Lead Story

Can the country’s manufacturing push be sustained with ‘PLIS’ and thank you?

With the second wave of Covid-19 pushing the economy into another downward spiral, the burden is now on the PLI scheme to revive growth

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Made-in-China got terrible press in 2020, thanks to the spiked virus, which is still widely believed to have originated in China. We can argue about the virus’ origin till we turn blue, but we can all agree that the pandemic has caused a steady decline in the fondness for manufacturing and sourcing from the country. In fact, even before the pandemic sent everyone indoors, the appeal of the country as a supplier was fading fast.

The trade war with the US, which had begun in 2018, had exposed fault lines of what was seen as Chinese-dominated global trade.

While the country initially began with low-end manufacturing, in recent years, its ambition to play for bigger stakes by moving up the value chain, including AI and connected technologies, is hurtling it towards a head-on collision with developed-market competitors such as South Korea and Germany. In e-commerce, China has become the largest market in the world, accounting for more than 40% of global online transactions. Given the mammoth size of the Chinese economy, the administration is now steering the country towards domestic consumption-led growth. That just might have ramifications on global supply. Abhijit Mukhopadhyay, analyst, Observer Research Foundation, believes that around 32.6% of total cumulative Chinese exports till November 2020 have gone to the US and EU countries. Add that to the exports to Japan, Canada, Australia, and the UK, the number goes close to 45%. On the other hand, China itself is not import dependent on these nations, with 16% of its imports coming from non-trade partners and smaller economies. Which means, the developed economies depend more on China than the other way around.

That realisation hit companies and countries hard about five years ago, when several Chinese plants saw shutdown on account of environmental clampdown by the government, but it hit even harder as the pandemic gripped the world. In manufacturing, China accounts for 30% of the world’s output, and fears of supply-disruption turned real when COVID-19 lockdown ended up disrupting the supply chain of 94% Fortune 1,000 companies.

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