Speaking during the opening ceremony of the inaugural China International Supply Chain Expo (CISCE) on November 28 in Beijing, Premier Li Qiang said that China is willing to build closer production and industrial supply chain partnerships with all countries as part of China’s latest efforts to retain foreign investment amid “de-risking” moves from Western economies. He warned of “challenges and risks brought by protectionism and uncontrolled globalization”, and said China would continue to create an international and rule of law-based business environment. Foreign businesses have been moving investments and de-risking their supply chains away from China due to fears of over-reliance as geopolitical and domestic uncertainties mount. Beijing has been promoting the five-day event as a demonstration that China is still the indispensable world factory by having global brands, including Apple and Tesla, among the 550 exhibitors, of which 130 are foreign companies. Foreign Chambers of Commerce said the Expo could provide a window to assess the opportunities still on offer in China, and to have a clearer view on how other businesses are assessing the market.
Jens Eskelund, President of the European Union Chamber of Commerce in China, said the Expo was expected to show “a clearer position on how China sees its role in global supply chains, as well as how some of the pressing issues in trade and globalization can be addressed”. Since China relaxed its stringent coronavirus controls at the beginning of the year, Beijing has begun an all-out push to woo foreign investors. However, China reported its first-ever quarterly deficit in direct investment liabilities in the third quarter. To offset the downward trend, Beijing has unveiled a series of measures, including the removal of investment barriers to the manufacturing sector and the opening up of part of the digital economy in selective regions, while also expanding visa-free entry to more countries to facilitate inbound travel. “Companies are scrutinizing costs to protect their margins. Invariably, supply chains will be a target, as 50% to 75% of the cost of doing business is influenced directly by supply chains,” said Mads Lauritzen, Asia-Pacific Strategy and Transformation Leader at management consulting firm EY-Parthenon.
Expo organizer, the China Council for the Promotion of International Trade (CCPIT), said American businesses account for 20% of the 130 foreign exhibitors, while around a dozen European companies are also taking part. Companies at the expo focused on agriculture, clean energy, digital technology, health and logistics. As the CISCE was to open in Beijing under the motto “connecting the world for a shared future”, U.S. President Joe Biden convened the inaugural meeting of his supply-chain resilience council in Washington. He announced 30 new actions “to strengthen supply chains critical to America’s economic and national security”. The measures are meant to spur domestic production of essential medicines and cut reliance on “high-risk foreign supplies” of medical products. They include new investments to monitor supply chains by sharing data more efficiently among federal agencies and assessing risks to the supply of renewable energy resources. Washington also established an early-warning system for supply-chain disruptions in semiconductors, a cornerstone technology for both economies. And although the volume of U.S. goods imported from China has fallen sharply, American supply chains remain indirectly linked to China through third-party countries like Mexico, a leading exporter of goods to the U.S. that has recently deepened economic ties with China.
Lin Meng, Director of the Modern Supply Chain Research Institute at the Beijing-based Chinese Academy of International Trade and Economic Cooperation, said that China’s endeavors to build a modern industrial system will improve the world’s capacity to address potential supply chain disruptions in the future. “This will ensure the seamless operation of the global economy in the face of challenges and uncertainties,” said Lin. China’s manufacturing industry has ranked first in the world in terms of scale for 13 consecutive years, accounting for nearly 30% of the global share, making the country the “world factory” in the global supply chain, according to the China Council for the Promotion of International Trade (CCPIT). Moreover, China’s high-end industries, such as electronics and electrical equipment, are increasing their footprints in the global business landscape. Its new energy industries, such as photovoltaics, are already world leaders. Emphasizing the substantial risk posed by industrial decoupling to global economic recovery, Zhao Ping, Dean of the CCPIT Academy, underscored China’s attractiveness to multinational corporations. The country offers a comprehensive supply chain support system, well-developed infrastructure, a vast market and effective government policies that foster innovation, she said. With China ascending the value chain, it has evolved into more of an exporter than an importer of intermediate goods utilized by manufacturers in other regions. This development enhances connectivity and, consequently, boosts the competitiveness of global supply chains, according to HSBC in a report published earlier this year.
This overview is based on reports by the China Daily and the South China Morning Post.
