Non-market forces are profoundly influencing the restructuring of global industrial chains. At the recently held Eighth Global Think Tank Summit, David Monyae, Director of the Africa-China Studies Centre at the University of Johannesburg in South Africa, candidly acknowledged the concerns of African countries, fearing the emergence of two parallel trade and investment systems, two parallel industrial and supply chain systems, and two parallel technological systems.

　　He noted that alongside the Mombasa-Nairobi Railway in Kenya, built by a Chinese company, some major powers are seeking to build a parallel highway for geopolitical purposes. "African countries do not want to take sides," Monyae said.

　　How to bring the multilateral trade mechanism back on track—linking rather than decoupling—was the focus of discussion among many participating guests. In the view of Wang Huiyao, founder and chairman of the Center for China and Globalization (CCG) and former counselor of the State Council, in the face of the trend of pan-securitization in the international community, China is using economic globalization to counter military globalization. It has not only proposed the establishment of the Asian Infrastructure Investment Bank and signed the Regional Comprehensive Economic Partnership (RCEP), but has also applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Digital Economy Partnership Agreement (DEPA), among others. "By focusing on economic development, China responds to all changes with constancy."

　　He also mentioned that the Third Plenary Session of the 20th Central Committee of the Communist Party of China is about to convene, and it is expected that reforms will inject new momentum into economic development—for example, by using new urbanization to drive investment and consumer demand, and by leveraging China's advantages of a complete industrial base and a full range of manufacturing sectors to expand trade in intermediate goods, enabling China to move up the global value chain.

　　Challenges

　　Regarding today's global industrial and supply chains, many experts mention reshaping and restructuring, and the 2008 international financial crisis is an unavoidable turning point.

　　"The last wave of globalization deepened the global division of labor, and global supply chains kept lengthening. But after the 2008 international financial crisis, as globalization receded, global supply chains tended to contract, and the original vertically integrated division-of-labor system split into regionalized systems centered on major manufacturing hubs," analyzed Wang Yiming, vice chairman of the China Center for International Economic Exchanges. In recent years, geopolitical conflicts have intensified and global supply chains have accelerated their restructuring. "The United States, in the name of 'de-risking,' is in fact pursuing 'de-Sinicization,' and China faces new challenges in stabilizing industrial and supply chains."

　　He noted that the formation and development of global supply chains is the result of both market laws and corporate choices, and that using political forces to change the global supply chain system will bring serious consequences, such as increasing production costs and causing disorder in the global supply chain system; creating new trade barriers and exacerbating global economic fragmentation; and pushing up inflation and increasing the risk of stagflation. "Today there are more and more trade-restrictive measures, and they have already affected global economic growth," Wang Yiming said.

　　The most recent trade-restrictive measure against China came from the European Union. On July 5, the EU's provisional countervailing duties on Chinese electric vehicles officially took effect. Since the beginning of this year, the EU has introduced multiple trade and investment restrictions against China.

　　"Some major powers are turning normal economic and trade issues into pan-security issues, placing geopolitics above the logic of a market economy, and even using administrative means to push for decoupling and broken chains and industrial reshoring," noted Yi Xiaozhun, former deputy director-general of the World Trade Organization and former vice minister of commerce. In recent years, he observed, some major powers, citing pan-national security, have rolled out various unilateral protectionist measures that violate World Trade Organization (WTO) rules. "Even the WTO's dispute settlement mechanism has been 'paralyzed' indefinitely."

　　The "Asian Economic Outlook and Integration Progress Annual Report 2024" (hereinafter referred to as the "Report"), released in March this year, shows that since the WTO trade dispute settlement mechanism fell into difficulty, the world introduced an average of about 500 trade-restrictive measures per year from 2013 to 2017; these restrictive measures increased to 1,500 in 2020 and surged to 2,800 in 2022, about three times the number in 2019. Because the WTO dispute settlement mechanism has been marginalized, 29 international trade disputes currently cannot be resolved. The number of "trade concerns" formally reported by WTO members also rose from 31 in 2016 to 130 in 2022. According to statistics on global trade interventions released by Global Trade Alert, between November 2008 and January 2024, governments implemented about 51,700 discriminatory policy measures, roughly 5.2 times the total number of policy measures conducive to commercial activity.

　　"The resurgence of Cold War thinking is the primary cause of today's fragmentation of the world economy," Yi Xiaozhun said. In his view, other causes of global economic fragmentation include the world's shift toward multipolarity and the collapse of the order of global economic governance.

　　He stated bluntly that the world is transitioning from unipolarity to multipolarity, but global economic governance and the economic order have not moved toward multilateralism. "Many of us may not realize that the economic globalization we embrace was actually formed in the unipolar society after World War II, but this pattern and mindset of unipolar governance are now in fierce collision with an increasingly multipolar world."

　Responding to All Changes with Constancy

　　How to respond to the disruption of industrial and supply chains caused by economic fragmentation, and how to "link rather than decouple"? Wang Huiyao cited many Chinese practices.

　　He believes China is one of the biggest beneficiaries of globalization. On the one hand, China's process of integrating into globalization—especially the economic miracle since reform and opening up—is attracting increasing attention and recognition from countries around the world. On the other hand, China hedges risks by joining higher-level multilateral international trade agreements. In addition to signing RCEP, mechanisms such as the International Forum on China-Japan-ROK Cooperation, the Forum on China-Africa Cooperation, the China-Central Asia Summit, and the China-Arab States Cooperation Forum are all promoting international economic cooperation.

　　The "RCEP Regional Cooperation Results and Development Prospects Report 2023" released by the Chinese Academy of International Trade and Economic Cooperation shows that since RCEP came into effect, most market entities have given positive assessments of expanding export markets, enjoying facilitation measures, increasing trade opportunities, improving the business environment, and using the rules to enjoy benefits. Industrial and supply chain cooperation among members within the region has shown strong resilience, and the dividends of promoting regional economic and trade cooperation and economic growth have been initially released. Not only have RCEP members such as ASEAN benefited significantly, but positive spillover and demonstration effects have also emerged, making it a favorable factor driving global trade and investment growth amid multiple crises and effectively mitigating the adverse effects of the "fragmentation" of the world economy.

　　Wang Huiyao also mentioned that more than 20 countries have applied to join the BRICS cooperation mechanism, an important platform for cooperation among emerging market countries and developing countries. "This is because many countries have seen the positive role the BRICS cooperation mechanism plays in promoting economic globalization and global governance." In Wang Huiyao's view, after the mechanism's expansion, new members can bring broader markets and more factor endowments, providing BRICS countries with more new cooperation opportunities and development opportunities.

　　World Bank statistics show that, calculated by purchasing power parity, the BRICS countries accounted for one-third of global gross domestic product (GDP) in 2023, a record high, while the share of the G7 economies fell to 29%. The BRICS countries currently include 10 countries: Brazil, Russia, India, China and South Africa, as well as Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates, which joined this year. Since the BRICS cooperation mechanism was established in 2006, its share of the global economy has increased by 10.2 percentage points.

　　In saying no to the countercurrent of economic globalization, many eyes turn to China. As an advocate and promoter of an open world economy, China actively opens its market to the world through various exhibition platforms, sharing China's development opportunities and achievements, and China is also an important node in the global value chain.

　　The "Global Value Chain Development Report 2023" released by the World Trade Organization shows that since 2017, China has become the central node of Asia's value chain, and together with Germany and the United States, has become one of the three major hubs of the global value chain.

　　"To solve the problem of global economic fragmentation, countries—especially major powers—must return to the correct track of multilateral cooperation," Yi Xiaozhun said, especially emphasizing that major powers should take the lead in earnestly abiding by WTO rules and adhere to resolving trade differences within the framework of the multilateral trading system. Citing the cooperation achievements between China and the United States at the WTO as an example, he said the outcomes of the WTO's 12th and 13th Ministerial Conferences came from behind-the-scenes cooperation between China and the United States, and there is still room for cooperation between the two countries. "But it should be under multilateral trade rules and within the multilateral trading system."

　　"Underdevelopment Is the Greatest Insecurity"

　　In fact, whether sharing the fruits of regional opening or promoting global development through regional cooperation, many countries are interpreting through practice that "non-cooperation is the greatest risk, and underdevelopment is the greatest insecurity." In Yi Xiaozhun's view, for countries to return to the correct path of multilateralism and win-win multilateral cooperation, they must first abandon the Cold War mentality of zero-sum games. Second, major economies need to rationally and in a balanced way handle the relationship between security and openness, and between security and development, to avoid falling into the trap of pan-securitization.

　　"Although globalization is receding, the trend of globalization has not changed," Wang Yiming said. At present, the growth rate of international trade is still faster than that of the global economy, and indicators such as the proportion of overseas asset allocation and overseas sales by multinational companies are also rising. "In this sense, globalization has not ended."

　　He also analyzed the significance of expanding opening up from the perspective of the supply chain system. "From international experience, the more competitive a product is, the more often it relies on foreign intermediate goods, because the best-quality intermediate goods are needed to produce the most competitive final products." Wang Yiming added that as an industry rises in the global value chain, its degree of external dependence also tends to rise. "This means that to enhance international competitiveness, one must participate in the global division-of-labor system."

　　It is worth noting that, as one of the new growth points for "accelerating the cultivation of new momentum in foreign trade," expanding trade in intermediate goods was written into this year's government work report. Trade in intermediate goods has also become the main body of today's international trade and of China's import and export trade. Among the "new three" foreign trade products that led exports last year, the battery cells used to produce lithium batteries and the tin-coated copper strips used to produce photovoltaic panels are intermediate goods.

　　The "Report" shows that despite continuous international trade frictions in recent years, Asia has a prominent advantage in competition in global value chain products, and China has maintained its dominant position in Asia's intermediate goods trade. In 2022, among the 22 intermediate goods with the largest trading volumes, China still ranked leading in 20, such as rubber tires; paper and paperboard; yarn, textile fabrics and finished product materials; glass; iron and steel materials; switchgear parts; and storage batteries. According to calculations based on UN Comtrade statistics, in 2022 China's share of global intermediate goods trade also jumped to 15.2%, ranking first in the world.

　　"China's trade in intermediate goods with economies such as ASEAN is growing substantially, and ASEAN has become China's largest trading partner," Wang Yiming analyzed. Some multinational companies are pursuing a "China Plus N" strategy and setting up production factories in ASEAN, promoting China's exports of intermediate goods to ASEAN countries. At the same time, the transfer of some of China's final manufacturing links to emerging market countries has also driven China's exports of intermediate goods. "This kind of adjustment and change in supply chains brings both new challenges to stabilizing industrial and supply chains and new opportunities for China to allocate its supply chain system globally," Wang Yiming said.