The New ‘Go Global’ Of Chinese Industrial Chains And Its Effects – Analysis


By He Jun

Against the backdrop of de-globalization, Chinese enterprises face renewed pressure to “go global” as part of the manufacturing migration trend. Unlike the proactive “going global” in the context of globalization, many enterprises in this new wave have various necessary reasons for venturing into overseas markets. Some do so because of insufficient domestic market space, while others must relocate overseas due to global supply chain adjustments or to avoid various U.S. sanctions on China. Some Chinese enterprises are advantaged in the industry, hence they actively expand overseas markets for their global industrial layout.

Chinese enterprises are important participants in the migration of industrial chains and supply chains from China to overseas. Unlike foreign investments that never look back after relocating, the headquarters of relocated Chinese enterprises remain in China, at least for now, so as to retain their roots in the Chinese market.

Currently, the new wave of enterprise relocation has produced significant effects. With Chinese and multinational enterprises establishing factories outside of China, China’s export volume of household appliances has been replaced by other countries. Taking the household appliance industry as an example, Mexico has replaced China as the leading exporter of televisions to the U.S. On the other hand, Vietnam has replaced China as the largest exporter of vacuum cleaners to the U.S. Industry insiders point out that while LG, Samsung, and other companies contribute to this shift, Chinese enterprises’ influence in Mexican and Vietnamese factories also plays a significant role. Analysts believe that the relocation of China’s household appliance industry and the subsequent export substitution have become irreversible trends. If China’s domestic consumption space cannot be expanded, it will be difficult to anchor more manufacturing capacity in the country’s domestic market.

Unlike the past focus on product exports, Chinese enterprises are now shifting towards offshore industrial chains, i.e., investing overseas to form industrial chains, or participating in the adjustment of overseas industrial and supply chains. Regarding this change, TCL Chairman Li Dongsheng pointed out that his company previously focused more on exporting products to realize the value of industrial advantages; yet with the changing global economic landscape, there is a greater demand for more regional and local industrial chains. In the new situation, if Chinese enterprises want to participate more deeply in globalization, they need to penetrate their industries and supply chains into major target markets, establish localized operational capabilities, and strive for more market share in global business.

One manifestation of China’s industrial chain going global is the structural change in exported goods. In the past, China exported a large number of finished products; now, the export of intermediate goods from China has greatly increased. In 2023, China’s imports and exports of intermediate goods reached RMB 25.53 trillion, accounting for 61.1% of the total import and export value, setting a historical record. According to data from the country’s National Bureau of Statistics (NBS), China’s exports last year to major trading partners such as Europe, the U.S., Japan, and South Korea all saw negative growth rates, with decreases of -5.3%, -8.1%, -3.5%, and -2.2% respectively, indicating a reduction or transfer of orders from developed markets. Meanwhile, its trade in intermediate goods with countries such as Vietnam, Mexico, Indonesia, and India saw significant growth. One important factor behind this change is the transfer of China’s industrial chain overseas.

Taking the exemplary case of Vietnam, considered one of the top performers among emerging market countries in recent years, since the onset of the U.S.-China trade friction in 2018, numerous American companies have established manufacturing bases in Vietnam. Simultaneously, many export-oriented Chinese enterprises have also set up factories there. According to a survey by China’s financial media Yicai. Vietnam is now the world’s second-largest exporter of mobile phones. Chinese photovoltaic companies such as LONGI Silicon Materials, Trina Solar, and JA Solar have invested in component factories in Vietnam. The production capacity of their Vietnamese factories largely substitutes for exports from China to the U.S. However, Vietnam does not have a complete photovoltaic industry chain, and these Chinese photovoltaic companies’ investments in the Southeast Asian country also drive exports of intermediate products from China to Vietnam. In terms of machinery and intermediate semi-finished products, China is Vietnam’s largest source of imports. This also explains why, despite the significant industrial relocation between China and Vietnam, Chinese exports to Vietnam have continued to rise.

The export of China’s electric vehicles, lithium-ion batteries, and solar panels is rapidly expanding as the industry chain goes global. In recent years, the scale of the European new energy vehicle market has grown rapidly, reaching 3.2 million units in 2023. Driven by this demand, Chinese battery manufacturers such as CATL, EVE Energy, Sunwoda, and others have been investing in factories in Hungary, with investments totaling hundreds of billions of dollars. In August 2022, CATL announced an investment of up to EUR 7.34 billion to build a 100GWh battery factory in Debrecen, Hungary, making it CATL’s second overseas factory after its German facility. Once completed, it may become the largest battery factory in Europe in terms of production capacity.

Electric vehicle and battery manufacturing giant BYD is also a representative Chinese enterprise in the globalization of the industry chain. On July 4, 2023, BYD and the government of Bahia in Brazil jointly announced the establishment of a large-scale production complex consisting of three factories in the city of Camaçari, with a total investment of BRL 3 billion. This is BYD’s first electric vehicle factory outside of Asia. In March 2023, BYD officially laid the foundation for a production factory in Rayong, Thailand, a key automotive production and export base, with production expected to begin in 2024. On December 22, 2023, BYD announced plans to build a new energy vehicle assembly plant in the city of Szeged, Hungary. Before this, BYD had already invested in battery production and electric bus manufacturing plants in Hungary. In March 2024, there were reports that after deciding to build factories in Thailand, Brazil, and Hungary, BYD was now eyeing Mexico. It is said that BYD plans to establish an electric vehicle factory in Jalisco, Mexico, and collaborate with Chinese companies that are already operating in Mexico to develop an industrial ecosystem.

These changes not only demonstrate the enhanced technological and product output capabilities of Chinese lithium battery and electric vehicle companies, but also indicate that relevant Chinese enterprises are actively promoting the offshore migration of the industrial chain in the related fields so as to further expand overseas markets.

Under the escalation of deglobalization and geopolitical turbulence, the global market is further fracturing, with traditional global supply chain systems breaking down into local supply chains. The surging tide of Chinese industrial chain globalization is an adaptation to this new reality. However, the offshore migration of Chinese industrial chains will not be without challenges. In addition to the general market risks, policy risks, legal risks, and exchange rate risks that foreign investment may face, the offshore migration of industrial chains under geopolitical turbulence will also encounter a number of issues.

Firstly, there will be certain negative impacts on China’s domestic industrial chain and economy. Unlike individual external investments, the offshore migration of industrial chains implies the systematic relocation of industrial elements, including capital, technology, equipment, production capacity, supporting industrial chains, and human resources. If the industrial chain within China cannot be upgraded, or if new industrial opportunities cannot be provided domestically, there may be a net outflow of industrial elements in the country, which could affect employment and lead to a decline in industrial competitiveness. The phenomenon of investment and employment migration that developed industrial countries experienced during the era of traditional globalization may occur in China. Hence, efforts should be made by the relevant authorities so that the phenomenon of industrial hollowing out domestically in China can be prevented.

Secondly, industrial adjustments in China must match the offshore migration of industrial chains. For Chinese enterprises, it is crucial to grasp the upstream end of the industry and keep the high-end of the value chain within the country. Taking the home appliance industry as an example, although Chinese companies like Hisense and TCL have significantly expanded their production capacity overseas, the production capacity of upstream LCD panel companies such as BOE and HKC remains in China. At the forefront of the value chain, reliance on Chinese exports still persists. This requires the Chinese industrial chain to evolve from its previous pure assembly to upstream segments with higher technological demands. In other words, Chinese industrial sectors must ascend along the “smile curve” and create new employment opportunities.

Thirdly, offshore migration of industrial chains may also encounter new geopolitical risks. In this era of rampant geopolitical risks, many Chinese companies are joining the offshore migration of industrial chains to avoid such risks faced in China. However, politicians in different parts of the world have also taken note of China’s industrial chain migration. On March 16, 2024, former U.S. President Donald Trump, speaking at a campaign rally in Ohio, stated that he would impose a 100% tariff on cars produced by Chinese companies in Mexico. Trump’s statement has strong electoral considerations, as Ohio has always been a key battleground state in U.S. presidential elections and is one of the Rust Belt regions with automotive manufacturing being a pillar industry. However, the imposition of tariffs as indicated by Trump is entirely possible. If he returns to the White House, Chinese companies that have ventured overseas may well encounter such risks.

Final analysis conclusion:

Amidst the profound changes in the global situation and the significant transformation of China’s foreign trade structure, the offshore migration of China’s industrial chains has become an inevitable trend. For Chinese enterprises, offshore migration of industrial chains is a path to survival. However, for the Chinese economy, it presents a “double-edged sword” effect. How to actively adjust China’s own industries under this overarching trend, enhance the value of domestic industrial chains, create more domestic employment opportunities, and simultaneously mitigate overseas geopolitical risks is a major challenge facing Chinese enterprises, think tanks, and government departments.

He Jun is a researcher at ANBOUND


Anbound Consulting (Anbound) is an independent Think Tank with the headquarter based in Beijing. Established in 1993, Anbound specializes in public policy research, and enjoys a professional reputation in the areas of strategic forecasting, policy solutions and risk analysis. Anbound's research findings are widely recognized and create a deep interest within public media, academics and experts who are also providing consulting service to the State Council of China.

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