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Emerging Economies Have a New Imperative

The COVID-19 pandemic has forced companies and governments around the world to reconsider long-held assumptions about economic-development strategies. Nowhere is this reckoning more urgent than in export-oriented emerging economies, which now must focus on supply-chain resilience on top of everything else.

SHANGHAI – For the last 25 years, revolutions in communication and transportation technologies have allowed companies to create truly global value chains. Those processing raw materials were linked up with manufacturers of inputs and parts, which were in turn linked to the companies that assemble and package final products, and then to distribution channels extending to consumers around the world.

In the two decades before the COVID-19 pandemic, the annual value of intermediate goods exported across borders tripled, to more than $10 trillion,giving rise to an intricately choreographed production system. But, because these global networks have evolved to reduce costs through maximum efficiency, they can be brittle, and sometimes will snap under pressure.

Hence, every country involved in the world’s production networks must understand its risk exposure, and build more resilience where it is needed. For emerging economies seeking to expand export-oriented manufacturing, the implications of this global reckoning could be far-reaching.