One of the most visible business news stories this week reflects around the state visit of China’s President Hu Jintao to Washington. There is, as always, speculation as to the various discussion items involved in this visit, some with longer-term supply and value-chain implications. As is often the case, there are many succinct agendas but it is rather important to take a step back and view the broader landscape of recent events, and what strategic directions China will take as an emerging economic superpower.
We would like to alert our Supply Chain Matters readers to a timely editorial series, China Shapes the World, running this week in the Financial Times. The series provides lots of insightful opinion, commentary and data, information that we believe senior sourcing and procurement executives should absorb and monitor in the coming months.
In one of today’s feature opinion articles, A strategy to straddle the planet, a global map notes the amount of China’s influence in foreign trade for specific countries. While we often tend to focus solely on the U.S. number (14.3 percent), the impact for South Korea (22.8 percent), Japan (20.4 percent), Australia (20.6 percent), Brazil (14 percent), South Africa (13.1 percent) are all profound indicators of value-chain influence. The key takeaways from this well written article is that in this new period of post-recession recovery, China wants to forge a new phase of globalization where financial, commercial, and perhaps political forces all converge on Beijing. There are trade relationships being developed that move beyond being a low-cost sourcing manufacturing center to the production of more sophisticated products such as capital equipment, high-speed rail, alternative energy and other infrastructure. China has also embarked on a campaign to insure adequate sourcing of key strategic materials, and recently to diversify foreign exchange reserves away from the U.S. dollar. The risks of potential backlash from other countries is also discussed.
A separate opinion column penned by Gideon Rachman notes that in the aftermath of the financial crisis, China feels that time is on its side, and has not been exhibiting a new assertiveness in confronting other countries, such as the U.S., in rebuffing demands for aggressive climate change, more accelerated currency re-valuation of the renminbi, or the rise of China’s military capabilities.
Included in our Supply Chain Matters Top Ten Predictions for Global Supply Chains in 2011 is a prediction noting that will be much more attention paid to outsourcing strategies and to analyzing all the pertinent factors motivating these strategies. These would include foreign currency shifts, concerns for IP Protection, and other factors. At the same time, China itself continues to provide a huge market of opportunity for many years to come, and the question is how open this market will ultimately become for foreign companies.
Senior supply chain and procurement supply executives are wise to keep a very keen and continuous eye on China’s moves in the international arena. China is quickly becoming the new force in global influence and this week’s visit to the U.S. is yet another milestone in that journey.