Since the 1980s, global value chains (GVCs) have been essential for economic growth, allowing multinational companies to collaborate with offshore suppliers to boost efficiency and reduce costs. China stands out as a prime example of this phenomenon. By implementing reform and opening-up policies and joining the World Trade Organization (WTO), China leveraged its comparative advantages to integrate deeply into GVCs, fostering a manufacturing-led development model.
From 1990 to 2022, China's manufacturing value added to GDP surged from 15.7% to 28.3%, with its global share of manufacturing value added jumping from approximately 7% in 2000 to nearly 30% in 2022. This remarkable growth has significantly propelled the world economy, with the World Bank estimating that China contributed an average of 38.6% to global economic growth between 2013 and 2021.
However, the last decade has presented challenges to GVCs, including technological revolutions, climate change, the COVID-19 pandemic, and rising geopolitical tensions. In response, some developed economies like the U.S. and its allies are encouraging manufacturing reshoring, nearshoring, and friend-shoring, aiming to decouple or reduce reliance on China by prioritizing security and resilience over pure cost and efficiency.
The reconfiguration of GVCs is already underway. The International Monetary Fund highlighted in its April 2023 World Economic Outlook that foreign direct investment flows among geopolitically aligned economies have increased more than those among geographically closer countries. Additionally, the United Nations Conference on Trade and Development noted a rise in the political proximity of trade and a decline in trade partner diversity since 2022, drawing global attention to China's evolving role.
As the second-largest economy, the largest manufacturer, and the top merchandise trader globally, China holds a systemically important position in GVCs. It serves as a key hub for trade and investment, particularly within the Asia-North America-Europe economic triangle, closely interacting with leaders like the U.S. and Germany.
Moreover, China has demonstrated strong capabilities in value creation. Chinese companies are not only utilizing local resources for innovation but are also transitioning from "made in China" to "created in China" and advancing towards intelligent manufacturing. This evolution underscores China's enduring influence and adaptability within the global production system.
Reference(s):
cgtn.com
