[Finance] Hsu Hui-yi Column: Industrial Restructuring in the Post-Super Globalization Era
RtiTalk 小編19h ago
As China's economy enters a period of structural transformation, its demographic dividend wanes, and geopolitical collisions intensify, finding the next world's factory and global growth engine has become a hot topic in the capital markets. Countries worldwide are trying to locate a new continent named 'Next China' on the map. However, it is foreseeable that in the future world economic landscape, there will not be just one 'China,' but rather a composite image woven from multiple countries and multiple networks.
The Changing Era of Globalization and the Irreplicable World's Factory
China's past economic success was driven by the release of 1.4 billion cheap labor, built upon the post-Cold War unipolar world, the 'super globalization' dominated by neoliberalism, and the dividends brought by China's accession to the WTO in 2001. Western multinational corporations could move entire supply chains across the Atlantic, with optimistic visions of political convergence through economic integration. China, with its strong national mobilization capabilities, constructed the largest and most complete industrial system in human history in an extremely short period.
Today, the global political and economic landscape has shifted from 'efficiency and cost' to 'security and resilience.' The strategic competition between the US and China, the supply chain crisis brought about by the COVID-19 pandemic, and the impact of the Russia-Ukraine war on energy, minerals, and other resources have made Western countries and multinational corporations realize the risks of putting all their eggs in one basket. Therefore, 'de-risking' and 'friend-shoring' have become new consensus. European and American countries will no longer allow deep dependence on a single authoritarian state; thus, the 'single world's factory' model is destined to be a thing of the past.
Modular Asia and the Rise of Friend-Shoring
Since no single country can, or is allowed to, undertake the entire supply chain, the 'next China' is likely to be scattered globally in a modular form. No single country can replace China alone, but the combination of numerous Asian countries can serve as a new hinterland in terms of scale and function. For instance, India, with its vast domestic market potential and abundant young labor force, is attempting to replicate basic manufacturing and heavy industry while creating advantages in software services and pharmaceuticals. ASEAN countries exhibit fine labor division, with Vietnam and Thailand undertaking electronics assembly and automotive component industries; Malaysia is growing in the semiconductor packaging and testing sector; Indonesia is leveraging its rich mineral resources to secure a position in the global electric vehicle battery supply chain. Mexico, protected by the USMCA and its geographical advantage, has become a winner of 'friend-shoring,' serving end-market demand in North America. Interestingly, in this wave of supply chain migration, it is not only European, American, Japanese, and Korean companies actively setting up factories in Vietnam and Mexico, but also a large number of Chinese domestic manufacturers. This implies that the formation of the 'next China' includes the global layout of Chinese enterprises themselves. Future supply chains will no longer be 'point-to-global' but 'region-to-region.'
From Demographic Dividend to Resilience and Computing Power
In addition to geopolitical shifts and changes in industrial division of labor, technological advancements are completely rewriting the global industrial equation. In the past, the world's factory was known for its cheap labor. However, the world is now at a turning point with the explosion of AI, industrial robots, and automation technologies. More than cheap labor, companies are concerned about stable and sufficient green energy supply, comprehensive data center and computing infrastructure, and predictable long-term policies and regulations.
Future manufacturing will no longer be labor-intensive but capital, technology, and energy-intensive. Therefore, the next world's factory may not be entirely in developing countries. It could also be in advanced manufacturing parks in the American Midwest or highly automated smart factories in Germany. When production can be highly compressed and replicated through AI and automation, the geographical distribution of global supply chains will become flatter and more dispersed. It is more likely to be a global supply model comprising India's population, Southeast Asia's assembly lines, Mexico's geographical location, and the advanced automation and AI technologies of Europe, the US, Japan, and South Korea. This will also be the key for enterprises and countries to survive and thrive in the next decade.
Further Reading
Hsu Hui-yi Column: Southeast Asia Refuses to Be Forced to Choose Sides
Hsu Hui-yi Column: How Southeast Asia Reshapes Digital Sovereignty Through AI Localization?
Author: Hsu Hui-yi, Adjunct Assistant Professor, Graduate Institute of Southeast Asian Regional Management, National Taipei University of Education
Source Link: https://www.rti.org.tw/news?uid=3&pid=235267
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