- Global value chains in manufacturing are under pressure
- Governments want to limit economic reliance on China
- Companies are seeking to streamline logistics and curb risks
- The goal is enhancing strategic sovereignty
The last decade was marked by the rethinking of global supply chains. Excessive reliance on just one or a few suppliers or export markets, coupled with political tensions, economic nationalism and trade protectionism, forced global value chains (GVCs) to become more regionalized. According to the Organisation for Economic Co-operation and Development (OECD), goods crossing the ocean reached their peak around 2011.
Since then, the foreign value-added content of exports has gradually fallen for many major economies, and the expansion of GVCs has stopped. In some sectors, though, a few Asian countries, especially China, maintained their central role as the main manufacturing hub. The Covid-19 pandemic revealed the fragility of GVCs in such sectors.
Disruptions and shortages of specific products forced governments in large economies to examine critical dependencies and reconfigure strategic GVCs. Such decisions include diversification of suppliers and reshoring manufacturing, bringing part of the industry “back home.”
Global economic development in the next decade will be defined by the U.S. and Europe’s attempts to find non-Chinese supply alternatives, build domestic production facilities in strategic sectors, and make supply chains more sustainable and responsible. Read more about this in my latest Report Scenarios “World race to self-sufficiency in strategic manufacturing” for the GIS – Geopolitical Intelligence Services.