Abstract

This case study “The World’s Factory: Can China sustain its Status amid the COVID-19 Turmoil?”discusses the journey of China as the World’s manufacturing superpower, the factors responsible for the growth of its manufacturing industry, and the various challenges it faced due to factors like the trade dispute with the US and the impact of COVID-19 on its manufacturing sector. The case begins with a brief note on China and its journey as the world’s manufacturing hub. China had emerged as the central player in global supply chains over the two decades from 2000 to 2020 as Western companies set up major operations in the country to minimize costs and to cater to the world's most populated country. The case then highlights the factors responsible for the growth of China’s manufacturing sector. There were many factors such as cheap labor, a robust supply chain, huge population size, business ecosystem, huge foreign direct investment, low taxes and duties, and competitive currency practices and deployment of smart technology and many more factors that contributed to making China ‘The World’s Factory’. Next, the case focuses on the challenges China’s manufacturing industry was grappling with. Problems slowly started emerging for the country due to rising labor costs and the emergence of low-cost centers like Vietnam. Besides, China had to cope with a trade war with the US which had a severe impact on its manufacturing industry. Adding to the problem was the sudden outbreak of the COVID-19 pandemic which prompted many companies to shift their manufacturing bases to other countries to reduce their reliance on China. Japan had already earmarked $ 2.2 billion to help its manufacturers shift out of China. However, some experts believed that picking a new country, or countries, would not be easy. No country had the kind of logistic set-up that China had. Few big countries had the tax rates that China had. It was not clear whether China would be in a position to overcome the emerging challenges and continue its dominance in the global supply chain in the coming decade.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Trace China's rapid rise from a backward agrarian society to a manufacturing powerhouse
• Discuss the role played by the policy framework in China's manufacturing success
• Analyze the factors which contributed to China becoming the world's factory
• Evaluate the impact of COVID-19 on China’s manufacturing industry
• Discuss the emergence of alternatives to China as the World’s Manufacturing Hub

Keywords

China; Manufacturing sector; Global supply chains; foreign direct investment; Trade Conflict; International Trade; International Relation; Covid-19 Pandemic; China plus One’ Strategy; Indian supply chain; Competitive advantage