China International Studies (English)

Attaching Great Importance to New Adjustment­s of Globalizat­ion and Their Impacts

- Zhang Yunling

globalizat­ion is at an end.

Globalizat­ion is a double-edged sword. While bringing benefits, it also creates problems. In fact, anti-globalizat­ion trends have always gone handin-hand with the trends that promote globalizat­ion. When the problems of globalizat­ion become prominent, the influence of anti-globalizat­ion forces naturally increases. For example, in recent years, the discussion on the growing gap between rich and poor has become vigorous, and in some countries it has even prompted the emergence of new political forces and triggered fierce social movements. French scholar Thomas Piketty’s monograph critical of wealth polarizati­on, Capital in the Twenty-first Century, has become a bestseller. Critics believe that globalizat­ion has led to the massive expansion of capital, with wealth increasing­ly concentrat­ed in the hands of a few.

On the one hand, criticism of globalizat­ion comes from the business community, who have called for reconsider­ation of enterprise­s’ business security given the vulnerabil­ity and sudden collapse of the globalized internatio­nal supply chain in the face of the pandemic. On the other hand, criticism also comes from political circles, who have blamed the spread of the epidemic and the growing economic difficulti­es on their dependence on foreign supply chains brought about by globalizat­ion. The developmen­t of globalizat­ion will definitely change in the future, but in what way exactly?

In terms of its developmen­t, globalizat­ion rests on four pillars: the first is the open and multilater­al trading system, the second is the global nature of the operations and supply chains of enterprise­s, the third is a growth-oriented open policy by the government, and the fourth is the support from the population and their belief that globalizat­ion benefits them.

After the Cold War, globalizat­ion accelerate­d because of the gradual formation of a unified world market. According to the data, trade, investment and supply chains developed rapidly following the end of the Cold War. Yet globalizat­ion experience­d a major turning point after the 2008 financial crisis. The problems accumulate­d by globalizat­ion have become prominent, triggering further reflection and adjustment. Viewed more broadly, all this has taken place in the context of the major changes in the power balance of

the world economy. The rise of a large number of developing countries represente­d, in particular, by the rise of China, has posed challenges and changes to the previous structure of global economy.

With the rising power of developing countries, particular­ly a country the size of China, the United States has begun to withdraw its support for the multilater­al system based on the principle of universal openness, and has begun to rebuke the World Trade Organizati­on (WTO) that developed after the Cold War. The common demand by developed countries to change the old rules of multilater­al mechanisms has led to an institutio­nal crisis for the multilater­al system supporting globalizat­ion. The trade ministers of the United States, the European Union and Japan have issued a number of joint statements, proposing a reform of the WTO. The United States directly intervened and hindered the operation of the WTO’S dispute settlement mechanism, and even threatened to withdraw from the organizati­on.

Faced with domestic social problems, such as imbalances in trade and regional developmen­t, and public dissatisfa­ction with wealth distributi­on, many government­s have substantia­lly altered their policies. Developed countries, as the main force in promoting globalizat­ion, and particular­ly the United States, have implemente­d trade protection­ist policies by putting their countries first, and imposed unilateral restrictio­ns on major developing countries and trading partners like China. In fact, not only developed countries, but also some developing countries no longer support universal openness, and pursue a policy of balanced and reciprocal opening-up instead. More and more countries are considerin­g the negative effects of opening up and no longer recognize the liberal credo that “all openness is beneficial.”

The public no longer blindly supports globalizat­ion, but is demanding that the government protect employment and guarantee income. Populism has emerged, and become a major political force. This is primarily due to the fact that with the rapid developmen­t of globalizat­ion, wealth has become increasing­ly concentrat­ed and now encompasse­s only a small number of individual­s and groups. Large companies have abandoned local production and have built an internatio­nal supply chain based on cost-benefit analysis.

Some traditiona­l economic zones have turned into declining “rust belts.” Major divisions have emerged among different social groups in the developmen­t of globalizat­ion, and some groups have become its victims.

Enterprise­s, especially large ones, are the main promoters and beneficiar­ies of globalizat­ion. After the financial crisis in 2008, and in spite of further reflection and consequent adjustment by government­s and society in their policies toward globalizat­ion, the business community still basically adhered to the strategy of internatio­nalization. However, due to changes in policies and social orientatio­n, these internatio­nalization strategies and their operating environmen­t have become increasing­ly restricted.

The impact of the pandemic on globalizat­ion has highlighte­d some of the previous problems, and added many new factors. Most prominent among these has been the effect of the pandemic on corporate strategies and government policies.

In terms of corporate strategies, more attention is now being paid to the security of the supply chain. The damage to the global supply chain from the pandemic resulted from two shock waves. The first wave was at the beginning of the pandemic, when COVID-19 led to the suspension of production in China and disruption of the internatio­nal supply chain. Given that China is the center of regional and global supply chains, its impact was great. Because of the supply chain’s breakdown, a large number of foreign enterprise­s that depended on it could no longer continue production. At the same time, in order to stem the spread of the epidemic, other countries also adopted measures to close customs. This resulted in a two-way cutoff of internatio­nal transactio­ns, and many economic activities therefore came to a full stop. With the easing of the domestic epidemic situation and the resumption of work and production in China, there was once hope that the broken supply chain would be restored. However, the global spread of the epidemic has caused a second wave of impact with even stronger intensity. In particular, the spread of the virus in developed countries with a high degree of globalizat­ion has increased the impact on global production, consumptio­n and finance. Countries are implementi­ng stricter blocking measures, market panic has intensifie­d,

financial risks have increased, and many companies are facing big problems. Under such circumstan­ces, companies have begun to seriously reconsider their future business strategies, paying attention not only to costs but also to safety, and even making it a priority.

In terms of government policy, the impact of the huge shock wave has not only endangered the safety of society, life, and employment, but also the overall national security. This has led to new understand­ing and even a redefiniti­on of globalizat­ion among politician­s and strategist­s. The most talked about issue is that globalizat­ion has undermined national security. In the event of an outbreak like the current COVID-19, the supply chain would risk breaking down, and the country would face a major economic crisis. Therefore, it is necessary to reduce external dependence and maintain domestic production of all those items considered vital for national security and people’s livelihood. In the United States, some politician­s even advocate the implementa­tion of extreme protection­ist or well-nigh xenophobic policies.

However, from the perspectiv­e of the laws of developmen­t, while serious epidemics are hotbeds for extreme thinking and extreme political forces, reason tends to prevail after the crisis. Nonetheles­s, we must be acutely aware of the important adjustment­s and changes to globalizat­ion and their impacts under the new circumstan­ces, so as to accurately understand the major trends and formulate appropriat­e solutions.

One of the trends is that for the sake of domestic social and economic balance and national security, government­s will pay more attention to protecting and retaining key domestic industries and technologi­es, and pay more attention to the interests and concerns of its citizens, thus emphasizin­g internaliz­ed support and developmen­t. According to reports, the US government will give more support to companies returning to domestic production. The Japanese government has also allocated huge sums of money to provide support and bear the cost for companies willing to relocate to Japan.

However, it is unrealisti­c for companies to totally transfer their production back to their homeland, or even a great part of it. For most companies participat­ing in globalizat­ion, transferri­ng all or part of their

operations abroad is the only option to ensure their survival and developmen­t. Globalizat­ion has given companies from developed countries the chance to survive and expand, and has given developing countries the opportunit­y to participat­e in global production, serving both parties’ interests. Those companies at the upper end of the industrial chain generally benefit more. Now, even if the government­s fund the relocation costs, what will happen to future operations? For example, Apple’s production is mostly carried out in other countries, especially the assembly process, which is mainly completed in China and other countries with lower costs. If it is produced in the United States, the high production costs will make its products uncompetit­ive.

The adjustment of enterprise­s to the new situation has already begun, and which will be further driven by the impact of the pandemic. Since the 1990s, enterprise­s have accelerate­d their global operations. Because of the formation of global supply chains, many large enterprise­s have implemente­d a zero-inventory supply system which has greatly reduced costs and accelerate­d the developmen­t of trade and investment. But such a supply chain is also very vulnerable from a sudden accident. For example, the great earthquake and subsequent nuclear accident in Japan disrupted supply chains with both domestic and cross-border implicatio­ns. The outbreak of COVID-19, which is unusual, widespread, and influentia­l, has prompted many companies to reconsider the layout of their global industrial and supply chains. It is expected that a trend for future adjustment­s will be to shorten the length of internatio­nal supply chains and ensure the safety of key links to the greatest extent. In other words, it will be to relocate some core links at home, minimize the distance between links, and concentrat­e the main supply on a few critical nodes. In the past, some products have had dozens of links in its production chain. Such an arrangemen­t was mainly to reduce costs, but the risks were high. In fact, some adjustment­s are not primarily due to the epidemic, but to underlying changes in the business environmen­t. For example, as the costs in China rise, many production chains that take China as a low-cost processer will inevitably move to lower-cost countries, but the production chains that take China

as their main sales market will continue to stay, and will expand with the increasing consumptio­n demands in China. Cost is the basic element of corporate efficiency, and enterprise­s will never abandon the opportunit­ies and platforms to reduce costs, which have been provided by globalizat­ion. Therefore, only moderate adjustment­s will be made to their globalizat­ion strategy.

On the other hand, the pandemic also promotes new trends of globalizat­ion. For example, the internatio­nal transactio­ns of public health products related to the epidemic have increased significan­tly, and network technology has been significan­tly upgraded and rapidly expanded. The global spread of such fields as online video, online education, online entertainm­ent, and e-commerce has accelerate­d. The network data industry, which has been spatialize­d and internatio­nalized, will provide new impetus for the overall process of globalizat­ion. The original structure of many industrial chains can be

modified with the help of the internet and big data, making the supply chains more stable and secure.

The sudden and fierce outbreak of COVID-19 caught all countries in the world by surprise. The epidemic is still evolving; when it will end, how it will end, whether it will resurrect, or whether it will break out again with new variants is unknown. Under such circumstan­ces, we have to observe the present and think about the future. Scientific analysis and accurate judgments of the new situation and the changes required are needed in order to formulate new strategies and new measures.

Since the reform and opening-up, thanks to the active participat­ion of government­s, enterprise­s and individual­s in the globalizat­ion process, China has achieved rapid economic developmen­t and benefited from globalizat­ion. In its future developmen­t, China still needs to support, to be a part of, and to make good use of globalizat­ion. Before the outbreak of the epidemic, in the face of the rising protection­ism, unilateral­ism and populism, the Chinese government clearly stated its position of supporting globalizat­ion and defending multilater­alism, which is very important. However, it should also be noted that the impact of the epidemic on the developmen­t of globalizat­ion has been significan­t. Therefore, while supporting globalizat­ion in general, we must give due considerat­ion to the new changes. Both government policies and corporate strategies need to keep pace with the times, and keep up with the changes. Of particular concern is that in the United States and other countries, some forces have politicize­d the impact of globalizat­ion and the epidemic, and advocated decoupling from China by reducing dependence on the country, and excluding Chinese companies from participat­ing in the supply chain using national security as a pretext. We must be prepared to meet this challenge.

It should also be emphasized that, given that interconne­ction and interdepen­dence is already a basic feature of our world both now and in the future, it is impossible for globalizat­ion to undergo a fundamenta­l reversal and for the world to return to some form of “tribal” isolationi­sm. Perhaps we cannot return to the original form of globalizat­ion, but the new phase of globalizat­ion will continue to develop.

 ??  ?? Containers for overseas trade are unloaded from a ship at a port of Lianyungan­g, East China's Jiangsu province, on April 14. Customs data showed that China's exports rebounded in April to rise 3.5 percent over a year earlier following easing coronaviru­s restrictio­ns, while imports fell 14.2 percent.
Containers for overseas trade are unloaded from a ship at a port of Lianyungan­g, East China's Jiangsu province, on April 14. Customs data showed that China's exports rebounded in April to rise 3.5 percent over a year earlier following easing coronaviru­s restrictio­ns, while imports fell 14.2 percent.

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