Supply chain

Almost all countries have been suffering the impacts of the pandemic since 2020, but China was hit by the pandemic first and had implemented the longest and strictest anti-Covid policy. China could suffer a worse "scarring effect" as a result, both on the societal and economic levels. China is desperate for solutions to get out of this situation.

Chinese component suppliers are trying to curb their reliance on Apple, the latest American giant caught in the US-China tug of-war. In the early days, Chinese firms able to make it onto Apple’s supplier list were able to breathe a little easier. But with reliance comes exposure, and a need to adapt amid news of Apple's decreasing sales and rumoured plans of making production shifts to other countries.

China’s auto market has been rattled by a brutal price war since late last year amid slowing sales. Sales of electric vehicles have plunged since a government subsidy expired at the end of last year and as consumers remain hesitant about spending.

Two of China’s largest container truck yards near the major port city of Ningbo in Zhejiang province have been filled with nearly 3,000 idle vehicles with no cargo to haul since early March, and the situation could get even worse with the delivery of new vessels. Could overcapacity in the industry lead to a price war?

Until now, China has held a dominant position in the global industrial chain from cathode materials to EV battery manufacturing and vehicle production, supplying nearly half of global core products. But with a major restructuring underway, it will have to tackle rising costs, supply chain shortfalls and the need to tailor resources for different markets.

While China’s prospects for better economic performance in 2023 are bright, says NUS academic Xu Le, the road to economic recovery is expected to be bumpy.

This year’s dramatic geopolitical changes have significantly altered the calculus for foreign investment in China as large European enterprises are increasingly taking the lead and Japanese businesses are retreating in manufacturing and advancing in services. American companies, on the other hand, are frozen as the US government imposes tough sanctions on China’s tech sector and as manufacturers weigh strategic moves back to the US.

Taiwan’s semiconductor industry is booming, but its pole position is at risk. With the industry deemed of national security concern, China, the US and the EU are implementing restrictive measures, upping their investment and aiming for autonomy and self-sufficiency in the sector, which could cause Taiwan to lose its competitive edge.

Despite challenges arising from the slowing Chinese economy, China is likely to continue pushing forward on the BRI, it being a key plank of President Xi Jinping’s foreign policy. Along the way, however, it will have to make certain adjustments for a smooth transition into BRI 2.0.