A new study conducted by the professor Laura Alfaro of Harvard Business School and Professor Davin Chor from the Tuck School reveals that despite the West's efforts to reduce dependence on China, global supply chains have not affected it at all.
The great "reorganization" of the USA and its allies, in fact, has shifted Chinese participation in global supply chains to other countries, resulting in higher costs for Western consumers.
The war is still cold, yes. But it seems warmer now.
In the last few years, we talked about it several times, relations between the West and China have significantly deteriorated, with significant consequences for global supply chains. Political tensions ed economic between the two sides, which in the Western case mostly carry the US flag, have led to a plethora of countermeasures.
Attempts to reduce dependence on the Chinese economy? Duties, investment restrictions and sanctions. One study suggests that these efforts are not having the desired effect, and that China continues to maintain a significant role in global supply chains.
West and China, intertwined ties
The study, entitled “Global Supply Chains: The Looming 'Great Reallocation' “, analyzed the last 40 years of data on global supply chains, focusing on events from 2017-2022. The researchers found that, despite expectations, the West's efforts to disengage from China are only producing more costs for Western consumers.
According to the data (that I link to you here), the measures taken by the West to reduce dependence on China have led to a reduction in direct imports from the Asian giant, but have also shifted Chinese participation in global supply chains to other countries. For example, China has increased trade and foreign direct investment (FDI) with countries such as Vietnam, Mexico and Malaysia, which in turn are increasing their exports to the West.
A major reorganization that feels like a revolving door
The phenomenon was defined by Professor Alfaro as a "great reorganization". But what would we be doing, or rather: how would we be reorganizing the economy in the West? The two main cornerstones show negative results. All things considered, dependence on China has not decreased.
Second, China's participation in global supply chains to other countries made the move completely cost-inefficient. Because production costs in countries like Vietnam and Mexico are higher than those in China. And this translates into higher prices for finished goods.
The situation is further complicated by recent news. The European Union has also recently suspended the investment agreement with China, and from a NATO perspective there is conflict both on the telecommunications level than foreign policy.
West and China, two figures
Secondo a relationship now famous of the McKinsey Global Institute, China accounts for 28% of global manufacturing output, compared to 18% for the United States and 15% for the European Union.
What's now?
Everything that the “war economies” ignore on their joyful path towards conflicts and catastrophes is that the dependence between economies is a guarantee of the future for the planet. There is no other way. None that is not, sooner or later, that of a united earth and an integrated humanity.
The more time that passes, the more obstacles there are. And the more obstacles there are, the more our species risks collapse economic, social, health. To address these challenges, a more collaborative and coordinated approach is needed between Western countries and China.
Everything else is suicidal madness.
