Caixin Weekly | Special Report Part 1: The Evolution of Global Supply Chain Decentralization - How Chinese Enterprises Can Adapt When Expanding Abroad (AI Translation)

财新周刊｜特别报道之一：全球供应链“去中心化”演变 中企“出海”如何顺势而为

In recent years, Chinese companies have significantly increased their international investments, indicating an expanding global strategy while adapting to a quickly decentralizing global supply chain. According to the Ministry of Commerce, China's non-financial outward direct investment reached $143.85 billion in 2024, a 10.5% increase from the previous year. The growth in newly signed contracts and dispatched labor also shows an increased global engagement[para. 1].

The ASEAN region remains a crucial investment destination for China, with countries like Singapore, Indonesia, and Thailand receiving substantial Chine investment. China's investment in Belt and Road Initiative countries amounted to $33.7 billion, marking a 5% increase, demonstrating continued strategic interest in these regions[para. 2]. This expansion covers industries like advanced manufacturing and new energy[para. 2]. Moreover, China's export model is evolving from product-based to capacity-related, focusing particularly on intermediate goods, a shift which supports the changing global supply chain dynamics[para. 3].

China has maintained its status as a preeminent exporter of intermediate goods, contributing significantly to foreign trade growth. These goods span several categories such as base metals and chemicals, aligning with China's accelerated foreign investments in these sectors[para. 4]. The COVID-19 pandemic, the Russia-Ukraine conflict, and China-U.S. trade tensions have catalyzed changes in global supply chains, pushing China towards a "China+1" strategy to reduce dependency by setting up overseas production while maintaining a strong domestic presence[para. 5].

Specific focus has been directed toward ASEAN countries and Mexico as key investment regions as part of China's overseas expansion efforts, demonstrated by analysis revealing these countries as top investment destinations in 2024. Vietnam and India, in particular, saw notable increases in imports of Chinese intermediate mechanical and electrical products, reflecting a growing trade network[para. 6]. Meanwhile, despite ongoing challenges, the U.S. remains a high-value market for China, with significant trade volumes recorded in recent years[para. 7].

Under the presidency of Donald Trump, trade relations between China and the U.S. have become strained, with new tariffs imposed escalating trade tensions and impacting China's foreign trade[para. 8][para. 9]. Amid rising costs and geopolitical risks, some companies are considering local investments, though this is tempered by high production costs sometimes surpassing those in China[para. 10]. Manufacturing companies are increasingly seeking "low-spec" versions of domestic facilities abroad to mitigate risks, advocating for a flexible approach [para. 11][para. 14].

The current unpredictability in U.S. trade policies under Trump's administration poses complex challenges for Chinese enterprises as they navigate global investment environments[para. 12][para. 14]. China's international investments are a cautious balance between employing local resources and maintaining competitive global supply chains. In response to U.S. tariffs, Chinese companies have increased investment in ASEAN nations, with Vietnam and Mexico emerging as primary beneficiaries due to strategic advantages and closer ties with the U.S. and EU markets[para. 6][para. 14].

Emerging market countries are eager to attract Chinese investments for industrial growth while striving to protect local industries. These countries are evaluating infrastructure improvements to accommodate shifting production landscapes. However, specific localization requirements pose challenges and opportunities for balancing foreign investment and industrial protection[para. 16]. A strategic emphasis on geographic diversification and risk management is expected to drive China's global expansion in upcoming years[para. 17][para. 19].

In summary, the increasing foreign investments by Chinese enterprises underline their strategic global engagement and adaptation amidst changing geopolitical climates and economic forecasts. As policy shifts continue, particularly under heightened U.S.-China tensions, Chinese companies remain focused on balancing local domestic capabilities with broader international influence.[para. 21][para. 17][para. 19].