Need to strengthen domestic demand

China should be prepared to improve the safety and competitiveness of its industrial and supply chains, especially in the manufacturing sector, given the changes taking place in the global production network because of the novel coronavirus outbreak.

China has been independently developing its industrial system since its accession to the World Trade Organization, integrating its industrial and supply chains with the global production network, and building a manufacturing system of the largest scale and most complete categories in the world.

After emerging as a global assembly center, China has also transformed itself into a regional hub for the global production network.

For nearly two decades, especially in the smartphone era, Chinese companies have been increasing their presence in Apple's supply chain. Currently, 382 of the 802 factories set up by Apple's top 200 suppliers worldwide are located on the Chinese mainland. Because of so many supply chain companies, domestic brands such as Xiaomi, Oppo and Vivo can be assembled at a relatively low cost, while Huawei is marching toward the highest end of the industrial value chain, the chip field.

The same is the case with many other manufacturing units, with China creating its own brands riding on an industrial chain that boasts of advantages such as industrial clusters and logistics networks that no other country can provide.

Some middle and low-end labor-intensive Chinese enterprises have shifted to Southeast and South Asian countries and elsewhere, but what they have actually shifted is their assembly lines rather than the whole industrial chain.

Such transfers will accelerate the regionalization of the production network and consolidate China's position in global supply and industrial chains.
China's pride of place on the global industrial chain is linked to the market and its industrial chain cluster and supply chain advantages.

That apart, large-scale investment in intelligent manufacturing technology and huge domestic demand means China can continue to consolidate its advantages in the global industrial and supply chains.

Of course, many core components and key equipments in China's manufacturing industry still come from the global industrial chain.

As Chinese enterprises move up the value chain, there will be a growing demand for such components and more and more fierce competitions.

The current risk to China is that some countries, due to political factors, cut off the export of core components, equipment or software to it and are trying to restructure the global industrial chain.

Therefore, China needs to boost domestic demand to consolidate the security of its supply and industrial chains. Its enterprises should have the courage to increase their ability to set up their industrial and supply chains across the world to help improve the competitiveness of the domestic supply and industrial chains.