LWL | Unraveling Global Economic Dynamics: COVID-19, China's Production Challenges, and the Strain on Global Value Chains

Thesis statement: The global economic impact of COVID-19 begins with China's inability to meet product demands, leading to a significant downturn. This crisis, caused by strains on China's production capacity within the global supply chain, particularly in supply chains, along with how to solve these problems in the Global supply chain is the point of this research

Abstract/introduction: The COVID-19 pandemic presented challenges and never-before-seen changes on a global scale. This research paper explores the consequences arising from disruptions in the global supply chain, with a focus on the closure of China's factories and their supply chains within the Global Value Chain (GVC). This research paper seeks to show the interconnectedness of economies on a global scale and to show the vulnerabilities revealed when critical supply chains become disrupted.

This study will also look at actions that can be taken to make a more responsive and durable supply chain, such as a digital program and an early warning system.

The research delves into the specific repercussions of COVID-19 on China's role within multiple Global Value Chains (GVCs). Understanding the profound implications of these effects on the global production sector helps comprehend the broader economic ramifications of the pandemic. This study analyzes the global supply chain, to help try to make it more resilient.  

This research paper argues that the beginning of the economic downturn from COVID-19 was caused by China's loss of their workforce which led to the disruption of the global manufacturing sector which then led to the downturn of the global economy. The main focus will show different strategies that can be taken to help the global supply chain. 

In conclusion, The global economic impact of COVID-19 begins with China's inability to meet product demands, leading to a significant downturn. This crisis, caused by strains on China's production capacity within the global supply chain, particularly in supply chains, along with how to solve these problems in the Global supply chain is the point of this research.   

 In Song, Hao, Hu, and Lu's (2021) research paper, the impact of China on the global value chain is explored. The paper shows how COVID-19 disrupted the global economy, attributing a significant role to China. It addresses the consequences of countries nationalizing their manufacturing sectors and departing from global supply chains, examining the anticipated effects on China's economy and manufacturing sector.

The research paper by Dallas, Horner, Li (2020) discusses the need for countries to adapt to the economic change from COVID-19. It provides an examination of the changes in Global Value Chains (GVCs) and the global economy and talks about the need to implant new strategies.

Whereas Zhan and Lu’s (2021) analysis talks about the strategies that can be taken to help stabilize the global economy and supply chain for the short, middle, and long term.

Research/analysis

The reason that China had such an effect on the global manufacturing sector is because they have the largest manufacturing sector as you can see in Fig. 1 in 2019 china had 28.7 percent of the global manufacturing output which is why when China's workforce got to cut that it affected the global manufacturing sector so much.

Source: Statista fig.1 

One of the actions that can be taken to help repair the global supply chain is to start building a digital supply chain to improve the supply chain flexibility. Following Zhan and Lu’s paper, this would mean having a digital interface and program to show the supply chain in detail. It would show the supply chain for a product end-to-end it would be traceable. Such a platform enables enterprises to identify and understand their suppliers and customers at multiple levels. By using the digital interface, companies try to shorten the supply chain as much as possible.

Another strategy that can be used as talked about in Zhan and Lu's paper is creating an early warning system. This early warning system would track indicators across different parts of the supply chain, including business operations, logistics, capital flow, and information flow. This system would allow businesses to quickly evaluate how emergencies or disruptions might impact them. With this system, businesses can prepare strategies in the early parts of emergencies. For example, they can use decentralized procurement, select different suppliers, and change inventory strategies.

In conclusion, This research sheds light on the workings of the global economy, with a  focus on the profound impact of COVID-19 stemming from China's challenges in meeting product demands. The crisis, rooted in strains on China's production capacity within the Global Value Chain (GVC), particularly in supply chains, has reverberated globally, causing unprecedented challenges and shifts. The interconnectedness of economies on a global scale has been revealed through the vulnerabilities exposed when critical supply chains face disruptions, as exemplified by the closure of China's factories during the pandemic.

As written in the literature review, the paper shows the ideas and research of Song, Hao, Hu, Lu, Dallas, Horner, Li, and Zhan, Lu, showing China's significant role in the disruption of the global value chain during the pandemic. The strategies proposed, inspired by Zhan and Lu's research, advocate for building a digital supply chain and implementing an early warning system. These strategic approaches are crucial for enhancing supply chain flexibility, minimizing disruptions, and creating a rapid recovery post-emergency.

 This research shows that the economic downturn experienced during the pandemic is linked to the challenges faced by China's manufacturing sector, which, in turn, disrupted the global supply chain. By addressing these challenges through the proposed strategies, businesses and economies alike can build resilience, and make a more responsive global economy.

Works Cited

Song, Yuegang, et al. "The Impact of the COVID-19 Pandemic on China's Manufacturing Sector: A Global Value Chain Perspective." Frontiers in Public Health, vol. 9, 2021, p. 683821,  https://doi.org/10.3389/fpubh.2021.683821. Accessed 24 Jan. 2024.

Dallas, Mark P., et al. "The Mutual Constraints of States and Global Value Chains during COVID-19: The Case of Personal Protective Equipment." World Development, vol. 139, 2021, p. 105324,  https://doi.org/10.1016/j.worlddev.2020.105324. Accessed 24 Jan. 2024.. 

Zhan, Jun, and Siyu Lu. “Influence of covid-19 epidemic on China and Global Supply Chain and policy suggestions.” Open Journal of Business and Management, vol. 09, no. 05, Sept. 2021, pp. 2497–2512, https://doi.org/10.4236/ojbm.2021.95136.