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To pursue development by conforming to market rules

By He Yin (People's Daily)    12:50, May 17, 2020

“The United Nations (UN) and the World Health Organization (WHO) need our strong support if they are to effectively coordinate global anti-epidemic cooperation. In the meantime, efforts must be made to strengthen macroeconomic policy coordination and safeguard the stability of global industrial and supply chains.”

Chinese President Xi Jinping has put forward the right solution to maintain stable global economic development in global anti-pandemic response in a phone call with Portuguese President Marcelo Rebelo de Sousa.

The spread of the COVID-19 pandemic has tested the global industrial and supply chains. Countries need to strengthen solidarity and cooperation by upholding the concept of building a community with a shared future for mankind to reduce the disease’s impact on global industrial and supply chains. This not only helps dispel the dark cloud of the disease, but also marks a major step toward global economic recovery.

The global industrial and supply chains are the results of international division of labor and cooperation formed on the basis of following the laws of the market economy. They are not the private property of anyone.

Following the trend of trade and investment liberalization and facilitation, multinational companies involved in economic globalization are fully practicing principles such as Adam Smith’s theory of free market and David Ricardo’s theory of comparative advantage.

The flow of capital, labor, technology and other production factors around the world, and the transfer of them from high-cost areas to low-cost areas and from high-efficiency areas to low-efficiency areas connect supply with demand in an effective manner.

The global industrial and supply chains have gradually replaced the product division and trading models between countries, greatly improving global production efficiency.

The continuous optimization of the global industrial and supply chains provides a key impetus for global development, benefiting all countries, including the developed, the developing, and the poorest.

To constantly create conditions for optimizing the global industrial and supply chains and better contribute to global development is a responsibility of global countries to build a community with a shared future for mankind.

However, for the time being, politicians in certain countries have claimed to intervene or even reconstruct the global industrial chain and supply chain because they have brought about “threats” during the COVID-19 pandemic.

Such an argument is contrary to the general trend of economic globalization and does not conform to the inherent logic of the rule-based global industrial and supply chains.

Enterprises are the main players in the market. The government could change economic incentives through tariffs and other tools. But as long as enterprises still seek the optimal profit at the minimum cost, economic globalization is unlikely to undergo a fundamental reversal. The division and cooperation between economies and advantage complementation are still a basic trend.

“Our China-based data suggests that the majority of our members will not be packing up and leaving China anytime soon,” said Alan Beebe, president of the American Chamber of Commerce (AmCham) in China.

Beebe’s understanding of the global industrial chain and supply chain is clearly different from that of some Western politicians who propose to bring the U.S. supply chain back home at all costs.

According to a latest AmCham survey, the majority of American companies in China have no plans to relocate production or sourcing activities to other parts of the country or abroad due to the coronavirus.

U.S. corporate boards are still focused on selling into China, which remains a large and promising consumer market, and a lot of the Chinese production that American companies do is already aimed at the local market, which is one of the ways that globalization may be more robust than many analysts acknowledge, Bloomberg reported.

The COVID-19 pandemic is a stress test on the resilience of the global industrial chain and supply chain. Countries now pay more attention to the overall safety of the global industrial chain and supply chain, as well as the scientific adjustment to localization, regionalization and globalization of their strategies.

However, transferring the industrial chain and supply chain is not as simple as turning on and off the lights. Just to be clear, the industrial chain and supply chain based on international division of labor have shaped today’s global production platform and constitute a modern global economic structure.

Dismantling the global industrial and supply chains and setting up barriers will have a huge destructive effect. In the short run, it may lead to inflation; in the long run, excessive government intervention in business operations will distort market rules and hinder economic development.

Stephen Roach, a senior fellow at Yale University, believes that political threats to break supply chains and to impose punishment would be a costly miscalculation, reducing innovation and prosperity.

Only by conforming to the laws of the market can development be facilitated. It’s noteworthy that China is a vital part of the global industrial chain and supply chain. After decades of construction and the practice of reform and opening-up, the country has established the world’s most complete industrial supporting system that is deeply integrated into the virtuous circle of the global economic ecosystem and welcomed by the world.

At a time when the world economy is hit by the COVID-19 pandemic, China continues to actively participate in the international division of labor and work with global partners to maintain the stability of the global industrial chain and supply chain, making an important contribution to the stability of the world economy and global development.

(For the latest China news, Please follow People's Daily on Twitter and Facebook)(Web editor: Hongyu, Bianji)

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