For multinationals, success in China crucial to global success

The role of Chinese suppliers, the backroom players driving the success of multinationals, is increasingly under scrutiny as voices for de-risking, re-shoring, friend-shoring, or the so-called "China plus one" strategy emerge amid rising geopolitical tensions and protectionism.

Some have even questioned: What if China is not part of the global business lifeline? Will multinationals be prepared to decouple from this crucial link in their supply chains, which many fear would deal a devastating blow to global trade?

However, for the supply chain guru-turned Apple CEO Tim Cook, who just visited China for the third time this year and once told media that "there's no supply chain in the world that's more critical to us than China," the answer can't be more obvious.

"I am so proud that Apple has an exhibit here with our partners. We could not do what we do without them," Cook said Monday when visiting the second China International Supply Chain Expo, which opened Tuesday and will run until Saturday, in Beijing. It is the second time Apple has participated in the expo, where a billboard at its booth states that more than 80 percent of the tech giant's 200 major suppliers produce in China.

Cook is no stranger to supply chain matters -- this behind-the-scenes relay of goods is like plumbing in a luxury hotel -- invisible when working perfectly, but when it breaks, it hurts hard.

Like Apple, many multinational corporations, particularly in the technology and automotive sectors, continue to view China as an indispensable part of their global operations. Disruptions to the global supply chain, which has been shaped by market-driven interactions between economies over decades of free trade, will only lead to lost economic growth and increased inflation.

For Bosch, a leading global supplier of technology and services, China remains a pivotal hub for global supply chains and industrial operations.

"China is crucial for Bosch, not just because it is our largest market outside of Germany," said Xu Daquan, president of Bosch China, in an exclusive interview with Xinhua. "Beyond the market size, China's innovation ecosystem and China speed are vital for Bosch."

The company boasts over 10,000 R&D personnel in China, spearheading the development of cutting-edge technologies such as hydrogen fuel systems, intelligent cockpit integration platform, and advanced driving solutions. Many of Bosch's new technologies for connected and new energy vehicles are either developed locally or applied in China as one of the first markets.

Expanding the supply chain in China also brings multinationals closer to the country's huge market. Last month, Bosch Group signed an agreement to set up its strategic commercial vehicle China headquarters in the city of Wuxi, east China's Jiangsu Province. The company has already established several automotive-related factories in Wuxi, with total sales in the city reaching nearly 3.8 billion U.S. dollars last year.

Xu noted a dramatic acceleration in product development cycles within China. "Just a year ago, we were discussing an 18-month timeline for developing a complete electric vehicle. Now, the industry is targeting a 12-month cycle. The development time for a car with thousands of components has shrunk from three to four years to just one year. This pace of change is extraordinary."

Reflecting on the evolving relationship, he added, "In the past, China needs Bosch for innovative technologies. Today, Bosch also needs China." He dismissed concerns about so-called "over-reliance" on China, instead emphasizing the strategic importance of the market, as well as the collaboration between Germany and China.

"For many automotive-related companies, success in China is crucial to achieving global success," he mused. "As technological revolutions unfold in China, maintaining a strong presence there is not just an option, but a necessity. Our assets in Bosch China are integral to our global portfolio."

With its comparative advantages well utilized to fit in an increasingly integrated world economy, China's status in the global supply chain is one chosen by market forces. China is the world's largest manufacturing hub and a country with a complete industrial system. According to a Goldman Sachs research in October, out of the 10 fastest-growing routes for trade in goods, all originate in Asia. And the majority actually originate in China.

At this year's expo, Rio Tinto, one of the world's largest mining companies, ran a joint booth with the world's largest steelmaker China Baowu in the smart vehicle area. In a speech at the expo's opening ceremony, Rio Tinto Chair Dominic Barton gave examples of how the company has benefited from being in a global supply chain with China very much at the center.

"We understand the importance of well-functioning global supply chains and want to improve them in our business," he said. "We also believe in China's high-quality manufacturing to help us excel in our global operations."

Rio Tinto is co-developing the Simandou iron ore project in Guinea with Chinalco, China Baowu and the government of Guinea. This is the largest mining project on earth and its construction is on time and on budget, largely due to our Chinese partners, he said.

"The benefits of an interconnected supply chain are clear," said Barton. "It's important that we speak up and come out of the shadows to defend and promote supply chain coordination and free trade."

More than just economics, fragmentation poses a significant threat to addressing the world's most critical shared challenges, including poverty, inequality, and climate change.

For instance, China's manufacturing power has dramatically driven down the cost of clean energy, including solar panels, wind turbines, and lithium batteries. Wood Mackenzie, a global research and consultancy firm, estimated that if the world were to block out "Made in China" in the energy transition, costs would rise globally by 20 percent, or the equivalent of 6 trillion U.S. dollars.

This cost advantage in clean energy production is just one example of how China's manufacturing capabilities contribute to global sustainability efforts, making the prospect of decoupling even more detrimental.

Picturing a scenario where China, the largest trading partner of a very long list of countries, is no longer the "world factory," Nobel-winning economist Michael Spence quipped: "it's so expensive that everybody would wake up in the morning and say: 'This is really ridiculous. We can't do this'."

An increasing number of multinationals have voiced their resolve to keep their engagement with China ongoing although uncertainties such as trade frictions loom large. For them, it's not about over-reliance, but more about staying competitive in a rapidly-evolving market environment. The mantra is "let business stay business."

Tadashi Yanai, chairman and president of Fast Retailing, the parent company of Japanese fast fashion giant Uniqlo, said in a recent interview with Nikkei Asia that production in China remained a crucial part for fashion retailers despite the trend of de-globalization.

Fast retailing has grown alongside the Chinese textile industry, and the importance of China, including its mainland-managed factories, has not changed, Yanai added, explicitly rejecting the "China plus one" strategy, noting that there is no simple way to establish large factories in other countries to replace Chinese production.

China's message is quite clear. The country will continue to take concrete actions to ensure stable and unimpeded global industrial and supply chains, Chinese Premier Li Qiang said Monday while attending a symposium with representatives of enterprises and organizations participating in the expo.

In his address at the expo's opening ceremony on Tuesday, Chinese Vice President Han Zheng called for promoting win-win cooperation, optimization and upgrading as well as green transition of global industrial and supply chains.

China will adhere to the right course of economic globalization, and enhance business and industrial capacity cooperation with other countries for a positive interplay among industries and shared benefits, Han said.

Today, amid shifting geopolitical tides, the greater challenge lies in building resilient supply chains that can withstand pressures while leveraging China's unparalleled manufacturing prowess.