China Remains the World's Top Manufacturing Hub Despite US Disruptions: Boao Forum

'Global trade dependence on Asia, including China, remains stable, and the country will never lose its status as the world's most important manufacturing hub, despite certain US moves that have been disrupting global industrial and supply chains,' said senior industry experts and company executives at the Boao Forum for Asia Annual Conference 2023 on Tuesday.

These comments came after a report released at the forum stated that global reliance on Asian goods trade remained steady. The report also highlighted that trade dependence among Asian economies, including China, remained at a relatively high level. The highest level of dependence - 21 percent - was observed among ASEAN countries. Japan and South Korea's dependence on China was over 20 percent, and the dependence of ASEAN and CPTPP countries on China was close to 20 percent, according to data from 2021.

The CPTPP refers to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a free trade agreement encompassing Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.

Most G20 economies witnessed an increase in their trade dependence on China between 2017 and 2021. However, the report indicated that only the US and France experienced a decline in their trade dependence on China.

'It is actually good for China that some labor-intensive industries would move away, as it would help the country's industries to upgrade to a higher level,' said Yao Yang, dean of the National School of Development at Peking University.

Yao suggested that China is unlikely to relinquish its position as the world's largest manufacturing hub for at least 10 to 20 years. 'With some labor-intensive industries shifting to some ASEAN economies and developing countries, it is geopolitically beneficial for China as a whole, as these economies are more integrated into China's manufacturing ecosystem.'

The Boao report also emphasized Asia's strong position in producing competitive products within global value chains. Of the top 22 intermediate products exported by Asian factories, 21 displayed significant export growth, with electronic component products, including integrated circuits, experiencing the fastest growth at a rate of up to 28.8 percent in 2021.

China continued to dominate the trade of intermediate goods in Asia. Out of the 22 most traded intermediates, China held a leading position in 20 of them.

Fabrizio Ferri, head of APAC Region of Fincantieri, one of the world's largest shipbuilding groups, acknowledged China's challenges, such as disruptions in industrial and supply chains. However, he stated, 'But China would still be a major production center. If we have to move to Southeast Asia, it is more because we want to get close to the market and our consumers there.'

Zhang Yuyan, director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, noted a significant shift in the past three years where Western countries, including the US, have adopted a strategy known as 'friend shoring,' involving manufacturing and sourcing from countries sharing common values.

'Leveraging political power to intervene in the free functioning of industrial and supply chains is a very big threat to the long-term and stable growth of the entire global economy,' Zhang said.