This photo taken on Nov. 28, 2023 shows the Raytheon hybrid engine platform of automaker Geely at the exhibition area of intelligent vehicles during the China International Supply Chain Expo in Beijing. [Photo/Xinhua]

The China International Supply Chain Expo (CISCE) opened in Beijing this week, the first of its kind in the world devoted to promoting industrial and supply chain collaboration. The expo seeks to showcase the variety of goods Chinese suppliers are able to manufacture, and demonstrate why it is important for businesses to have a reliable, resilient, efficient and interconnected supply chain, all of which are necessary to ensure goods are available, affordable and capable of meeting consumer demand. 

For the past few decades, China has been at the center of global supply chains and the world's largest supplier of public goods. However, in recent years, the integrity and unity of global supply chains has been put at risk as they have been increasingly politicized by certain countries who see them through the lens of great power dynamics. In doing so, these nations have embarked on various strategies in an attempt to carve up, diversify and break global supply chains irrespective of the consequences that it has on goods.

Supply chains should ideally be tightly bound, efficient, have everything they need and overcome logistical hurdles. To better understand how this works, let's imagine a car factory. The factory does not spontaneously produce cars on its own, rather, it assembles a wide variety of parts and components. If the factory is to produce a large volume of vehicles each day, it needs fast and effective access to these parts. 

As such, suppliers that create and specialize in given components tend to place themselves close to the partner factory, so as to cooperate in labor expertise and supply, and create the final product at a faster pace. This is how a supply chain works. Similarly, all of these factories might want to locate themselves near to a well-established port or transport infrastructure, so that their products can be shipped out and moved quickly. 

Supply chains operate on a logic of efficiency and geography to ensure all business demands are met. China, with the world's most well-established manufacturing infrastructure, expertise in almost every kind of component, as well as an impressive transportation and logistical infrastructure in the form of mega ports such as Shanghai, is the world's primary location to "get things done" in a manufacturing sense. That is why it has become the largest exporting nation. 

During his address at the opening ceremony of the CISCE, Chinese Premier Li Qiang said that maintaining the resilience and stability of global industrial and supply chains is an important guarantee for the promotion of global economic development. 

Indeed, two-thirds of global trade is directly related to supply chains, and research by the World Bank shows that a 1% increase in global supply chain participation will raise global per capita income by more than 1%. As such, the entire world benefits when cooperation on global industrial and supply chains remains stable and even deepens, and generally suffers when cooperation is hindered and stagnates.

Politicizing the issue of supply chains and seeking to "de-risk" will in fact lead to greater risks as such practices cause supply chain disruptions and contribute to inflation. In the long run, supply chains will lose the comparative advantages from specialization and large scale, and production efficiency will also be reduced, therefore weakening the resilience of supplies when it comes to the impact of natural disasters.

Politics should not be allowed to get in the way of the formula that ultimately works best. 

Tom Fowdy is a British political and international relations analyst and a graduate of Durham and Oxford universities. For more information please visit: 

http://m.keyanhelp.cn/opinion/TomFowdy.htm

Opinion articles reflect the views of their authors, not necessarily those of China.org.cn.

Related

Go to Forum >>0 Comment(s)