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Investment Institute
Macroeconomic Research

AXA IM Talk on Asia & China Market: Why China is still the world’s factory, and upgraded

  • 26 July 2021 (5 min read)

This month AXA IM’s Emerging Asia Economist, Shirley Shen, shares her latest research and insights on how China manages to upgrade its supply chain status against both trade war and the pandemic.

Please find the full script below:

Welcome to our monthly video, my name is Shirley Shen. I’m the Emerging Asia economist here at AXA Investment Managers.

We recently analysed China’s supply chain position in global trade, and how the “world’s factory” is able to maintain competitive by turning adversities into advantages.

The onset of the COVID pandemic and Sino-US trade war have disrupted supply chains and posed threats to China’s status as the world’s factory and top exporter.

However, what actually transpired in the past few years has been the opposite – China has not only maintained the status quo, but in fact also gained further market share in global manufacturing and trade.

China’s successful defense against the trade war and COVID-19 reflects the incredible resilience of its supply chain system. So the question is, where does this growing resilience come from?

In recent years, we have seen a clear and dramatic upgrade in China’s production system, which has moved up the value-chain from cost-based competition to skills-and-technology-based. This is also manifested in the type of products it sells to the rest of the world, which is increasingly more in the high-skilled sector.

Inevitably, this rapid emergence of China as a manufacturing and export powerhouse has reshaped the landscape of global trade and production network.

Our study shows that developed economies, led by Japan and, to a lesser extent, the US – have lost market share to China in the medium and high-skilled segments.

Meanwhile, due to rising wage and other costs, China’s loss at the low-value end of the production process have benefited other emerging economies, such as Vietnam.

Therefore, a reshuffling of the global production ecosystem has occurred, as China deepens its integration into the global economy.

Thank you for watching and stay safe. 


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