U.S. media article: China is increasingly becoming the "factory of factories"

Ask AI · How China’s growth in intermediate-product exports is reshaping the global trade landscape?

Reference News Network March 30 report A March 20 article published on the website of U.S. business magazine Fortune titled “China Is Becoming a ‘Factory of Factories,’ Providing Drive for Global Manufacturing in Places Like Southeast Asia as Trade With the United States Declines.” The author is Angelica Ong. Excerpts from the article are as follows:

China is becoming a “factory of factories,” gradually increasing exports of industrial components such as phone parts, processors, memory chips, and lithium-ion batteries. These components will be assembled at the final stage in economies such as those in Southeast Asia.

Sung Jong-min, a partner at the McKinsey Global Institute, said, “In the future, we may buy fewer ‘Made in China’ products, but there will be more products that contain components made in China.”

Last year, China’s exports of consumer goods fell by 2%, while exports of intermediate products rose by 9%.

Because U.S. President Donald Trump imposed high tariffs on goods exported to the United States from China, the value of China-U.S. trade fell by about 30% last year. Sung Jong-min explained that “China is stepping up efforts to diversify its trade partners, increasing trade with emerging economies.” He also authored a research report on global trade. China’s new trade partners are mostly manufacturing hubs; they need more low-cost machines and components from China, rather than finished products that are more expensive.

The research report is titled “The Geometric Structure of Geopolitics and Global Trade.” The report notes that the United States’ trade partners changed as well last year. The United States replaced two-thirds of the goods it previously purchased from China, switching to buying smartphones from India and laptops from Southeast Asia.

ASEAN plays a key role in trade adjustments triggered by tariffs. Southeast Asian countries have received some manufacturing business that was shifted out of China. This is happening because companies are trying to respond to tariffs that the United States imposed on Chinese goods earlier.

Sung Jong-min said, “ASEAN plays an intermediary role in global supply chains, so that supply chains won’t break. ASEAN’s export growth is about 14%, more than twice the global average. What is notable is that trade between Southeast Asia and China, as well as between Southeast Asia and the United States, has both increased. According to data from the McKinsey Global Institute, the two trade corridors—ASEAN to China and ASEAN to the United States—are the fastest-growing trade corridors in the world.”

Although concerns were raised that globalization may be dead after last year’s “Liberation Day” tariff policy was implemented, global trade has not declined. Sung Jong-min believes there is less evidence that countries are moving manufacturing back to their own countries or to neighboring nations. He said, “Despite a lot of news about onshoring, reshoring, and nearshoring, that isn’t really happening on a global scale. More and more countries are connecting through longer supply chains, and in that sense, globalization is still continuing.”

Instead, trade is being reconfigured along geopolitical lines. Countries are increasing trade with allied countries and reducing trade with countries viewed as competitors or opponents. Not only the United States is doing this; as geopolitical competition between China and the United States intensifies, China is also increasing trade ties with Southeast Asia, Europe, Latin America, and Africa.

Investment is also being reconfigured according to the geopolitical landscape. The United States is stepping up investment in allied countries, seeking investment especially in areas such as semiconductors, and also reaching out to allies such as Japan, South Korea, and Middle Eastern countries. On the other hand, China is now a net investor overseas.

Sung Jong-min believes that tariff policies may change, but deeper shifts—including who trades with whom and who invests in whom—may persist long after headlines about the latest trade war fade. He concluded, “Geopolitical events like tariff policy may deliver shocks in the short term, but structural waves like geopolitical realignment will have a lasting impact.” (Compiled by / Hu Xue)