Increasing share of china in manufacturing

For decades, the world embraced an interconnected, interdependent global economy that promised unparalleled growth, access to resources and free flow of goods, services and ideas.

In contrast, in the future, the economic policy landscape will be anything not predictable earlier. Global expansion is being replaced by a more fragmented and localised approach to growth.

Two features of this new emerging reality – geo-economic fragmentation (GEF), and China’s manufacturing prowess and strategic dominance, accentuated by global dependency on it for energy transition efforts – need to be understood to decipher the implications for growth.

Consequences and costs of GEF are propagated via all channels, by which countries engage with each other economically, trade being the main channel.

According to Global Trade Alert Data, between 2020 and 2024, nations have imposed over 24,000 new restrictions related to trade and investments on each other. This has slowed down global trade growth significantly, and signs of stagnation are beginning to emerge.

The impact of GEF is also observed in global FDI flows, which are increasingly concentrated among geopolitically-aligned countries, particularly in strategic sectors.

According to an estimate, between 2000 and 2030, China’s share of global manufacturing is projected to increase from 6% to 45%. China’s rise as a manufacturing behemoth is seen in automobiles (especially EVs), manufacturing, mining and refining capacity for critical minerals (copper, lithium, etc) and in clean energy equipment.

Over the last decade, global solar photovoltaic (PV) cell manufacturing capacity has increasingly moved from Europe, Japan and the US to China. Its share of solar panels exceeds 80% in capacity. Nearly 70% of the world’s rare earth minerals, critical resources for high-storage batteries, are processed by Chinese companies. China dominates global distribution of critical minerals and other economic resources.The road to energy transition runs through China for several nations.

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