How the post-Covid world will impact China
Thank God for Latin, otherwise, just like BC ("Before Christ", now "Before Corona"), AD too would have fallen victim to the Coronavirus! So far, we remain in anno domini and let us not rush to herald or bemoan the hegemony of the dragon. The Covid-19 pandemic has now raged for nearly four months with the staggering death toll continuing to climb across the developed countries in the West. More pain is forecasted, with GDP in the West set to plummet by as much as 10 per cent in 2020.
In recovery mode
The past three decades have seen China rising dramatically from a developing country to the second-largest economy in the world. It has also successfully pursued its hegemonic ambitions both in its neighbourhood and globally through the Belt and Road Initiative. The latter found fertile ground in Europe with several economies reeling from the 2008-09 recession and desperate for foreign investment.
The United States had an aggressive administration targeting China but went along with striking of deals. Indeed, one was signed just before the pandemic broke out in the US. At the same time, China — the country where the virus originated — appears to have handled the pandemic well and is returning to normalcy with only a handful of new cases. Its economy seems to be in recovery mode, and it may even claw back to maintaining its HGDP level.
More ominous are reports that the Chinese are in the race to develop a vaccine to counter Covid-19 and again the world may have to turn to them, just as they had to for PPE and testing kits. But, let us not sound the trumpet just yet. This pandemic is set to change the way the world operates. Public health and economic security, in general, will now receive the attention larger economies have previously reserved for defence. We can expect shorter supply chains and potentially kept within national borders, across sectors, including health, food and energy.
We are already seeing major companies looking at possibilities of relocating some of their production units out of China with Japan, ASEAN and India wooing them. These are not insignificant costs, and these changes will harm China's economy in a big way.
Moreover, the pandemic has fuelled further reliance on technology, which in turn pushes for greater use of human-replacing AI and robotics. The Chinese have been doing well in today's high-tech areas (5G being an example) but critical technological innovations and breakthroughs remain western and well-enforced technology restrictions will hugely hurt them. Indeed, since these technologies reduce the need for human-power, the advantage of cheaper labour will be lost on China as well.
Nativist behaviour
According to the IMF, global GDP at the end of 2019 was around US $87 trillion. Of this, the US and EU-countries taken together account for $21 trillion and $19 trillion, respectively. Adding Japan, UK and a few others, the West's share of global GDP is around 60 per cent. But these countries have recently faced schisms in their traditional bonds of camaraderie, spurred by nativist behaviour.
China was riding on this shaky coalition and taking advantage of the Europeans who have lagged on leveraging their aggregate potential leaving the world with a general view that they are somewhat lost. This, however, hugely belies the truth given their considerable strengths exemplified, even in the Covid context, by the fact that the likely first vaccine in an Oxford effort, supplemented by a manufacturer in India. And, let us not forget that the company that was being lured to bring its Covid vaccine research to the US was German!
Stand together
The massive common hurt caused by Covid-19 coupled with the stark realisation that China is a major threat should catalyse coalescing among the US and Europe, no matter the results of the US Presidential election in November.
Effectively ring-fencing technological innovation and restricting economic access for investment can itself raise the bar and dash for quite some time Chinese hopes that a divided West would let them rule. Propelled by the size of its population, China was well on its way to becoming the largest economy in the world. But at $14 trillion, it is yet only 15 per cent of global GDP in nominal terms. And, in per-capita income terms, only ranks 65 out of 186 countries. Its rise in recent years may have been meteoric but the numbers appear to indicate that the Covid-19 pandemic may have caught it wrong-footed. CE would continue as the Common Era and not find itself transformed into the Chinese Era.
(Courtesy of Mail Today)
Also read: How a changing global order will emerge in the post-Covid world