Global production landscape a result of market competition, international division of labor

BEIJING, May 14, 2024 /PRNewswire/ -- A report from People's Daily: Since the Industrial Revolution in the 18th century, the continuous development of productivity and economic globalization has led to the accelerated flow of production factors worldwide.

As a result, the distribution of manufacturing capacity in different countries and regions has been constantly changing, forming a dynamic global pattern of production capacity.

This is an objective phenomenon determined by economic laws under market economy, which requires a science-based and rational understanding.

The global production landscape is a result of economic globalization. Under open market economy, an international division of labor has been formed due to the comparative advantages of countries. Through international trade, they share the benefits brought about by this division of labor and specialization. This is the inherent logic behind economic globalization and free trade.

For example, according to a report by the Semiconductor Industry Association of the United States, semiconductor companies headquartered in the United States reported total sales of $275 billion in 2022, accounting for 48 percent of the global market. In the $180.5 billion semiconductor market in China, American companies held a share of 53.4 percent.

Another example is Japanese carmaker Toyota. The company sold nearly 10.31 million vehicles worldwide in the 2023 fiscal year, and nearly 8.78 million were sold outside Japan.

This situation, where production capacity exceeds domestic market demand in a country, is not "overcapacity" as claimed. Instead, it is a natural phenomenon of international division of labor and specialization based on comparative advantages during the process of economic globalization. It is one of the manifestations of market mechanisms.

The global production landscape is a result of the law of value. In market competition, capacity with higher production efficiency can obtain higher profits by offering lower prices, thereby eliminating capacity with lower efficiency. In this process, the coexistence of efficient and inefficient capacity is not indicative of overcapacity, but rather a necessary stage for the law of value to take effect.

For instance, with technological advancements and the growing popularity of green development concepts, new energy vehicles are gradually replacing traditional fuel-powered cars.

According to the International Energy Agency's "Global Electric Vehicle (EV) Outlook 2024" report, global EV sales reached nearly 14 million units in 2023, accounting for 18 percent of the total. It is projected that by 2030, 1/3 of cars running on Chinese roads will be electric, while the proportion in the United States and the European Union is expected to approach 1/5.