23rd Parliamentary Intelligence-Security Forum – Global Supply Chain

Mr. Derek Scissors, a member of the congressionally mandated U.S.-China Economic and Security Review Commission, contended that the global supply chain model predicated on cost minimization and profound integration with China is unsustainable. He asserted that under Xi Jinping’s leadership, China has deviated from market reform towards increased state control, anti-competitive policies, escalating debt, demographic decline, and a strategy of “dual circulation” aimed at diminishing China’s reliance on foreign economies while augmenting global dependence on China. Scissors cautioned that this paradigm engenders long-term structural risks and short-term coercive leverage, particularly in sectors such as semiconductors and pharmaceuticals, where upstream inputs remain heavily China-dependent even when final manufacturing occurs elsewhere. He underscored the imperative for comprehensive supply chain transparency across all tiers, emphasizing that markets operate most effectively with complete information. He cautioned that a failure to proactively diversify could result in abrupt and destabilizing disruptions in the event of conflict, such as over Taiwan. Ultimately, he asserted that the cost-minimization era will conclude whether gradually or abruptly and policymakers must establish a novel organizing principle for supply chains that prioritizes security and resilience over lowest-price efficiency, even if that entails higher costs.