China’s supply chains are under growing pressure amid increasing uncertainty in the global markets, a senior official from China’s central bank has warned. “The impact of Covid-19 has sped up the shift in the global distribution of production,” Liu Guiping, deputy governor of the People’s Bank of China, told the Global Asset Management Forum in Beijing on Saturday. “In addition to the influence of geopolitical contests, China’s industrial sectors are facing double pressure – industries moving into Southeast Asia and back to developed countries. “Chip shortages and supply chain stoppages threaten supply chain security and competitiveness.” China’s aviation firms vulnerable as Biden ups the ante with more sanctions He also identified other threats to China’s economy, including the increasingly unpredictable course of the Covid-19 pandemic ; rising inflation and tightening monetary policies; and growing anti-globalisation and nationalist sentiment that could have an impact on international trade. China has seen an exodus of factories heading to cheaper countries in Southeast Asia in recent years. Amid concerns over supply chain security, the United States and Japan, among other developed countries, have tried to cut their reliance on Chinese manufacturing and bring more jobs back home. The rivalry between China and the US and the high tariffs on Chinese imports imposed in the Donald Trump era have created further opportunities for countries such as Vietnam and Mexico. The Regional Comprehensive Economic Partnership , which took effect on January 1, has also fuelled speculation that the growing appeal of Southeast Asia will accelerate the “China exit” in the manufacturing sector. Liu also warned of the risk of “massive” capital outflows from emerging markets due to monetary policy shifts in major economies. There is a growing expectation that the US Federal Reserve will raise interest rates in March to curb inflation – a move the British and Indian central banks have already made and one that the European Central Bank is also considering. Liu said rate hikes might see euro and US dollar assets flowing back to the US and Europe, which could cause turbulence in global financial markets and increase the spillover impact on China. China to showcase ‘dual circulation’ strategy in Yangtze River Delta To prepare for an increasingly hostile global environment, Liu also stressed the importance of energising the domestic market, a major element of China’s dual circulation strategy . Li said this policy needed to be broadened as well as deepened with proper monetary policies to help China prepare for contracting demand, supply shocks and weaker expectations. He said the country should “fully tap into the massive potential of the domestic market”, “provide an effective supply of capital for economic development, promote the creation of financial products and services that are more conducive to urban and rural income growth” and encourage consumer spending. Lou Jiwei, a former finance minister and chairman of the Global Wealth Management Forum, told the forum that China was seeking to attract investment from foreign companies by further opening up, improving the regulatory environment and making sure foreign enterprises were treated properly.