Despite the spreading of COVID-19 epidemic worldwide, the global economy is becoming more digital, multipolar and networked.

Back to five decades ago, that is, since the 1970s, the booming information technology revolution has brought the global industries together more closely than ever before. Since then, economic globalization has developed rapidly. Economists have studied the new characteristics of industrial labor division and coordination worldwide, and formed the important consensus of Global Value Chains (GVCs) in the early 21st century. This consensus has also become an important discourse system in the field of international economy and trade.

In the second decade of the 21st century, with the advent of a new round of technological revolution and industrial transformation, the trend of networking, decentralization and industrial boundary integration of GVCs is becoming increasingly obvious. There is no doubt that Global Value Networks (GVNs) can better reflect the new development trend of economic globalization than GVCs.

A multi-dimensional upgrade of GVCs

As a product of Globalization 3.0, GVCs will gradually cease to exist.

In domestic and foreign economic circles, it is generally believed that economic globalization since the industrial revolution has gone through three stages. The first stage was before World War I when economic globalization had come a long way to 1.0, with Britain taking the dominant position. The second stage was after World War II, when the industrialized countries in Europe and the United States led the establishment of rules and regulations for international order and governance system, and generated Globalization 2.0, in which the United States played a leading role. The third stage was Globalization 3.0 since the 1970s, marked by the rise of transnational outsourcing, which led to the formation of GVCs. At this stage, in the early period, Japan and the four rising powers of Asia, namely Taiwan, Hong Kong, Korea and Singapore developed rapidly. In the later period, with the end of the Cold War, especially China’s accession to the WTO, the rise of emerging markets further enriched and developed the GVCs.

According to the definition of the United Nations Industrial Development Organization, GVCs refer to the global cross-enterprise network organization connecting production, sales, recycling and other processes to realize the value of goods or services. As an operation mode of industrial organization, GVCs have brought many countries and regions into the process of economic globalization.

However, it should also be noted that the GVCs, as products of economic globalization, are formed under the leadership of multinational corporations in developed countries and rely on the post-World War II international economic governance system.

The international financial crisis in 2008 ushered in a new period of great changes in economic globalization. An important reason was that the dividend of the last round of scientific and technological revolution was largely used up, the total factor productivity representing technological innovation stagnated or even declined, the global economy underperformed in replacing old drivers with new ones, the separation between the fictitious economy and the real economy became increasingly serious, and the income distribution gap was stuck in a worsening dilemma. As a result, in the recent decade, trade protectionism, unilateralism and populism have intensified in some countries, economic globalization has experienced twists and turns, and it seems that the global economic governance system has been losing its sense of direction.

At first sight, the COVID-19 epidemic has indeed obstructed the industrial and supply chains, but it happened to bring about an obvious change in the patterns of production, circulation, consumption and distribution worldwide. In essence, human society’s demand for products and services with good price and quality will not alter, such economic laws as labor division, coordination and complementarity will not be outdated, the trend of trade liberalization will be irreversible, and the tide of economic globalization will be irresistible. Therefore, in the coming period, we will see such a picture: on the one hand, protectionism is increasingly intense and anti-globalization is rampant; on the other hand, the network and related technologies are progressing continuously, the industrial forms are rapidly integrating, and the value creation activities are carried out in the close connection and cross-cooperation of multiple value chains.

As early as in 2016, at the China Development Forum, Robert Koopman, chief economist of the World Trade Organization, once said that the GVCs have formed a network, which contains both foreign and domestic value chains, affecting both multinational corporations and small and medium-sized enterprises.

Indeed, as a new mode of value creation in human society, GVNs will become a new platform for new economic globalization. The current dilemma of global governance happens to signify that industrial transformation and new economic globalization are being nurtured, the evolution of international economic and trade patterns is accelerating, the trend of world multi-polarization is becoming more obvious, and Globalization 4.0 is approaching. The emerging GVNs reflect the general trend of a new round of technological revolution and industrial transformation. It is a “new global operating system” with both inheritance and innovation, and can become a multi-dimensional upgraded version of GVCs.

GVNs make labor division and coordination more efficient

By GVNs, labor division and coordination worldwide can be conducted more systematically and efficiently.

Nowadays, the great improvement of transportation conditions and the extensive application of advanced communication technology have provided strong support for the realization of integrated land, sea and air transport. The energy revolution is creating new ways to produce, transport and consume energy. Artificial intelligence, Internet of Things, cloud computing, big data, blockchain and other technologies are developing by leaps and bounds. Such business model innovations as cross-border e-commerce, mobile payment and private equity sharing are constantly emerging. Transboundary integration and integrated innovation of technology and business models in various fields are generating new models and approaches for regional and global economic cooperation. Large scale, wide-field, long-distance and ultra-precise global industrial coordination is gradually turned from conception to reality.

The way of global industrial organization is changing from center-edge model to decentralization-multicenter model. For example, in the past, multinational corporations used to rely on the central headquarters to issue instructions to branches around the world to jointly find new markets and customers. Nowadays, the role of the central headquarters is weakening, while that of the peripheral centers is strengthening. IBM has its procurement headquarters relocated to Shenzhen, China, global service delivery center located in Sao Paulo, Brazil, human resources headquarters in Manila, Philippines, customer support headquarters in Brisbane, Australia, and technical sales support headquarters in Kuala Lumpur, Malaysia and Bangalore, India. Similarly, whereas IBM used to rely solely on more than 160 unconnected “mini-IBMs” that were rooted in markets all over the world to maintain its operation, the customer demand from any country or region may be delivered to other countries and regions for processing where there are the most matching talents and the most appropriate costs.

In terms of GVNs, the traditional national manufacturing has evolved into global manufacturing, the borderless production and service systems have taken shape, and the labor division and coordination worldwide based on industrial integration have been carried out in an all-around way. It’s predictable that in the future, multinational corporations, international organizations, non-governmental organizations, financial institutions, even small and medium-sized enterprises, and even families and individuals are the center, will act as a center but not in the form of a center. However, they will all be important nodes in GVNs, connected by creating and sharing value. Moreover, the addition of each node signifies a great enhancement in the value creation capacity of the GVNs.

GVNs will foster a high degree of integration

The GVNs will promote a high degree of integration between the three industries and the production, circulation and consumption.

With the continuous innovations in the science and technology and the system, the increasingly globalized allocation of various resource elements will redefine the relationship among production, circulation, consumption and distribution, and unprecedentedly shorten the space-time distance among countries, nationalities and people, thus bringing about a series of profound changes in human economic patterns, modes of production, living habits, interpersonal relations and thinking paradigms. Global value creation has changed from the separation of production, circulation and consumption to the integration of the three.

A study by Cisco predicts that in 2025, there will be 100 billion devices in the world that can be connected, and each device will be equipped with a large number of sensors, which will promote a high degree of integration of the three industries, completely break through the boundaries of traditional value chains, and create a value-networked world. All market players, even all countries and nationalities included in the GVNs, will truly become an integral part of the world economy, thus laying an important foundation for building a human community with a shared future.

The reason lies in the fact that the global supply chains are shifting from a linear model to a three-dimensional layout and multi-point crossover model.

Taking 3D printing technology as an example, its extensive application and the global layout of industrial networking are making the industrial chain and supply chain of the whole industrial system develop from a linear model to a diversified, three-dimensional and networked orientation. In the era of traditional GVCs, it took several years for a new product to be launched. However, in the era of GVNs, from product creativity to prototype making, then to crowdfunding for production, and sales, the product birth cycle is greatly shortened. Manufacturers can get timely feedback from customers about the new product and carry out improvement and iteration quickly. In the future, 3D printing equipment will be distributed in communities and even families, and users themselves can become the designers and producers of products as well.

While the manufacturing industry is changing to be flexible, personalized and family-oriented, the logistics industry will change, storage and finished goods transportation will decrease significantly, and profits for middlemen will become very low.

GVNs is conducive to tackling the challenges together

By GVNs, the human society can better tackle various risks and challenges at present together.

The non-traditional security threats, such as unbalanced development, climate changes, environmental pollution, terrorism, public health events, resource crisis, food crisis and financial crisis, are becoming common problems for human society. Countries around the world have realized again and again that no country can be an “isolated island”.

In fact, for the sake of so-called interests and security, it is neither possible nor realistic for the world to simply turn back to the world of the Cold War era or even before it; it is also difficult to “retreat group”, “have priority”, be alone and take the lead. All countries must cooperate effectively, take precautions, or face crises rationally and jointly overcome difficulties to minimize the extent of losses.

Historical experience tells us that the booming new round of technological revolution and industrial transformation is an important condition for solving these problems, and undoubtedly it’s required to match them with new global public products and effective operation rules. GVNs are an important platform for promoting inclusive and sustainable development around the world.

Take technological innovation as an example, the technological innovation model in the world nowadays is shifting from the closed and exclusive model to the cooperative network model. It is difficult for large enterprises to adapt to the market competition in the future by relying solely on internal resources for innovation. More and more technological innovation is now being driven by numerous small and medium-sized companies, and even some of the major basic research led by the government is being replaced by private laboratories. Transboundary integration and integrated innovation in different regions and technology fields are creating new models of global cooperation. A case in point is that the private companies SpaceX and “Blue Origin” have been rising based on comprehensively utilizing global innovation resources. They are advancing side by side with state power to usher in an “age of interstellar voyages”.

Four ways to construct GVNs

This time, countries, industries and enterprises around the world are actively responding to the challenges posed by COVID-19, which further proves the general trend of new economic globalization, e.g. GVCs networking. How to construct GVNs? We need to start from the following aspects:

Create a global trade network more perfect and efficient. The construction of GVNs will enable the global trade system to get rid of the fetter of international governance system left behind by the Cold War and create a global trade network more perfect and efficient. The World Trade Organization should embody the concept of “GVNs” in the formulation of digital trade rules. The major powers should adhere to the concept of responsibility, rational restraint and win-win coordination, devote themselves to the development of an open world economy, support multilateralism, and pursue democratization and legalization for international economic governance.

Construct more flexible global supply chains and industrial chains. Developed economies should leverage their advantages of advanced technology, developed infrastructure, intensive capital and high-end talent gathering to improve the global industrial chains and supply chains instead of turning themselves into “isolated island economy”. Instead of fearing or resisting globalization, developing countries should seize the major opportunities of building GVNs and build on the good momentum to provide new impetus for global economic growth. China is forming the most important consumer market in the world. With abundant human resources and a relatively complete industrial system, China should join the rest of the world in building GVNs, which will make a great contribution to improving global industrial chains and supply chains and promoting economic growth.

Form a more inclusive global economic development pattern. Taking the construction of a global education network as an example, it can create an open education platform, gather global high-quality education resources in a wider scope and to a greater extent, form a global program to bridge the digital divide and promote inclusive development, comprehensively raise the global education level, and transform the large population dividend of developing countries into the quality dividend. This is especially true of the global science and innovation network, which can gather innovative talents and resources from all regions and fields of the world, build a huge innovation community with collective efforts and wisdom, and make full use of the network power to generate more innovation results.

G20 should contribute to constructing GVNs. As an important platform for global crisis response and economic governance, G20 has brought together major developed economies and emerging market economies, which had played an important role in tackling the international financial crisis in 2008. Therefore, G20 can be taken as a framework to call on all economies to jointly construct the global financial safety network, global intelligent manufacturing network, global science and technology innovation network, global energy network, global education network, global culture and tourism network, global public health safety network, global environmental protection network, etc., and explore and formulate corresponding operation rules on the basis of inheriting and making breakthroughs in the existing international governance system, and attract participation of market players around the world, to jointly generate value in many aspects, foster new markets and enjoy development dividends in various aspects.