Editorial | World needs China at the centre of supply chains more than ever

China is deeply embedded at the centre of global supply chains – the hub of a web of relations with the world that is not easily unwound. Nonetheless, disruption wrought by the Covid-19 pandemic has prompted reflection among multinationals and foreign governments on the high degree of reliance on a single country in a worldwide network. There is even talk of decoupling, or the world becoming less globalised.

This is premature, not to mention inward-looking and blinkered. With the country back at work after the front line of the pandemic shifted to Europe and the United States, this talk does not reflect the role of China in the globalisation of supply chains, driving world trade and maintaining global growth. It has been fuelled by the big drop in China’s trade in January and February, with exports falling 17.2 per cent and imports 4 per cent. On top of the US-China trade war, the pandemic has indeed wreaked havoc. As a result it is seen to validate China exit strategies formulated during the trade war.

The reality is that supply chains developed around China at the centre must go on, especially now that Covid-19 has apparently tipped the world into recession. This would highlight China’s advantages, such as with its modern infrastructure and relatively low-cost skilled labour, in driving recovery

Chinese manufacturers and suppliers shut factories and offices in an effort to contain the spread of the disease, disrupting industries including those for technology and pharmaceuticals. Typical of the overreaction at the other end of the supply chains has been a broadcast remark by the French Finance Minister Bruno Le Maire: “We have to decrease our dependence on a couple of large powers, in particular China, for the supply of certain products” and “strengthen our sovereignty in strategic value chains” like cars, aerospace and medicines. The spread of the coronavirus had also impacted “people supply chains”, particularly the global movement of tourists and students.

The trade figures underline the fact that measures implemented to halt the spread of Covid-19 affected both supply and demand, a double whammy quickly reflected in the trade statistics. The return to work still under way in China will stimulate both, with knock-on effects on other countries’ economies, which in turn is a major driving force for China to resume business as normal. This will reaffirm the country’s place at the centre of global supply chains.

There may be wariness about dependence on China because that is where the new virus gained its reported foothold. But China is so deeply ingrained in supply chains that virus or not, a world facing severe economic headwinds needs it more than ever.