above 50%.
This means that European and American countries must rely on the import of Chinese materials in the face of the epidemic. At this stage, if they are forcibly “de-Chinese”, they will inevitably be subject to countermeasures. Therefore, at least until the epidemic in Europe and America slows down significantly and is contained, the market need not worry too much.
More importantly, the current global economic situation is uncertain, and the global financial system has entered an unprecedented period of fragility. The primary task of major companies is to maintain enough cash to observe the recovery of the global economy after the epidemic. Therefore, for international giants, the current focus is to minimize all unnecessary industrial expansion, transfer, and investment. There is no incentive to follow the slogans of politicians, and more is based on their own recovery of the global economy. Decision and rhythm.
In the long run, it is very difficult for Western countries to resume manufacturing and form an independent industrial chain system.
The US “manufacturing return” strategy has been implemented for 10 years, and the results have little effect. Regardless of how the US government pushes it, companies are unwilling to make excessive domestic investments for their own benefit.
The result is that the manufacturing sector ’s share of the US economy has been steadily declining under the “backflow” efforts of the past decade: the value added by the US manufacturing industry to GDP in 2008-2015 has not been able to return to 12.8% The level is much lower than the level of about 15% in 2008. Affected by this, the U.S. manufacturing population is also shrinking: the proportion of U.S. manufacturing practitioners has been declining since this century. In the three years of 2015-2017, the proportion of U.S. manufacturing practitioners was 8.8%, 8.3%, 8.5%.
More importantly, China has become a “world factory” after 30 to 40 years. According to different historical stages or the results of active or passive adaptation, this is difficult for other countries or regions to replicate.
At the same time, China has a huge consumer market, and it is a rational choice for companies to place manufacturing close to the market. The profit-seeking nature of capital causes companies to consider their production layout from the perspective of their own economic benefits. It is impossible for governments of all countries to force all overseas companies to carry out conversions that are not in their interest, nor can they provide sufficient economic compensation to help them convert.
Profit is still the fundamental purpose of enterprise development. Entrepreneurs will still consider from the perspective of their own interests to consider how the layout can maximize industrial benefits. For governments and enterprises in Western countries, the return of the production chain to the local area may bring some new job opportunities in a short period of time, but in the long run, the price will be reduced profit margins and higher product prices. In the end, it will also damage consumer welfare, which is neither an ideal result nor the nature of capital for profit.
In addition, we have further open policies and a continuously optimized business environment, constantly improved and upgraded infrastructure construction, and we have enough room for policy maneuvers. All these combined efforts make it difficult to implement “de-China”.
From “Desinicization” to “Confrontation”
In any case, the new crown has caused a major impact on the global scale, and the global industrial chain and supply chain have been hit hard. The future industrial chain and supply chain will also face adjustments, and we also face the challenge of consolidating the industrial chain, complementing the industrial chain and innovating the industrial chain.
If you want to consolidate the industrial chain, you need to strengthen investment in the key global industrial chain and enhance China’s position in the global industrial chain. The so-called critical global industrial chain mainly has the following characteristics: First, the international division of labor and integration are the closest; Second, in this field, science and technology are developing fastest, the market is expanding fastest, and of course the problems are also the most concentrated; third This feature has the most intense international competition in this field.
This requires us to maintain high-quality economic development and occupy a leading position in the high-tech industry. At the same time, we must also grasp the global leading position of future high-tech industrial technology, master independent intellectual property rights, and not be caught in the neck by foreign countries. To achieve leapfrogging development in science and technology, China must not just follow and imitate others, let alone wait for technology transfer, and must strengthen independent innovation. Without independent innovation, there is no weight for international cooperation.
In addition, under the framework of the Belt and Road Initiative, we must speed up the pace of enterprises going abroad, especially by establishing industrial parks abroad, establishing economic corridors, investing in manufacturing projects, and innovating industrial chains, which may become Complement the important forces of China’s global industrial chain.
Finally, we must strengthen opening up and integrate into the new layout of the industrial chain of large international companies. At this point, we need to complete our social credit system. The fraud incident of Ruixing Coffee was exposed, which actually reflected the problems of integrity and corporate governance structure. The lack of credibility and the unreasonable governance structure have caused pressure on the U.S.-China stock market to face general investigations. After this epidemic, large international companies will begin to re-arrange their industrial chains, and we must integrate into their new industrial chain layout in a very open manner.
Whether it is economic or political, or even cultural, from a broad perspective, “de-Chinese” is impossible, and it is not in line with the mainstream trend of globalization. The Chinese taste has been drifting across the ocean for so many years. Last year, the Atlantic Monthly published an article on Sino-US relations, saying that American policy makers have been ignoring a problem that they have been thinking about for a long time. Change China, but have never considered that China may change the United States. In fact, the relationship between China and the United States is like a relationship between husband and wife. No one can change who they are, but they are independent and interdependent. No system or system in the world is perfect. Just as no one is perfect, no matter whether it is a person or a system, it will be constantly optimized with the changes of the times.
But today’s China-US relations seem to have entered a field that has nothing to do with the economy. If you look at the global economy calmly, “de-Sinization” is an emotional concept based on the premise that each must pay a painful price. Judging from the situation, “antagonism” will continue. For us, this is a danger and an opportunity.