Asian Economies in Global Supply Chains
Friday, Jan. 6, 2023 10:15 AM - 12:15 PM (CST)
- Chair: Calla Wiemer, American Committee on Asian Economic Studies
Regionalizing Value Chains: Trends, Opportunities, and Risks
AbstractPre-pandemic assessments suggest that resilience in global value chains can be strengthened by reducing the number of linkages between suppliers and customers. With the goal of shortening value chains while still diversifying sources geographically, the strategy seems to involve regionalization of production. Asia’s manufacturing value chains have followed this trend with the People’s Republic of China at the center. Two disruptions to the process merit a closer look: the PRC-US trade conflict: and the COVID-19 pandemic. In particular, this paper looks at whether regionalization supported resilience in Asia in response to these shocks and how it can be leveraged to achieve a faster, more robust recovery from the pandemic. The analysis pays attention to cross-region (between Asia and Europe vs North America) and cross-sector differences. Based on the assessment, policy implications are drawn, highlighting the balancing of risks and opportunities in a more regionalized recalibration of supply chains.
Connecting Eurasian Supply Chains: The Impact Of Covid-19 and the Russia-Ukraine War on the EU-China Rail Landbridge
AbstractInternational supply chains are dependent on ease of crossing borders and efficient connectivity in terms of price, speed, and reliability. Communication costs explain why intensification of international supply chains during the last four decades has occurred primarily within regional value chains (RVCs), centered on East Asia, Europe, and North America. Initially responding to demand from automobile and electronics firms to connect their European and Chinese supply chains with shorter and more reliable freight services than maritime shipping, the Eurasian rail Landbridge established in the 2010s was the first major overland link between RVCs. The Eurasian Landbridge was resilient through deteriorating EU-Russia relations after 2014 and the COVID-19 epidemic in 2020-21. However, following the Russian invasion of Ukraine and inclusion of the Russian rail company in western sanctions in February/March 2022, traffic along the main Landbridge routes ceased. This paper analyzes the evolution of the Landbridge as an exercise in choice of connectivity for Eurasian supply chains, the response of supply chain managers to the closure of routes, and the role of public policy in creating reliable alternatives.
The Impact of Covid-19 on Supply Chain Credit Risk
AbstractGlobal supply chains expose firms to multi-regional risks while also providing a buffer against local shocks. The recent COVID-19 pandemic and its differential impact on different regions in the world provide an opportunity to explore these effects.We examine multi-regional supply chain risk by focusing on credit risk as measured by CDS spreads and US-China supply chain networks. We find that local risks propagate through global supply chains to other regions. CDS spreads for firms with Chinese supply chain partners increase by 8-9 percent due to supply chain disruptions during the pandemic-related economic shutdown period in China, and the spreads decrease by 12-20 percent when the supply chain activities resume during the economic re-opening period. The household demand channel plays an important role in this risk propagation. We find that supply chain activity resumption is insufficient to decrease credit risk in sectors that cater to local households when the local economy suffers from dampened household spending due to economic shutdowns. Having a more global customer base mitigates the local household demand shock effects. Firm leverage and supply chain duration weaken supply chain resilience as reflected in credit risk during the pandemic, whereas supply chain network centrality, cash holdings, growth opportunities, and strong credit ratings increase resilience in global supply chains.
- F6 - Economic Impacts of Globalization
- O5 - Economywide Country Studies