“The Chinese productive system is already changing”

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Tribune. The health crisis of 2020 suddenly highlighted the dependence of many countries on the Chinese economy, especially in strategic sectors such as the pharmaceutical and chemical industry. It is also the economic and diplomatic tensions with China that are pushing certain Western countries – the United States since 2018, Australia, the United Kingdom, Canada and the European Union (EU) more recently – to consider decoupling progressive vis-à-vis the Chinese economy in strategic sectors.

Thus, shifts of production chains outside of China could add to the Sino-US trade war on tariffs and trade restrictions. How could China adapt to these possible transformations?

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About 30% of Chinese exports are carried out by foreign companies and 10% by joint ventures associating foreign and Chinese companies: the Chinese economy therefore depends considerably on foreign companies established in its territory. Potential shifts in production chains outside of China would impact its economic activity as well as technological innovation, now stimulated by transfers made by foreign companies.

Bangladesh, Ethiopia and Vietnam

However, a new stage in the development of the Chinese economy began several years ago, and its production system is already changing. The rise in wages in China is pushing companies, Chinese or foreign, to go and produce in other countries (Bangladesh, Ethiopia and Vietnam, for example), mainly in labor-intensive sectors, while the production of more sophisticated goods and services are developing on Chinese territory.

The move upmarket of Chinese industry is considerable. Chinese groups have thus won 95% of the Chinese market for electric vehicles, 85% for smartphones, 50% for robotics (in 2018) and are making progress abroad.

The share of foreign value added in Chinese exports has declined markedly since the mid-2000s, particularly in electronics and information and communications technologies.

Still dependent on foreign technologies, China continues to move upmarket in order to gain a certain autonomy in high technologies. The 14the The five-year plan adopted in March 2021 marks a break with previous plans by designating as a priority the reduction of China’s external dependence on foreign technologies and certain imported resources.

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