Global Industrial and Supply Chain Restructuring: Background, Characteristics and Development Trends

The restructuring of global industrial and supply chains is a hot issue in today’s world, and as a result of the once-in-a-century changes and intensified geopolitical and economic competition, the demand for global industrial and supply chain security has risen sharply, with government departments and transnational corporations (TNCs) becoming the most critical stakeholders. Governments carefully calibrate industrial and trade policies from the perspective of national strategies to create industrial chains that support national competitive advantages, and multinational corporations respond to geopolitical risks by prioritizing industrial and supply chain security and sustainability over capital and efficiency. Against the backdrop of changes unseen in a century, decelerating globalization and global economic downturn, the characteristics and future trends of global industrial and supply chain restructuring are worth paying attention to.

Background of Global Industrial and Supply Chain Restructuring

During the upswing of economic globalization, countries generally benefited from and were open to globalization, and TNCs laid out their industrial and supply chains globally on the basis of their comparative advantages, and the location of their industrial and supply chains was seldom interfered by national security factors, and the national security exception clause of international trade rules was rarely invoked. However, since the outbreak of the COVID pandemic, the security needs of countries for their industrial and supply chains have risen sharply, and they are highly concerned about the asymmetric dependence of their industrial and supply chains on the outside world. Since the creation of the World Trade Organization (WTO) in 1995, security issues in the context of national security have never been as direct a constraint on international trade, capital flows and industrial layout as they are now, and have had an unprecedented impact on the evolution of global trade patterns. Major developed economies have made more efforts to adjust their industrial policies to promote the industrial and supply chain autonomy and control, more near-shore dealings, more cooperation with the allies and more regionalized, thus promoting the reconfiguration of the industrial and supply chain. That further triggered rising demand by the governments and the business community of all countries for the global industrial and supply chain’s security and resilience, global trade and investment. Pan-securitization became obvious, and in a sense, strengthening the resilience of industrial and supply chains has become a tool for geopolitical and economic competition. All parties are more concerned about relative rather than absolute economic gains, focusing on the relationship between the resilience of the industrial and supply chain and national security.They are highly concerned about the security risks brought about by economic interdependence between countries and the digital economy, and the there has shown new features in resulting impact on the geo-economic order, which highlights a historic change in the balance between economy and security, and relations between selective country-specific economic and trade cooperation and geo-economy have become closer.

The widespread application of digital technology and the rapid development of the digital economy are also contributing factors to the sharp rise in the security needs of all countries. The world’s major economies attach great importance to the digital economy and seize new opportunities for industrial change. Data security and technological security are key areas of international competition and new challenges to the economic security of all countries. At the same time, the competition among big countries in the field of digital economy and technology has become a key variable in the reconstruction of the global industrial and supply chain, the digital trade rules are the focus of the game among all parties, and the establishment of a global digital economy governance system in line with the interests of one’s own national security is the goal of the game. As a component of non-traditional security, data security is increasingly being highly valued by all countries. From a global perspective, the objectives of trade and investment competition are also undergoing structural changes, and the focus of competition is not on general trade in goods or traditional manufacturing, but on high-end trade in services and advanced manufacturing related to the digital economy, with the ultimate goal of safeguarding their own development security and technological competitive advantages.

Characteristics of Global Industrial and Supply Chain Restructuring

The restructuring of the global industrial and supply chain is the result of changes in economic factors, especially market factors. Different from the past, the current restructuring of the global industrial and supply chain presents some new features. As the key stakeholders, government departments have actively launched industrial policies to directly participate in it, and multinational corporations have put safety in the first place when restructuring the industrial and supply chain, digitization as well as green and low-carbon have become the important basis for decision-making on trade and investment.

I. Government-Led Industrial Policy to Promote Reconstruction of the Industrial and Supply Chain

In the process of Western economic development, the effective allocation of resources by the market is highly spoken, and government intervention is widely criticized. In developed economies, industrial policy used to be regarded as interference in the market economy, but this perception is changing. The article “Industrial Policy: It Doesn’t Work” published in Harvard Business Review, Vol. 11, 1983, argues that industrial policy is profoundly affected by the political system and economic conditions of a country, and that the political decision-making process in the United States poses an insurmountable obstacle to the implementation of industrial policy, and that the choice of industrial policy should be avoided in the event of certain problems in the economy. The article “A New Era of Industrial Policy Has Arrived”, published in Harvard Business Review 9/10, 2023, points out that we are entering a new world order in which governments around the world increasingly use industrial policy to influence where companies are established and operated, what products they sell, and to whom they sell, and that a new era of industrial policy has arrived. Unlike in the past, in the current restructuring of the global industrial and supply chain, government departments have not given way to the market, but rather have taken the initiative to work with TNCs to deal with negative externalities by formulating specific industrial policies to promote, constrain or guide the direction of development of their industries and their global layout.