Experts urge sharper supply chain edge

Workers assemble vehicles at the assembly workshop of FAW-Volkswagen Automobile Co., Ltd. in Changchun, northeast China's Jilin Province, Nov. 23, 2020. (Xinhua/Zhang Nan)

Officials say new steps can help boost SMEs despite production relocations

China should enhance its global supply chain advantages, despite some inevitable production relocations, and promulgate new financial measures to strengthen the competitive advantages of small companies, officials and experts said.

The nation will improve supply chain finance regulations and factor the changes in industrial organizations, while effectively supporting the development of enterprises in supply chains, a senior official of the People's Bank of China, the central bank, said at a forum over the weekend.

Wang Xin, head of the PBOC research bureau, said the central bank will improve the supply chain bill platform and promote the nation's unified registration and publicity of warranty of title, so as to effectively broaden the financing channels for small and medium-sized enterprises and ensure more capital can flow into the real economy. A warranty of title is a guarantee by a seller to a buyer that the seller has the right to transfer ownership and no one else has rights to the property.

"We encourage major enterprises to finance through the accounts receivable and confirm the rights by service platforms," said Wang, adding the measures could reduce financing costs of small and medium-sized enterprises.

In China, the standards of account receivable financing and transparency need to be further improved, and there are risks such as false transactions, the central bank official said at the forum held by the Finance 40 Forum in Xi'an, Shaanxi province.

The forum published a report named "Qujiang Report－Global Industrial Chain Restructure and China's Choices". It said that the comparative advantage pattern of global division of labor will be redefined.

China has advantages in the digitalization and capitalization of global industrial chains, along with some challenges, it said. The process of multinational companies' diversification of production to hedge against new risks may lead to industrial relocation to some extent, and some businesses may move out of the country.

Further improving the business environment in China and strengthening confidence and guarantees for the global manufacturers in the downstream of the industrial chain will be key to determining China's future position in global supply chains, said the report.

Service industry globalization will be further strengthened, while industries like automobiles, electronic products, textiles and clothing may focus on regional allocation of industrial chains, driven by factors like technology, government, market and costs, it said.

Zhou Yu, deputy head of the PBOC's international department, said with China entering a new phase of development, industrial development will further follow the rules of comparative advantages, while there will be some business relocation of labor intensive and low value-added industries.