Liu Zhibiao: Policy Suggestions on China's Response to the Introversion of Global Industrial Chain

Release time:2020-05-12Author: Liu Zhibiao

Maintaining the stability and competitiveness of China's industrial supply chain is one of the countermeasures put forward by the central government in response to the impact of the epidemic on China's economy. After the epidemic, the global industrial chain may turn inward. On the whole, the global industrial chain will evolve in two directions: first, the vertical division of labor tends to be shortened. Second, the horizontal division of labor tends to agglomerate regionally. The evolution of the introversion of the industrial chain may harm economic efficiency because it cannot gain the benefits of international division of labor.In practice, the way that Chinese enterprises, especially those in coastal areas, embed GVC is a "double embedded" mode, that is, in reality, Chinese enterprises embed both GVC and local industrial clusters at the same time. Based on the reality that Chinese enterprises are double-embedded in GVC, in the future, the Chinese government should actively promote the construction of such a global industrial chain cluster that not only joins GVC but also is embedded in industrial clusters. To this end, it is suggested that the post-epidemic country's policy orientation towards industrial clusters should be directed in the following directions: First, we should create a professional service environment and increase canvass business orders based on industrial chain. Second, we have to strengthen patent strategy and intensive R&D investment. Third, we should also improve income distribution and rely on domestic economic circulation. Fourth, we should encourage mergers and acquisitions and take collective actions.