Abstract:Against the backdrop of regionalization, shrinking and inward shift of global value chains, this study systematically explores the internal mechanism and multifaceted impacts underlying the shift of the division system of China's industrial and supply chains from globalization toward localization, before analyzing the practical challenges and feasible development paths. The study concludes that China's industrial and supply chains are undergoing a prominent local restructuring. Such transformation is driven by three core factors: shifting global priorities from the sole efficiency pursuit to a balanced efficiency and security, restructuring comparative advantages resulting from changes in the factor endowment structure, and the domestic demand support stemming from the unique economic advantages of a major country. This transformation produces positive outcomes including restructuring the national economic geography, boosting the upgrading of domestic value chains and reinforcing the mechanism of industrial and supply chains; meanwhile, it creates potential risks such as a weakened momentum for opening-up and intensified technological decoupling risks. At present, the localized restructuring of the division system of China's industrial chain and supply chains still faces multiple real challenges including a lingering market fragmentation, an insufficient domestic supply of the core intermediate goods, a heightened volatility effect of the external environment and inadequate high-level opening-up. Accordingly, China needs to further develop a unified national market, ramp up the indigenous supply capacity of key intermediate inputs, foster self-controlled industrial and supply chains, and steadily advance the high-level opening-up.
