Communist China’s two extreme ways of handling the pandemic—from implementing the previous zero-COVID policy to the current lifting of restrictions without a plan—pose major challenges to the global supply chains.
Multinational companies have made concerted efforts to reduce reliance on China’s parts network. They now consider supply chain reliability and flexibility more significant than cost and efficiency.
Global outsourcing of European and American manufacturing began in the early 1960s. European and American companies took control of marketing and innovation functions and gradually moved away from the upstream industry segments of raw material extraction and processing. With its large and inexpensive labor force, cheap land, and huge market, China received capital, technology, and management support from developed companies and opened its economy to foreign trade.
Especially since China joined the World Trade Organization (WTO) in 2001, it has become the “world’s factory” of traditional manufacturing and an integral part of the global supply network due to its demographic dividend and cheap labor.
However, the impact of COVID-19 and the changes in the geopolitical situation, such as the Russia-Ukraine war, have brought major challenges to the global supply chain. Security and risk prevention has become increasingly important to businesses.