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Global Value Chains and COVID-19: An Update on Machinery Production Networks in East Asia

Global Value Chains and COVID-19: An Update on Machinery Production Networks in East Asia
26 November 2021
Mitsuyo Ando, Kazunobu Hayakawa
COVID-19, East Asia, global value chains, industry and manufacturing

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Although global value chains (GVCs) are prone to the contagion of shocks through supply chains, machinery international production networks (IPNs), a sophisticated version of GVCs, have proven their robustness and resiliency in past shocks in East Asia. During the coronavirus disease (COVID-19) pandemic, worldwide machinery exports significantly declined in April and May 2020. Compared with the general and electric machinery and precision machinery sectors, the negative effects were by far more serious for the transport equipment sector, particularly in North America and Europe. These exports, however, returned to their pre-pandemic levels by September 2020, showing a rapid V-shape recovery in all three machinery sectors. Machinery IPNs, particularly those in East Asia, tend to be robust and resilient, with positive demand shocks that partially mitigate negative supply and demand shocks. In 2021, GVCs have faced several challenges, including a shortage of containers and semiconductors as well as the emergence of the delta variant of COVID-19. Although some countries and sectors have faced sporadic declines recently, East Asia has maintained its machinery exports beyond the pre-pandemic levels, at least at the regional level until August 2021, unlike in other regions. Maintaining the active utilisation of GVCs may be important as one of the key development strategies for East Asia.

Global Value Chains and COVID-19: An Update on Machinery Production Networks in East Asia


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