Edward Tse's Blog

March 23,2020articles

Summary | How the Coronavirus Could Impact Global Supply Chains​

On March 11, Gao Feng Advisory’s CEO Dr. Edward Tse was invited to join the Caixin Webinar on the impact of the Coronavirus epidemic on global supply chains.

Key points by Dr. Edward Tse at the Webinar:

The havoc to a company’s supply chains depends on its industry.

  • For apparel, toys and shoes making industry, the coronavirus epidemic did not affect them too much. These industries are labor intensive and cost driven, so the shift of supply chain from China has started since over a decade ago.
  • Due to the importance of the US market, the decision to build plants in the U.S. will be more customer-responsive, and help them better cater to the exports. (But they may not have to close down their China factories.)
  • For consumer electronics and automotive industry, the companies are most disturbed. These industries are involved in sophisticated supply chains. Although supply bases are located in different countries, the final assembly base is usually in China.
  • The decision to move out of China has to be careful in making, since it involves the entire supply base and takes years of planning. The importance of China and its consumer market has also to be considered.
  • The probability of global supply chains fully resume will be 80% in a couple of months, and over 90% or close to 100% by the summer or late summer.

There will be profound changes to China’s governance system.

  • China has developed into a very unique “3-layer development model”, with the central government at the top, the entrepreneurial companies at the bottom and the local government being a link in between.
  • The model works well for economic development, but it may not be adequate to fully address a new public agenda, such as public health.
  • China’s governance system will have profound changes and become more transparent and accountable.

There will be a safer and more health-conscious living environment in China.

  • The safe and healthy living environment is now considered equally, if not more important than economic growth.
  • The value chain of healthcare will be extended to cover early detection and prevention, both of which are crucial for a future public health and management system.
  • Future application scenarios will include more participants and promote a comprehensive ecosystem for public health agendas.

Innovation and entrepreneurship will become more prevalent in China.

  • After decades-long rising, entrepreneurship and innovation will further accelerate to address the pain points that were exposed during the coronavirus epidemic
  • Entrepreneurs, as private sectors, are also expected to be much involved in Public Private Partnerships (PPP).
  • There will be more collaboration between private and public sectors to create solutions addressing public agenda issues.China will play a more responsible role in the world.

    • Enhancing the public agenda is not just a China issue but also an international one, for the whole human beings.
    • Issues such as climate change, public health and financial risks, all transcend across national borders.

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Founder & CEO of Gao Feng Advisory Company, a global strategy and management consulting firm with roots in China. —learn more

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