Wen/Chen Gen

Modern economic globalization has experienced a shift from Global Commodity Chains (GCC) to Global Value Chains (GVC).

Global Commodity Chains (GCCs) are the chained process of production of a set of interrelated labor that occurs around a final consumable commodity. With the fragmentation of the organization of complete commodity exchanges and the deconstruction of the separate factor systems of developed and developing countries, highly complex pieces of production and business activities have been able to realize new transnational links on the basis of large-scale fine-tuning of the division of labor and restructuring, which in turn triggered a systematic reconfiguration of the international production system in the post-1990s period.

In this context, value analysis was introduced to the global commodity chain and further shaped what is now known as a global value chain - a series of stages in the production and sale of products and services that add value to the product, with at least two of the stages occurring in different countries. countries. In other words, a country, sector, or company is involved in a GVC if it is involved in (at least) one of the stages of the GVC.

Currently, the international and domestic environments are becoming more and more complex, and the intertwining of the New Crown Epidemic and the US-China economic and trade frictions are catalyzing a new round of GVC adjustments.

Global Value Chain from expansion to contraction

Global value chain is proposed to explain the value-creation links of R&D and design, production, marketing, and after-sales service of products globally subcontracted to different countries, and the enterprises get the corresponding value-added trade activities by participating in different links of the product life cycle. It can be said that global value chains are the most important product of the economic and trade integration of countries in the past three decades.

After the 1990s, with the upgrading of GATT to the World Trade Organization (WTO) and the expansion of globalized mass production, the depth and breadth of GVCs have been developed tremendously - the participation in GVCs has been increasing while the length of the chains has been extended rapidly. At the same time, trade in intermediate goods has begun to overtake final products, gradually becoming a major component of international trade.

In this process, China gradually developed into the world's factory and became one of the centers of global value chains and international trade. The ULC database of the First Institute of Finance and Economics shows that in terms of participation in global value chains, China has surpassed traditional manufacturing powers such as the United States, Germany, and Japan to become the world's number one manufacturing power. At the same time, China has also become a core link in the global value chain, with almost all industries dependent on China to some extent.

The McKinsey Institute has selected 20 basic industries and manufacturing industries and analyzed the dependence of global countries on China's consumption, production, and import and export. The study found that with the deep integration of Chinese manufacturing into the global value chain, especially in the electronics, machinery and equipment manufacturing sectors, China's role in the global value chain is not only as the supply side of the "world's factory", but also as the demand side of the "world market" in recent years.

China's role in global value chains has become increasingly important both as a supplier playing the role of "world factory" and, in recent years, as a demand-side player in "world markets.

The World Bank reports that global value chains grew most rapidly between 1990 and 2007, with technological advances in transportation, information and communications, and the lowering of trade barriers attracting manufacturing firms to extend their production processes beyond their borders. Moreover, three regional value chain networks were formed worldwide, centered on China, Germany, and the United States, in Asia, Europe, and North America.

This trend of global value chain expansion, however, began to shift after 2008. The international financial crisis erupted in 2008, in which the share of GVCs in global trade reached a peak value of 52%, and then the indicator showed a downward fluctuating development trend. This phenomenon occurred in parallel with the slowdown in global trade growth.

According to World Trade Organization statistics: since the 1990s, except for 2001, the volume of global merchandise trade growth has been maintained at the level of 1.5 times to 2 times the volume of global GDP growth. In the second decade of the 21st century, the situation changed -

In 2012 and 2013, the volume of global merchandise trade growth was equal to the volume of global GDP growth; in the following three years, the volume of global merchandise trade growth was lower than the volume of global GDP growth; There was a rebound in 2017 and 2018; in 2019, global merchandise trade stalled amid ongoing trade tensions between the U.S. and other countries and declined near the end of the year, with a small overall decline of 0.1%.

And today, global trade is growing at a lower rate than the sluggish global GDP growth rate, which in past boom times was about twice as fast. The 2020 New Crown Epidemic is a huge impact on global trade, and according to the WTO's forecasts, global trade in 2020 will plummet by 13% to 32%. The shift in global value chains has become a fundamental fact.

Multiple factors drive the transformation of GVCs

The transformation of GVCs is driven by multiple factors.

First of all, after the global financial crisis, the economies of all countries have not been fully cleared, overcapacity has led to a slowdown in the growth of the world's total economy, and the slowdown in the rate of growth of investment has been particularly significant, while at the same time, the economic and social problems that have been accumulating over the past two decades of high-speed development after the financial crisis have also begun to emerge, especially around the issues of demographics, debt, and so on. Structural conflicts have been magnified and intensified, leading to the rise of global protectionism.

Second, major emerging market economies, such as China, have begun to engage in extensive substitution of domestic intermediates for foreign intermediates, substituting purely domestic production for global value chain production.

And, over the past two decades, both labor productivity (APL) and unit labor costs (ULC, the cost of labor per unit of value added, with rising values representing declining competitiveness) in China's manufacturing sector have risen rapidly, whereas unit labor costs in the world's third- and fourth-largest manufacturing countries, Japan and Germany, have continued to fall over the same period. This has also led to the emergence of manufacturing industries moving out of China and affecting changes in the value chain on a global scale.

Third, developed countries have taken measures to attract the return of manufacturing, and many governments have strengthened their intervention in the transfer of industries.

Before the United States turned to "America First" trade protectionism, the structural changes in the global economy had already caused the phenomenon of the return of manufacturing in developed countries to varying degrees.

If the early discussion of "global competition and rank reorganization" considered "reconfiguration" to be the innovation of value chain participants in the implementation of value chain activities or the reconfiguration of the entire value chain, then now, the current global value chain is being reconfigured, and it will not be able to be reconfigured. However, reconfiguration of global value chains at this stage is also related to the "expansion" and "contraction" of the division of labor in the value chain in both vertical and horizontal dimensions and the displacement of network nodes, and is affected by the industrial revolution and technological advancement as well as the changes in global economic and trade rules.

The globalization of the world's economy is a major challenge.

Grasping the opportunity of GSC restructuring has become the **** knowledge of governments at this stage. If the Chinese government wants to seize the wave of global value chain restructuring and seize the economic and technological high ground, it must choose the appropriate restructuring path, and quickly make the strategic design and policy of chain transformation and path selection.

First, we must recognize China's true position in the global value chain. The study found that although the overall technology gap between China and developed countries is showing a trend of narrowing, the absolute gap between the two is still obvious.

Currently, China's position in the global value chain division of labor, in general, is relative to other countries and regions of the world in addition to the U.S., rather than directly challenging the U.S. leading position, China's low end of the global value chain to the middle and high end of the process will be a long-term gradual process. In this process, the competition between China and major developed countries in core technology research and development, brand promotion and other aspects will gradually intensify.

The second is to choose the right path of reconstruction. The path of a country's participation in the reconstruction of the global value chain is divided into active embedded in the global value chain, passive access to the national value chain and leading the creation of regional value chains, and according to the differences in the international competitiveness of a country's industry, the path of the selection of the differences.

According to the country's macroeconomic concept of "double cycle", each path does not exist independently. Pharmaceutical manufacturing and transportation equipment manufacturing tend to choose passive access to the national value chain reconstruction path in the context of globalization, while the chemical products manufacturing, electrical equipment manufacturing and electronic and optical equipment manufacturing tend to create a dominant regional value chain reconstruction path along with independent innovation.

Third is to enhance the level of technology and improve the domestic supply chain network.

In the case of gradually intensifying technological competition with developed countries, China should strengthen basic scientific research and human capital accumulation, promote independent technological innovation, and at the same time, optimize the innovation environment through reforms, and strive to enhance the overall technological competitiveness of China.