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After Nearly Beating Back Coronavirus, China Plans to Aggressively Leverage Crisis to Gain Global Supply Chain and Political Advantage

 

Rather Losing Its Position, China Plans Aggressive Post-Virus Push, Flooding Market in Key Product Sectors


March 17, 2020
SCDigest Editorial Staff

With the coronavirus starting in China amidst real questions about its transparency in terms of what was happening with the numbers and the source of the virus itself, many observers have recently stated the crisis was sure to accelerate a trend already under way that sees US and other Western businesses reducing their dependence on China sourcing.

That rethinking of supply chain strategy had already begun for many companies before the virus in the face of the US-China tariff wars and general political turmoil, but many found it was harder to get out of Chiba than they thought. But perhaps the coronavirus would the lynchpin that would push many companies to reduce dependency on China.

Supply Chain Digest Says...

China is "planning to overproduce various goods to flood the market and increase its market share while Western companies are on their backs."


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For example, "Already it looks like the virus will hasten the progress to more decentralized global value chains," three Boston Consulting Group consultants recently wrote in the Harvard Business Review.

So many saw the virus crisis as likely to greatly weaken China's global position. China, it appears, has other ideas.

"Several Chinese government agencies and officials are talking publicly about how China can take advantage of being the first country to start recovering from the novel coronavirus (because it was the first country to contract it) to take over the industries of the future," writes Josh Rogin, a columnist for the Washington Post.

He then quotes Nate Picarsic, co-founder of Horizon Advisory, a consultancy that tracks Chinese government and economic activity, as saying that "They [China] have a post-virus strategy, and it is already underway."

More specifically, China intends to seek out more foreign direct investment, seize market share in critical industries and try to stop the West from confronting its bad behavior, Rogin says.

He notes that after the 2008 financial crisis, China acted quickly to build up its national champion companies using large government subsidies and rampant intellectual property theft from Western companpes. Now home to some of the world's largest and most capable firms, Rogin says China is "planning to overproduce various goods to flood the market and increase its marketshare while Western companies are on their backs."


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What's more, "Chinese commentators in state media are calling for post-coronavirus expansion of Chinese companies abroad, especially in key sectors like 5G, high-speed rail, new energy vehicles, artificial intelligence and the industrial Internet," Rogin says.

"It is possible to turn the crisis into an opportunity - to increase the trust and the dependence of all countries around the world of ‘Made in China,'" Han Jian, of the Chinese Academy of Sciences and director of the Ministry of Civil Affairs's China Industrial Economics Association, wrote on March 4.

"Beijing is trying to manipulate the situation to unfairly take even more control of the industries of the future," Rogin concludes. "We must be smart and not let that happen, by dealing with the crisis without losing sight of the longer game."


What do you think of China's post-virus strategy? Let us know your thoughts at the Feedback section below.

 

Your Comments/Feedback

Bob Habbiajm

Lead Consultant , Supply Chain and Procurement Consulting
Posted on: Mar, 18 2020
Interesting. For a long time the West has swept the risks of making in China aside in favour of profits through cheaper manufacturing costs. We in the West will have no response to this threat unless we choose to increase manufacturing capacity closer to home, which will delay our recovery further.   
 

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