China urged to build stronger supply chain role like Apple to counter US decoupling

Speakers at the China Development Forum in Beijing call for high-value-added industrial clusters and interdependent supply chains in face of US trade war

Not even superpowers like US and China could build a completely self-sustained supply chain, former vice commerce minister Yi Xiaozhun says

3-MIN READ3-MIN

Beijing is focusing on climbing the industrial value chain to fuel sustained economic growth. Photo: Xinhua via AP

Published: 8:00am, 27 Mar 2023Updated: 6:55am, 30 Mar 2023

China should build high-value-added industrial clusters to strengthen its position in the global supply chain and counter the US-led decoupling, former top officials said on the weekend, as they downplayed concerns over factory relocations to Asian neighbours.

Much of the factory exodus was driven by China’s own private companies, former Chongqing mayor Huang Qifan told a high-level annual forum in Beijing, citing the need to readjust strategies to avoid tariff barriers amid the US-China trade war.

Around 60 per cent of foreign companies newly registered in either Thailand or Vietnam in recent years were Chinese-owned and mostly engaged in labour-intensive industries, Huang told business leaders and policymakers at the China Development Forum on Saturday.

These firms mainly produce low-value-added products such as apparel that were sensitive to tariffs, and it was “understandable” that they would make “some adjustments”, Huang – now a distinguished professor of economics at Fudan University – told the audience, according to a transcript released on the Sohu news portal.

For China, the real issue is to build up industrial clusters. Instead of low value-added sectors, we should focus on high-value-added industries

Huang Qifan

Though a small section involved providers of electronic assembly services, hi-tech and new tech products had not been affected, said the outspoken ex-official regarded as an expert on financial and economic affairs.

“It’s also reasonable for some multinational companies to strengthen their presence in Southeast Asia, and this will naturally lead Chinese firms providing support services to move there as well,” Huang added.

Such a shift was “not necessarily bad for China’s industrial restructuring”, he said, as Beijing pursues quality over quantity in economic growth.

“For China, the real issue is to build up industrial clusters. Instead of low value-added sectors, we should focus on high-value-added industries,” Huang added.

An intensifying trade rivalry between China and the United States, alongside nearly three years of stringent pandemic control measures and rising labour costs, has forced businesses to reconsider their heavy dependence on China, with many moving manufacturing to India and Southeast Asia.