Where is China's supply chain headed? | AnYong Views the World
Text by | Shi Jiaxiang
Edited by | Chen Zhiyan
The topic of the supply chain has never been as important as it is today.
During a month of intense discussions about going global and tariffs, we've witnessed that to prevent re - export trade and changes in the origin status to evade restrictions, the US Customs has launched a new "Origin Verification System". It is strictly investigating re - export tax - avoidance behaviors through countries like Vietnam and Mexico, requiring importers to provide three - level supply chain traceability documents.
Lawyer Xiao Chunhui, a partner at Fangda Partners, told "Undercurrent Waves" that among the large manufacturing clients he serves, most enterprises are accelerating their existing global expansion processes. Even after the China - US meeting in Geneva ended with a 90 - day grace period, diversification and localization of production remain the key to the future strategies of most enterprises.
In summary, for enterprises still exporting to the United States, on the premise of applying the US non - preferential origin rules, they should pay more attention to the location where the product undergoes substantial changes and reasonably plan the origin of the product. Only in this way can they achieve flexibility in the supply chain and effectively avoid the impact of the US's ever - changing tariff policies - which may determine the success or failure of enterprises going global.
In the Chinese academic circle, Lin Xueping is one of the few scholars who have written books on both supply chain and globalization issues. As a visiting researcher at the China Quality Development Research Institute of Shanghai Jiao Tong University, he has been observing and recording the global supply chain for over 20 years.
In Lin Xueping's "Supply Chain Offensive and Defensive Battle" published in 2023 and "Going Global on a Large Scale" published in 2025, there are many well - known expressions about the Chinese supply chain - for example, "The supply chain is like a surging torrent, spreading out in all directions to find the most stable and vast low - lying areas", "The supply chain under the free market has become a transparent fishbowl under the containment of national power", "The competitiveness of the supply chain is not only the combined force of all supply chain nodes but also the sum of a country's manufacturing capabilities".
According to his observation, the enterprise competition attribute of the supply chain has begun to be superimposed with the national attribute, and "supply chain security" has replaced the original pursuit of cost and efficiency as the top priority for supply chain enterprises and the countries behind them.
At present, when developed countries are trying to bring industries back, industries are relocating to Southeast Asia, the Chinese supply chain is facing changes, and enterprises are entering a new era of going global, what is happening to the Chinese supply chain? And where is it headed?
To find the answers to these questions, "Undercurrent Waves" conducted an interview with Lin Xueping. He believes that "the Chinese government should help Chinese enterprises improve their autonomy and controllability within the supply chain as much as possible and stay within the chain as long as possible to buy time for 'alternatives'."
At the same time, he also put forward some things that all parties should do when building a more ideal global supply chain in the future. For example, adapting to the supply chain networks of different countries is a basic skill for enterprises; we should dispel the myth of the "Chinese speed" of the supply chain and avoid excessive technology diffusion; we should attach importance to the positive role of foreign investment in cultivating a healthy supply chain, and leading enterprises in the chain should treat all links of the supply chain well.
Lin Xueping said, "This is an offensive and defensive battle and will also be a protracted war."
The following is the dialogue. Some content is from Lin Xueping's two books and has been edited by 'Undercurrent Waves' -
Part 01
The Migration of the Supply Chain Is Inevitable
["Undercurrent"]: The migration of the supply chain has been one of the high - frequency terms in the Chinese manufacturing industry in the past two months. What kind of attitude should we adopt to view this?
Lin Xueping: The large - scale migration of the Chinese supply chain is generally a forced situation caused by external geopolitics. Chinese enterprises' global expansion is a hasty one. The wave of century - long tariffs initiated by the United States has especially accelerated this process.
We should not evaluate enterprises from a moral perspective too much. There are many reasons for the supply chain migration. For example, downstream brand manufacturers may coerce suppliers: if you don't come, you won't get the orders. From another perspective, these are originally Chinese enterprises' orders. If they don't go to Mexico, these orders may be taken away by local Mexican or South Korean enterprises. We need a global and dynamic perspective for this kind of trade - off.
For the regulatory authorities, they need top - level design. They should clarify which capabilities can go global and how to protect the enterprises going global.
["Undercurrent"]: Objectively speaking, is the competitive relationship between China and other countries in the supply chain inevitable?
Lin Xueping: With China's current production capacity, it is more like a global super - supply chain. However, the problem is that other countries believe that supply chain security is more important than cost and efficiency.
Currently, the Chinese supply chain is facing competition from near - shore manufacturing and friend - shore manufacturing. This will lead to the formation of parallel supply chains in Southeast Asia and India. In a sense, parallel supply chains will definitely replace the Chinese supply chain in some areas. The speed of the loss of the Chinese supply chain is a race against the growth speed of such Asian alternatives.
["Undercurrent"]: You mentioned the concept of "protecting the supply chain and its foundation" in your book, which actually calls for protecting the supply chain ecosystem. But is this contradictory to the reality of the supply chain migration?
Lin Xueping: The core lies in how to view foreign investment.
For example, the transfer of the supply chain related to Foxconn is very obvious. In 2024, its production capacity in India was close to 20% and will continue to increase in 2025.
Now we emphasize that core technologies should be independently controllable, which is definitely correct. However, this may lead to three results:
First, it may easily deprive Chinese workers of the opportunity to participate in globalization at their doorstep. Because many foreign - owned enterprises can sell their products globally, and individuals can easily become an essential part of the global value chain in China.
Second, if Chinese enterprises want to enter other countries' markets, there will be higher barriers. Because the other side will say "I have no share in your market". For example, when Chinese wind turbines enter the European market, they will face strong opposition from Siemens Gamesa and Vestas of Denmark. Because the market share of these foreign - owned enterprises in China has become negligible.
Third, it will worsen the supply chain environment. When foreign - owned enterprises deal with suppliers, they will have a reasonable profit - sharing mechanism, allowing both upstream and downstream enterprises to benefit. Chinese enterprises still need to improve this awareness urgently.
The survival status of foreign - owned enterprises in China seems to be a neglected topic at present. The living space of foreign - owned enterprises has also been greatly impacted. If we regard foreign - owned enterprises as living organisms, then they now need nutrients and treatment. This is an important issue regarding how Chinese enterprises can better integrate into the global value chain.
["Undercurrent"]: But it seems that the migration of the Apple supply chain is inevitable?
Lin Xueping: This is an inevitable result of geopolitics squeezing the supply chain, which has led to the redistribution of production capacity globally. Apple's products are always in large quantities. Apple sells 240 million iPhones and over 100 million AirPods every year. This requires centralized production in super - factories to achieve economies of scale.
Therefore, the production of iPhones is being massively migrated to India, while the production of earphones is concentrated in Vietnam. Of course, the future is still unpredictable. Currently, Trump is still pressuring Apple, and high tariffs are still imposed on iPhones made in India when they enter the United States.
This also shows that the global supply chain is still in an unstable state. The migration of the Apple supply chain is an imbalance, and this imbalance may also bring new possibilities.
The core point I emphasize is that we need to recognize the contributions left by foreign - owned enterprises like IBM, GE Healthcare, and Apple in China: the feedback they bring to the upstream, the management and workers they leave behind, and the rich supply chain are all a huge wealth. As a major manufacturing country, we will increasingly realize this.
["Undercurrent"]: Previously, there was a common view that due to limitations in production capacity and other aspects, Southeast Asia and Mexico cannot replace the Chinese supply chain. What's your opinion on this issue?
Lin Xueping: This kind of comparison doesn't make much sense. Take Vietnam as an example. Its GDP is the same as that of Guangxi, but its population is twice as large. Don't regard it as a giant; it cannot be an equal competitor to China. However, the key lies in the extent to which Vietnam can erode China's capabilities.
We should be vigilant and guard against the "erosion" of China's capabilities at the supply chain level by different countries. In the Foxconn factory in Chennai, India, the female workers' speed of completing the wiring for mobile phone installation is not slower than that of workers in Shenzhen, Dongguan, and Kunshan in China. Therefore, the increase in the production capacity of these factories will reduce the domestic production capacity and employment opportunities.
Multinational companies may not withdraw from China on a large scale, but diversifying production bases has become one of the important strategies.
However, an important fact is that even when production is transferred overseas, most of it is still undertaken by Chinese - funded enterprises. Shenzhou International Group, the world's largest knitting OEM giant based in Ningbo, Zhejiang, is the main supplier for Nike, Adidas, Uniqlo, and Puma. Its revenue in 2022 was nearly 27.8 billion yuan. In 2005, it set up a factory in Cambodia and began to layout in Southeast Asia, and in 2014, it invested in Vietnam and successively established fabric factories and garment factories.
The label on Nike sweatshirts in shopping malls has changed from "Made - in - China" to "Made - in - Vietnam", but most of these products are still manufactured by Shenzhou International, and many fabrics and auxiliary materials also come from China.
In many fields, it's like a boomerang. After spinning around, it still returns to the original manufacturer, only with a change in geographical attributes.
["Undercurrent"]: You mentioned in your book that in a sense, the existence of the supply chain also limits the intensity of unilateral trade conflicts initiated by countries. The current supply chain is more closely intertwined than before. Why is the world moving towards anti - globalization?
Lin Xueping: The existence of the supply chain makes the relationships between enterprises in different countries closely intertwined in a relatively invisible way, and their economic interests are also mutually bound. If an American company is a node in the supply chain, it may rely on its downstream Chinese company to finally sell its products.
Although chips are a key area where the United States restricts China, in 2024, Intel's chip sales in China still ranked first in terms of market share, even higher than in the United States. This means that when the United States imposes trade tariffs on computers made in China, it may "hurt" Intel.
This is the protective effect of the supply chain's interconnection.
As for the so - called "anti - globalization" now, it is actually a Chinese perspective. If we "look at the Earth from the moon", in fact, the supply chain is migrating, a large number of new factories are emerging, showing the characteristic of "local acceleration on a global scale". The connection nodes of the supply chain are just changing their geographical locations, but the interweaving remains the same.
The United States is now not considering economic rationality and effectiveness. It is forcefully disrupting the existing supply chain division of labor, trying to reduce the trade deficit and bring back the manufacturing industry through tariffs. Leaving aside whether this method can achieve the goal, the global supply chain is in such a "distorted" and painful period. Global efficiency is sacrificed in pursuit of a broad sense of "supply chain security".
Part 02
The Truly Important Connection in the Supply Chain
Is the Flow of Knowledge
["Undercurrent"]: Before "Going Global on a Large Scale" this year, you published "Supply Chain Offensive and Defensive Battle" in 2023. Why did you choose to approach the China - US trade disputes from the perspective of the supply chain?
Lin Xueping: I initially wrote "Supply Chain Offensive and Defensive Battle" because of the ZTE incident in 2018. At that time, people still thought it was part of the trade friction. Then, with the Huawei incident in 2019, people realized that the United States was targeting China's high - tech industries point - by - point.
Being large but not strong was a common description of Chinese manufacturing before. It seemed that it could be easily defeated. However, the impact of the China - US trade war on China was not as quick and decisive as the United States had expected.
China was indeed stuck in some fields, but it also had the resilience to face the huge external impact. So, I wanted to find out what the vitality of Chinese manufacturing was.
The supply chain perspective is the best way to observe this issue.
For example, the new energy vehicle industry not only changes the vehicle itself but also the pattern of the upstream supply chain. Previously, only Audi cars priced over 500,000 - 600,000 yuan were equipped with air suspension, and the patents were concentrated in the hands of several German manufacturers such as ZF. Chinese suppliers had no chance at all. However, after the rise of new energy vehicles, companies like Konghui Technology in Zhejiang and Zhongchuang Zhiling in Henan have also manufactured air suspension.
It's true that some products cannot be made in China, which can be called the "control power" of the supply chain. However, there is also the "connection power" between enterprises, which means establishing close relationships between upstream and downstream enterprises to form a combined force.
In a sense, the control power is composed of countless slices of connection power. If each slice can be solved separately, the combination of connection power can also offset the control power.
["Undercurrent"]: The supply chain is an extremely complex concept. How do you understand it today?
Lin Xueping: The term "supply chain" sounds like a technical term. For example, it involves how factories schedule raw materials, arrange shipments, and is even mixed up with logistics.
However, when I emphasize the "supply chain", I'm not referring to technical applications but the "supply chain perspective". That is, how to view the relationship between upstream and downstream enterprises. This relationship goes far beyond a simple business relationship.
The truly important "connection" is the flow of knowledge.
Take the most obvious example. China used to be stuck in the production of airbags. The core of an airbag is the ignition chip and control. Knowledge about airbags is often held separately by the vehicle manufacturer, the controller, and the chip manufacturer. No single party can make a breakthrough independently.
In fact, SAIC - GM - Wuling found the upstream controller and promoted cooperation among the three parties, which finally solved this problem.
From the perspective of the supply chain, it's like a lock with three keys, one for each party. It represents a "combined efficiency", a relationship where 1 + 1 > 2. The supply chain perspective provides a systematic thinking to look upstream and gain a comprehensive understanding.
["Undercurrent"]: The "Chinese speed" has once contributed to China's supply chain. Why do you say we should forget the "Chinese speed" today?
Lin Xueping: Sometimes we think the supply chain in Mexico is weak, which is a Chinese perspective. In fact, it is in a stable balance there. If we increase the speed, new problems will arise.
Don't use the Chinese speed to sweep across the world. Release production capacity in an orderly manner at the world's average speed. This will be more beneficial to China as a whole.
["Undercurrent"]: So, what is the core problem of the Chinese supply chain at present?
Lin Xueping: The domestic market is still in a cut - throat competition stage. Although low cost is a good thing, not everyone should develop in this direction. Going global provides a new direction. Not all enterprises need to stay in the domestic market and compete fiercely. Some enterprises can actively seek new opportunities overseas.
It's not because there is a profit margin that enterprises go global, but because they can find new profit margins after going global.
In addition, it is also very meaningful to achieve upstream - downstream collaborative innovation: innovation - driven development is not the responsibility of