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The theory that "multinational companies are accelerating the shift of production capacity out of China" overstates the resilience of the "made in China" supply chain and industrial chain

2020-03-13 548

    Affected by the covid-19 epidemic and the superposition of the Spring Festival holiday, some industries in China have been hit to some extent. In the face of this situation, some people are worried about the trend of China's economy. Some even say that multinational companies will accelerate the relocation of production capacity to replace China's important position in the global supply chain and industrial chain.

  In this regard, a number of insiders interviewed by the reporter of securities daily believe that it is a normal phenomenon for some enterprises to set up factories in foreign countries in consideration of various aspects, so many factors need to be taken into consideration for enterprises to move abroad, and the conditions for large-scale relocation of the industrial chain from China are not available. The "made in China" supply chain and industrial chain are resilient.

  China's position in the global industrial chain

  It will not be changed by short-term external shocks

  China is an important link in the global supply chain of many multinational companies. At present, China is the only country in the world with all the industrial categories listed in the UN industrial classification. It has the largest output of more than 200 industrial products in the world, with some industries reaching or approaching international advanced levels. It is the largest manufacturing country in the world, with strong industrial supporting capacity.

  There is no denying that the epidemic will have an impact on Chinese companies. However, the industry experts interviewed by the reporter agreed that the statement that "multinational companies will accelerate the shift of production capacity and replace China's important position in the global supply chain and industrial chain" was biased.

  "That's an exaggeration." Zhang jun, chief economist of Morgan Stanley huaxin securities, told securities daily that similar remarks have been made in the course of china-us trade frictions, but China's position in the global industrial chain will not change due to short-term external shocks from the perspective of its own soft and hard factors such as human resources and infrastructure.

  He further said that as China's economy is shifting toward domestic demand, more overseas companies will put their production capacity in China to meet Chinese demand, shifting from "made in China" to "made for China." At the same time, the government is stepping up reform and opening up efforts. For example, the experience of the Shanghai financial free trade zone will be promoted nationwide in the future to provide more convenience for cross-border trade and services.

  Chen li, director of the chuancai securities research institute, told securities daily that China already has a sufficient labor force and industrial chain foundation built up over the years. "Chinese people are hard-working and have strong execution ability," he said. "they are one of the most mature countries in the industrial chain and will not be easily replaced."

  "Of course, it is not ruled out that some companies may re-adjust their global production layout for their own interests or other factors." Chen said the fog.

  Liu zhe, deputy director of the huambo new economic research institute, said in an interview with securities daily that although the epidemic is sudden and spreading, its impact on the global economy and industrial chain is mainly a short-term supply shock.

 On the one hand, she said, it is necessary to recognize the current economic situation and the impact of the epidemic on China's economy, the liquidity of small and medium-sized enterprises and some service industries in the first quarter, and take timely and effective policy support measures. On the other hand, it is important to realize that short-term supply shocks will not affect China's core competitiveness, domestic demand potential and resilience in the medium and long term. Concerns about China's economic trend and capacity shift should not be overstated.

  The government solves the difficulties and enterprises actively help themselves

  Shortening supply chain "shutdowns"

  In the face of the impact of the epidemic, the government has introduced a number of measures to help enterprises overcome their difficulties.

  The executive meeting of the state council on March 10 made it clear that all regions and departments should accelerate the resumption of work and production of the whole industrial chain in an orderly manner while implementing precise prevention and control measures at different levels. First, we need to improve the prevention and control guidelines for the resumption of work and production in light of the epidemic situation, give full play to the work mechanism of the state council in promoting the resumption of work and production, set up special classes for cross-sectoral work, strengthen overall guidance and coordination services, and open up blockades in the industrial and supply chains. Second, we need to step up international coordination and cooperation and maintain the smooth flow of international supply chains by increasing international cargo flights and other measures. Third, we should guide financial institutions to take the initiative to connect with core enterprises in the industrial chain, increase support for loans with working capital, and give them reasonable credit lines.

  While making good use of policies, many enterprises have also launched a series of "self-help" measures and actively participated in global cooperation.

  The relevant person in charge of wanfeng group said in an interview with "securities journal" reporter, in the face of the outbreak, wanfeng further integration of international group resources, promote the transformation and upgrading of industrial sector informatization, intellectualization, and formulate emergency plan, flow with upstream and downstream suppliers and end users to connect the channels, improve the mechanism of the orders, real-time monitoring of changes in the global outbreak, according to customer order requirements and global production base of existing material, personnel, production capacity, use of the Internet of things of intelligent scheduling system and large data analysis as a whole in order to arrange production, rapid response to market changes, to meet customer demand.

 "So far, wanfeng has been able to operate the production line at full capacity and efficiently, and the delivery of orders at home and abroad has been relatively smooth, demonstrating the resilience of the 'made in China' supply chain." The official said.

  Chunxing seiko is a leading enterprise of radio frequency devices, entering the international first-class queue. Wang jin, general manager of chunxing seiko Marketing Department, said that the growth of the overseas market demand for rf device business was significant as the subsidiary of chunxing seiko communications entered the supply system of nokia and Ericsson. The four international communication equipment suppliers of radio frequency devices have won all of them and centralized supply to major customers. In the aspect of 5G, it mainly focuses on the field of macro station filter, from low frequency to high frequency.

  "COVID - 19 outbreak occurs, inspires the global manufacturing supply chain reconfiguration and a series of chain reaction, suzhou city government through scientific management measures as a whole, strict screening program, through the supply chain, to return to work and production, in time for the development of injection sedative, since February, suzhou company to return to work and production into the benign lane." At the same time, chunxing jinggong, as the first industrial park in suzhou city to resume work, has formulated a sound epidemic prevention and control plan to maximize the coordination of people, logistics and information flow, shorten the "shutdown" of the supply chain caused by the outbreak, and resume work in a safe and orderly manner, wang told securities daily.

  It's not just addition

  More should link through each link of industrial chain

  In the face of some skeptical voices, China has responded with concrete actions.

  Further improving the business environment is one of them. In particular, the regulations on improving the business environment, which came into effect on 1 January this year, provide a stronger institutional guarantee for improving the business environment. But this also is one of the important factors that the market main body carries out the operation must consider.

  The optimization of the business environment has been recognized by the industry. According to the doing business report 2020 released by the world bank, thanks to the reform and opening-up drive, China's global ranking of doing business has jumped from 78th to 46th in 2018 to 31st in 2019, making it one of the world's top 10 economies with the largest improvement in ease of doing business for two consecutive years.

  In fact, the improvement in China's business environment is well known among foreign companies. The industry believes that the improvement of China's business environment is a long-term and continuous process, and with the implementation of the new round of reform policies, the Chinese market will show greater charm to enterprises from all over the world.

 What should I do next? The experts interviewed by the reporters offered Suggestions from different perspectives.

  Chen li told securities daily that after years of reform and opening up, China's economy is one of the largest in the world, but it has also come to a crucial stage of high-quality development, from quantitative change to qualitative change. Therefore, China's industrial chain in the future is not only to do addition, more importantly, through the whole chain of the upper, middle and lower links, especially through the "neck" of the key areas of the relationship, to vigorously improve the scientific and technological level of all links of the industrial chain. At the same time, it is urgent to improve the financial industry's effective support for the development of the real economy and precise drip irrigation.

  "In terms of policy, we should make rational planning, avoid the situation of 'one size fits all' and support industrial development in a forward-looking and orderly manner." Chen said the fog.

  Liu zhe puts forward Suggestions from the enterprise level. She told the securities daily that in the face of the sudden epidemic, enterprises should neither underestimate the current difficulties nor sit idly by and do nothing. Instead, they should actively help themselves and transform the crisis into an opportunity.

  "From just, according to data released in February, there is an obvious growth of short-term loans to companies, policy support has played a positive role, combined with the enterprise gradually return to work, the staff are back, step up the production and business operation activities, most of the company's liquidity has spent the most difficult stage, the next need to focus on supply chain repair and enterprise transformation." Said the loss.

  Specifically, first, adopt flexible supply chain management strategy, properly handle and coordinate the relationship between the upstream and downstream industries, ensure the smooth supply chain, resume normal production and operation as soon as possible, and make up for the loss during the shutdown. For upstream enterprises, we should actively communicate with them about their actual situation and capacity recovery, obtain support from upstream enterprises, and maintain a relatively stable supply and price of raw materials. For downstream enterprises, we should pay close attention to their resumption of work and liquidity recovery, and give them a certain buffer period when necessary to tide over the difficulties together.

  Second, pay attention to and adapt to the new changes in production and channels brought about by the epidemic. Outbreak period, not only cultural entertainment, education, retail industry such as online permeability improved significantly, intelligence, automation, informatization level of manufacturing enterprise production is expected to also will accelerate transformation, some enterprises explore during the outbreak of the new product sales channels and sales model, is also likely to affect the original consumption patterns. Enterprises need to formulate effective production and operation plans in a timely manner, adjust their own pace of transformation, and adapt to the new changes in the market and consumers.