Supply chain

Waves of Covid-19 outbreaks have dealt a big blow to China's economy, with strict anti-epidemic measures affecting businesses, exports and trade. Lockdown uncertainties have also sparked fears of increased competition with foreign manufacturers and a global supply chain restructuring away from China. Caixin surveys the challenges ahead.

As Shanghai battles with its worst Covid-19 outbreak, stringent anti-epidemic measures confining almost everyone at home have ground the city to a halt. It is believed that if Shanghai is not able to resume production by May, industries with supply chains in the area will not be able to function, and the automotive industry will be hit the hardest.

Even as Shanghai aims to reach “social zero Covid” in the coming days, it has moved to resume key manufacturing industries and businesses. Undoubtedly, notes Zaobao correspondent Yu Zeyuan, the authorities are well aware that Shanghai is China’s economic and political nerve centre and that any disruption could easily spell trouble.

With the ongoing Russia-Ukraine war, logistics providers have been hard put to keep goods moving between China and Europe. One route is the China Railway Express (CRE) that cuts through Russia and Ukraine, which gives sellers and suppliers cause for concern, leading to a sharp drop in the volume of goods being transported via that route. Zaobao correspondent Edwin Ong takes a look at the impact of the war and how the CRE can get through the challenging period that is coming.

In 2022, as global supply chains normalise and inflation gradually decreases, there is room for cautious optimism in the global economic outlook, but much will depend on countries’ fiscal policies and the extent to which the US Federal Reserve adjusts its interest rates. Economics professor Zhang Rui predicts that if investments of economic giants such as the US, the EU, Japan and China continue to rise, the global economy will expand, but emerging countries will need to be wary of increasing their debt burdens.

Academic Pei Sai Fan says that one should dream big with the metaverse and not only see it as a new avenue of making money. By creating a new virtual universe from scratch, we can make good use of the blockchain-based metaverse to promote an equitable, more transparent and more inclusive rules-based international digital currency and financial system and enhance the global governance system to deal with issues facing all countries. This would require a global approach and China is well placed technologically to actively participate and lead the effort with like-minded nations in creating such a metaverse. It would be a pity if countries squandered such an opportunity to truly build a better world for all mankind.

Economics professor Zhang Rui notes that the US’s huge trade deficit cannot be looked upon in isolation from the dominance of the US dollar; when exporting countries hold more US dollars, they are more able to purchase US debt and support the US in issuing national debt and get US dollars to flow back to the US. This suggests that looking beyond the surface of its large trade deficit, the US's fundamentals remain strong and with the advantages it has in the capital account and services trade, there is little chance that its leading position in global trade can be usurped.

In 2020, Japan was ASEAN’s largest export partner of auto parts, making up 17.8% of ASEAN's exports, followed by the US (15.4%) and China (10.2%). However, with the onslaught of the Delta variant of Covid-19 this year, many Southeast Asian countries have imposed factory operation restrictions that have disrupted the supply chain, with Japanese firm Toyota Motor suffering the greatest impact. Japanese academic Sukegawa Seiya examines the issue.

Zhang Rui analyses that there are more pros than cons to China’s entry to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) whether one looks at it from China’s individual economy, regional industrial chains or global income gains. However, sizeable obstacles stand in the way of its entry, not least US-led political roadblocks, even if the latter is not currently a member of the reconfigured CPTPP. China’s internal system and regulations will also have to change to meet the rigours of the high-standard CPTPP. Can China play the long game and will the world truly move closer towards Asia-Pacific economic integration?