China’s Crucial Role in the Reconfiguration of Global Value Chains
Since the 1980s, global value chains (GVCs) have been pivotal in driving economic development worldwide. Multinational companies from developed countries have orchestrated global production networks, collaborating with offshore suppliers in developing countries to pursue lower costs and higher efficiency. This collaboration has enabled many developing nations to participate in international production systems, attract foreign investment and technology, and connect with global markets, thereby promoting national growth and prosperity.
China stands as a remarkable example of this integration. Through policies of reform and opening-up, alongside its accession to the World Trade Organization (WTO), China has leveraged its comparative advantages to gradually integrate into GVCs and achieve manufacturing-led development. From 1990 to 2022, China’s share of manufacturing value added in its GDP increased from 15.7 percent to 28.3 percent. Globally, its share of manufacturing value added surged from about 7 percent in 2000 to nearly 30 percent in 2022. According to the World Bank, China’s contribution to global economic growth averaged 38.6 percent between 2013 and 2021, injecting significant impetus into the world economy.
In the past decade, however, GVCs have faced challenges stemming from technological revolutions, climate change, the COVID-19 pandemic, and geopolitical tensions. Some developed economies, such as the United States and its allies, have implemented industrial policies encouraging manufacturing reshoring, nearshoring, and “friend-shoring,” aiming to reduce dependence on China within GVCs. The criteria for selecting suppliers are increasingly influenced by considerations of security and resilience rather than purely cost and efficiency.
The reconfiguration of GVCs is thus underway. The International Monetary Fund highlighted in its World Economic Outlook (April 2023) that the share of foreign direct investment flows among geopolitically aligned economies has risen over the last decade, surpassing flows between geographically proximate countries. Similarly, the United Nations Conference on Trade and Development reported a noticeable increase in the political proximity of trade and a decline in trade partner diversity since 2022.
Amid these shifts, China’s role and prospects within this reconfiguration have garnered global attention. As the world’s second-largest economy, the largest manufacturer, and the largest merchandise trader, China exerts significant influence on the global production system. It serves as a key hub for trade and investment, especially within Asia, connecting closely with economies like the United States and Germany, and forming a vital economic triangle across Asia, North America, and Europe.
Moreover, China possesses a strong capability for creating value. Companies in China leverage local resources for innovation and benefit from the vast Chinese market. They have evolved from producing “made in China” goods to pioneering “created in China” innovations and advancing towards “intelligent manufacturing in China.”
As global value chains continue to reconfigure, China’s systemic importance is likely to persist. Its ability to adapt and contribute to the evolving dynamics of the global economy underscores its pivotal role in shaping the future of international trade and production networks.
Reference(s):
cgtn.com
