The second China International Supply Chain Expo (referred to as “Chain Expo”) will open in Beijing on November 26th, 2024, against the backdrop of trade tensions with the West. The Chinese Communist Party (CCP) is increasing its investments in industrial chains and the global South, highlighting its challenges and decline in international trade.
Currently, in terms of foreign trade, mainland China has held various trade fairs such as the Trade Fair, Import Expo, and the Belt and Road Initiative events. What sets the Chain Expo, which started last year, apart from the rest?
According to official statements, the Chain Expo focuses on long-term cooperation rather than short-term transactions; it emphasizes industry collaboration rather than mere commodity trading. The expo aims to help companies find global partners to strategically plan the future development of China’s supply chain.
Despite the CCP’s promotion of the high participation of European and American exhibitors and Fortune 500 companies at this year’s Chain Expo, Chinese state media CCTV has focused on reporting under the theme of “how to maintain global supply chain stability,” inadvertently revealing the CCP’s focus and anxiety.
Previously, due to the CCP’s exploitation of its advantageous position in the global supply chain for political coercion and weaponization of supply chains, countries like the EU and the US have implemented plans such as “China Plus One,” “de-risking,” or “friendshore outsourcing.” In response, the CCP has accused the West of “trade protectionism” and “disengagement.”
Sanctions from the West against the CCP and industrial chain relocations have started affecting Chinese companies’ development. Chinese experts indicate that upstream Chinese enterprises are facing the risk of industrial migration, with foreign companies, especially those in high-tech fields with strong spillover effects on Chinese industry development, moving out. Downstream Chinese companies are facing supply disruption risks, such as with iron ore, high-end machine tools, display materials, semiconductor materials, among others.
In the first 11 months of 2023, US imports of smartphones from China decreased by 10% compared to the previous year, while imports from India expanded fivefold. Imports of laptops from China also decreased by 30%, while imports from Vietnam surged fourfold.
Wang Xiuwen, assistant researcher at the Institute of CCP Military and Operational Concepts at the National Defense Security Research Institute, expressed to Epoch Times that the CCP is trying to attract foreign businesses to the Chinese market, expand economic cooperation, and circumvent US sanctions and blockades. Hosting expos is the CCP’s preferred and quickest method, as seen in its Belt and Road activities.
“The main goal of the Chain Expo is to establish a global supply chain centered around China or specific industries, with strategic objectives beyond just securing orders, worth continuous attention beyond ordinary trade and expo activities,” noted a researcher from the China Institute of Economic Research.
According to official statements, another distinguishing feature of the Chain Expo is to promote deep integration of developing countries and emerging economies into the global supply chain, expanding unilateral open access to the least developed countries, and actively inviting African enterprises to participate with free booth space and support services.
This aligns with CCP leader Xi Jinping’s declarations, such as granting 100% tariff-free treatment for products from the least developed 33 African countries, announced at the China-Africa Cooperation Forum in early September.
Amid trade tensions with the US and the EU, the CCP is shifting its focus towards the global South. These southern countries offer a demographic dividend and agricultural or mineral advantages, motivating the CCP to intensify its activities in these regions.
Essentially, the CCP still prioritizes its “Made in China 2025” initiative, actively advancing the Belt and Road strategy but with less fanfare, steadily progressing with a low-profile approach.
The global South has become a fierce battleground for US-China competition, reminiscent of the CCP’s “Third World” approach during the Cold War era.
The CCP views the global South as a core driver to reshape the Western-dominated global order, with the Belt and Road serving as a central tool. Xi Jinping has organized numerous forums, meetings, and summits to promote China’s modernization as an alternative to Westernization, aiming to bolster CCP’s global political influence.
Given that a large portion of China’s Belt and Road investments came from open trade with the West, particularly the US market, the current strained political and trade relations between China and the West have led to a contraction of the Belt and Road initiative, losing its economic momentum.
The convening of the Chain Expo under such circumstances highlights the CCP’s challenges and downturn in international trade.
In the CCP’s pursuit of trade with emerging economies, the primary goal is to find international markets for its vast manufacturing and service sectors. However, due to the purchasing power limitations of emerging markets, Chinese products intended for Europe and the US markets require modification to meet the pricing and functional demands of emerging countries.
“Most cooperation opportunities offered by emerging economies predominantly involve supplying raw materials – essential minerals, for instance. The cooperation between the two sides in the industrial chain integration is more about upstream and downstream integration rather than two independent supply chains complementing each other,” remarked an analyst.
As China’s export-oriented economic model faces resistance from the West, global trade patterns are undergoing significant changes. In 2023, China’s exports to the US decreased by 20%, causing Southeast Asia to replace Europe and the US as China’s largest export market. Most developing countries and those in the global South are being flooded with cheap Chinese goods.
In response to trade tensions with the US and the EU, the CCP is compelled to relocate production to Southeast Asia or other global South countries to avoid higher tariffs or trade sanctions. While these southern countries may not immediately absorb China’s excess production capacity, it is preferable to sell products at a loss than to let them depreciate in warehouses.
“The CCP’s focus is not solely on the southern country markets but also on its global strategic positioning – bit by bit capturing strategic locations. Even if Chinese manufacturers incur losses selling products to southern countries, the CCP will subsidize to capture markets and strategic positions,” she elaborated.
Additionally, the CCP prioritizes “industrial cooperation,” with southern countries serving as a long-term stopover for trade. If exporting products to Europe and the US is successful in “cleansing their origin,” not only will there be benefits in foreign trade, but even the import of high-end chips or equipment may flow through intermediary countries and manufacturers back to the mainland. Despite advocating for internal circulation, the CCP essentially treats the southern countries as part of its internal network.
Analysts suggest that the limited market size and lack of a middle class in the global South make it challenging to absorb China’s inexpensive goods. Increased imports from China jeopardize the fragile economic development of these countries, potentially draining the vitality of their struggling manufacturing industries.
Simultaneously, this situation risks provoking backlash; for instance, in July of this year, Indonesia imposed a 200% import tariff on textiles and other goods from China due to unfair competition concerns. Chile also imposed anti-dumping duties on Chinese steel a few months ago, while Mexico and Brazil enacted similar measures. Other countries are also gearing up; Thailand recently established a new government agency to review restrictions on imports from China.
The Indonesian government is closely monitoring whether China’s new e-commerce platform, Temu, will enter the local market. Indonesia is concerned that Temu’s entry could threaten local small and micro businesses, disrupting the domestic supply chain.
The rapid expansion of China’s export-oriented industrial policies in recent years has sparked a trade war between the US, Europe, and China.
Since the late 1980s, due to prolonged low domestic consumption in China, economic growth has relied heavily on export trade. Government subsidies, intellectual property theft, and protectionism from the CCP have sustained this surplus capacity issue for an extended period.
The collapse of China’s real estate industry has exacerbated this situation. Under CCP industrial policies, banks have significantly increased new loans to the manufacturing sector, aiming to export surplus capacity to global markets to alleviate domestic employment pressure.
While accusations of China’s surplus dumping previously focused on industries like steel, the scope of Chinese exports now covers a range of products. Beijing is seeking green technology and information technology to drive a new wave of export-oriented economic development.
These technological advancements are of strategic importance to developed economies like the US and Europe, leading to tariff disputes against Chinese products. As the CCP shows no signs of deep systemic reforms, trade frictions among the US, Europe, and China are expected to intensify.