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China's Supply Chain Able to Withstand Novel Coronavirus Strom
  ·  2020-03-08  ·   Source: NO.11 MARCH 12, 2020

The novel coronavirus outbreak is unlikely to shatter China's role in the international supply chain in an increasingly interconnected world economy as the country continues to make headway in containing the virus.

Although epidemic control measures have slowed production and logistics for some companies in China, the largest source of imports to 65 countries worldwide, analysts and industry insiders said shifting production out of China won't be a cost-effective option.

"I think in some sectors, companies are very dependent on China. There's no such thing as shifting the supply chain," Nicholas Lardy, a senior fellow at the Washington, D.C.-based Peterson Institute for International Economics, said.

China is a world-leading sales and logistics services provider with full-fledged supply chain clusters, making it a go-to supplier for global enterprises, according to Yang Daqing, a researcher with the China Society of Logistics.

The outbreak will not damage China's leading role in the global supply chain, Lenovo CEO Yang Yuanqing said, adding that the 33 Lenovo plants around the world are working to maintain stable supply.

Addressing concerns over disruptions to the global auto supply chain, Mike Hawes, Chief Executive of the Society of Motor Manufacturers and Traders in the UK, said it is too early for any judgment while any possible production bottleneck warrants attention given the level of complexity and integration of the supply chain.

Hawes said his organization would keep an eye on the developments of the outbreak, while manufacturers make necessary adjustments to keep supply from hitting the brakes.

The impact on China's supply chain will come in stages depending on how fast the outbreak is contained, Xu Qiyuan, a researcher with the Chinese Academy of Social Sciences, said.

If the epidemic is brought under control before the export orders spike in March and April, industries in China will hardly feel the pinch. Any development past that, however, may hit export and cause deeper disruptions, Xu said.

The overall tally of new cases of confirmed novel coronavirus infection nationwide has gradually declined, with new cases outside Hubei Province, the epicenter of the outbreak, sinking, official data showed.

World Health Organization (WHO) Director General Tedros Adhanom Ghebreyesus said on February 24 that COVID-19 can be contained, based upon the findings by the WHO-China joint mission in China.

China has ratcheted up efforts to help companies resume production, arranging chartered trains to ferry workers from their hometowns to manufacturing hubs such as Guangdong, Zhejiang and Shanghai.

Factories of companies like Tesla and FAW-Volkswagen Automobile have resumed production, while the American manufacturer Honeywell said 18 of its 21 plants in China are working at full capacity.

The evolution of China's role in the supply chain has never been easy, Yang Daqing said. He said the coronavirus outbreak would upgrade it further to feature a better contingency system against various risks.

The country may move up the global value chain after the epidemic with possible breakthroughs in sectors like artificial intelligence, industrial and civil robotics, 5G and medical care, Fu Xiaolan, founding Director of the Technology and Management Center for Development at Oxford University, said.

Epidemic-driven demand for teleworking, long-distance medicare and online education will help boost sales for data storage services, according to Lenovo's Yang.

"China will rebound rapidly after the novel coronavirus outbreak burns itself out because we are talking about a huge economy that is essential to the world's supply chain," Tan Kok Wai, the Malaysian Government's special envoy to China, said.  

This is an edited version of an article published by Xinhua News Agency

Copyedited by Sudeshna Sarkar

Comments to zhangshsh@bjreview.com

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