Ministry of Commerce: China’s new competitive advantages in the global supply chain are taking shape.

The report argues that, as global supply chains undergo accelerated restructuring, China—already a key regional hub within the global supply chain—will see its position and role within the global system evolve. While its traditional advantages, such as low costs and large-scale production, may be eroded, its core supply-chain strengths—comprehensive industrial support, vast market potential, and relatively high labor productivity—remain pronounced.

China will develop new competitive advantages in supply chain efficiency, innovative application scenarios, and an open economic system.

As global supply chains undergo restructuring, how will China leverage its own strengths?

During the Third Qingdao Summit for Multinational Company Leaders in 2022, the Institute of International Trade and Economic Cooperation of the Ministry of Commerce released the report “Multinational Corporations in China: Re‑Choosing Amid the Reshaping of Global Supply Chains.”

The report indicates that multinational corporations continue to view China as a key investment destination. U.S.-based Conner Corporation The “Foreign Direct Investment Confidence Index” report, released in January 2022, shows that China’s FDI confidence index ranking rose from 12th place in January 2021 to 10th place in 2022.

As the global supply chain undergoes accelerated restructuring, China, as one of its key hubs, faces both significant opportunities and formidable challenges. Multinational corporations, serving as vital links in China’s integration into the global supply chain system, play a crucial role in helping the country adapt to these adjustments and achieve high‑quality development in the manufacturing sector. With its robust market, well‑developed industrial‑chain support infrastructure, steadily advancing technological innovation, and an increasingly favorable investment climate, China is forging new competitive advantages in its industrial and supply chains—advantages that will, in turn, further enable multinational enterprises to thrive in the Chinese market.

China’s competitive edge in the global supply chain remains pronounced.

The report argues that, as global supply chains undergo accelerated restructuring, China—already a key regional hub within the global supply chain—will see its position and role within the global system evolve. While its traditional advantages, such as low costs and large-scale production, may be eroded, its core supply-chain strengths—comprehensive industrial support, vast market potential, and relatively high labor productivity—remain pronounced.

Specifically, China’s manufacturing supply chain is vast. China’s manufacturing value added has continuously… In 2012, China ranked first globally. By 2021, the value added of China’s manufacturing sector had risen from 18.2% of the global total in 2010 to nearly 30%, surpassing the combined share of the United States (16%), Germany (7.4%), and Japan (5.2%), thereby securing an overwhelming global lead that other countries such as India and Vietnam are unlikely to overtake in the short term. According to incomplete statistics, China leads the world in the production of more than 220 industrial products; globally, 90% of personal computers, 80% of air conditioners, 75% of solar panels, 70% of mobile phones, and 63% of shoes are manufactured in China.

China’s manufacturing supply chain is well-developed and highly integrated. China possesses… With 41 major industrial categories, 207 medium‑level categories, and 666 minor categories, China is the only country in the world to possess all industrial sectors as defined by the United Nations Industrial Classification. Should its supply chains be disrupted, they can be independently repaired and restored within a relatively short period of time.

Countries around the world are highly dependent on China’s supply chains. According to a report by the McKinsey Global Institute, globally… Among 186 countries and regions, 33 list China as their top export destination, while 65 cite China as their leading source of imports. China’s share of global industrial manufactured‑goods exports has continued to rise, reaching 19.5% in 2020—significantly higher than that of major manufacturing economies such as the United States (5.0%), Germany (9.6%), and Japan (4.5%).

New competitive advantages are taking shape.

In recent years, the global manufacturing sector Both the scale and the share of FDI inflows have been on a downward trend, yet China’s manufacturing sector has maintained relatively stable levels of foreign investment utilization. In 2021, the actual amount of foreign capital utilized by China’s manufacturing industry reached US$33.73 billion, up 8.8% year on year—1.1 percentage points higher than the global growth rate of FDI in manufacturing. The proportion of foreign investment absorbed by the manufacturing sector as a share of total foreign investment across all industries declined from 30.5% in 2018 to 19.4% in 2021. This shift can be attributed to two factors: first, the substitution effect arising from the upgrading of the tertiary‑sector structure; and second, the pull‑effect driven by structural upgrades within the manufacturing sector itself.

However, it cannot be overlooked that in recent years, China’s manufacturing sector has seen a gradual erosion of its low-cost competitive advantage. According to the report’s data, From 2016 to 2020, the average annual growth rate of monthly wages in China’s manufacturing sector was 9.84%, outpacing that of developed economies such as the United States (3.77%), Japan (0.75%), and South Korea (1.60%), as well as developing countries like Vietnam (4.54%) and India (1.47%). In absolute terms, in 2020, the average monthly manufacturing wages in the United States, South Korea, and Japan were 4.8, 3.8, and 2.6 times those in China, respectively, while in Vietnam and India they stood at only one‑third and one‑fifth of China’s level. Compared with major economies, China enjoys a slight advantage in industrial water and natural gas prices; however, its industrial land prices are 2.8 times those in Vietnam and three times those in India.

However, China’s cost‑effectiveness advantages in labor productivity, digital transformation, infrastructure, and market size are becoming increasingly pronounced. At the same time, as the Chinese government continues to implement a series of reform, opening-up, and transformation‑driven policies, China will develop new competitive strengths in supply chain efficiency, innovative application scenarios, and an open economic system, thereby maintaining strong appeal for multinational corporations investing in China.

The report argues that labor productivity is a key indicator of whether a country’s economy has the potential for future growth and a crucial measure of the efficiency of modern supply chains. According to statistics from the International Labour Organization, China has the fastest-growing labor productivity in the world, with an average annual growth rate of 6.7%, which is 5.1 percentage points higher than the global average growth rate. In 2021, China’s labor productivity reached US$16,512 per person, significantly surpassing that of Vietnam (US$3,905 per person), India (US$6,688 per person), and Indonesia (US$9,151 per person), among others.

China’s advantages in international logistics and supply chains continue to strengthen. It ranks among the top globally in both total port cargo throughput and container throughput. Among the top 10 ports, China accounts for 8 and 7 positions, respectively. The average port operation times at major Chinese ports are significantly better than those at leading foreign ports. In May 2022, the average vessel dwell time and berth‑on‑berth time at China’s container ports were 1.98 days and 1.04 days, respectively—substantially lower than the respective averages of 3.3 days and 2.4 days at major international container ports.

In terms of innovative application capabilities, China’s R&D expenditure intensity has already moved from… The figure has risen from 1.9% to 2.4%, essentially reaching the pre-pandemic average of 2.5% among OECD countries. China also enjoys a distinct advantage in emerging production factors. According to statistics from International Data Corporation (IDC), as of 2021, China accounted for approximately 23% of global data generation, ranking first worldwide.

China is also assuming an increasingly important role in Asia’s regional supply chains. Judging solely by the degree to which major Asian economies rely on trade with China, according to UNCTAD statistics, In 2020, the shares of ASEAN, Japan, and South Korea in China’s total imports increased by 11.1, 4.5, and 7.7 percentage points, respectively, compared with 2012. China has become the largest trading partner for the vast majority of Asian countries; investing in China means forging close trade ties with the entire Asian region and tapping into a much broader space for growth.