The world may soon see the emergence of new global supply chains and markets, especially as the global economic order is being challenged, Valerio Fabbri writes in Portal Plus. This shift has been brought about by US-China trade disputes and sanctions imposed on Russia since 2014 and the military invasion in Crimea in 2014 and the latest one in Ukraine in 2021.
These events have disrupted the established global industrial supply chain, opening the door for emerging markets like India to become part of the new global industrial supply chain. In light of the changing geopolitical dynamics, with China and Russia increasingly being isolated, the two countries must explore economic ties and seek more complementarities.
A report titled Characteristics and Prospects of China-Russia Trade Cooperation from the Perspective of Global Industrial Chain recently published on the social media handle of the Chinese Academy of Social Sciences’ Institute of Economic and Political Studies & Global Strategic Think Tank suggests this. The paper recognizes the impact of the COVID-19 pandemic, the geopolitical conflict and global environmental policies as offering opportunities for Beijing and Moscow in terms of trade cooperation.
However, the paper only partially addresses the challenges posed by the China-centric supply chain, which did not perform well during the public health crisis. It also overlooks the severe human rights and democracy issues that trail in Bejing’s wake.
The co-authors of the paper acknowledge the existing limitations to finding an economic compatibility between China and Russia as their economies provide different products, as well as differing export baskets. China participates in the lower levels of global value chains and therefore, much of their export involves foreign value-added components. On the other hand, Russia mainly produces raw materials and resources such as oil and timber and these components are at a higher level in the value chain.
Additionally, China does not have access to high-end technology components in the global supply chain, like microchips, which are necessary to build high-end products and electronics. Even in areas such as artificial intelligence and 5G, Russia has little to offer.
It is evident that China and Russia are attempting to build strong economic relationships as part of their own strategic interests. However, it is unlikely that their efforts will result in a drastic shift in the geopolitical and economic dynamics. Sanctions, protectionist policies, and resources diverted to militarization pose significant challenges to the global economy and supply chains. Therefore, China and Russia’s efforts to build stronger ties may not be enough to make up for the losses in the industry or ease increasing tensions in the West.
Portal Plus suggests that the time is opportune for free trade and for a shift in resources from militarization to sustainable development, green technology, and infrastructure. These are areas in which countries across the world have not been performing well and are in desperate need of attention.
