Is China going to benefit from the Covid-19 and consequent lockdown?

%name Is China going to benefit from the Covid 19 and consequent lockdown?

China was the first to report a case of Coronavirus back in December. The debate can go on as to whether the virus was an error of judgement or a deliberate act of oversight or manufactured in a laboratory. The top scientists have rejected the Trump charge of viruses being manufactured in a laboratory in the Wuhan province in China. It is more likely a virus pandemic that was underestimated by most health experts. But that is off the point.

The real point is that while China may have been the source of the pandemic, it has also learnt its lessons very fast and shows it is most likely to recover rapidly post the pandemic. This could have larger implications for the way the post pandemic growth is managed at a macroeconomic level. China is just about coming out of a prolonged lockdown and the wheels of trade and industry are just starting all over again. Here is what China is doing to facilitate a recovery and growth post the pandemic.

Aggressive testing to continue in China

China’s State Council has already pledged to aggressively ramp up virus testing that will cover all people exposed to greater infection risks and allow everyone who wants a diagnostic test to get one. On learning from countries like China and South Korea is that large-scale and efficient testing is a key to containing the pandemic. That is where most of the US and Europe faltered. In the absence of treatment, the only way to slow the spread is massive testing, rapid contact tracing and strict quarantine. In the meanwhile, China accelerated approval of testing kits, widened market access to private companies and expanded testing capability. The country now has manufacturing capacity to produce enough testing kits for domestic use.

Policies to control imported infections

While the domestic infections are waning, China is still exposed to the risk of infections from in-bound travellers. China now requires inbound travellers to stay at designated quarantine sites for at least 14 days upon arrival. Some cities prone to higher infection risk are adding an extra period of home isolation for travellers. In addition, massive nucleic testing is being carried out among nearly thousands of people with overseas travel histories.

How the Chinese economy will benefit from the pandemic?

China is likely to be the first off the hook and hence best prepared to leverage best when the recovery starts. Here is how China stands to benefit.

  • China is still regarded as the most reliable suppliers to the global economy. But it now has some added advantages. Chinese production facilities are largely operational. Even during the peak of the Covid-19 crisis, except in Hubei province where Wuhan is located, China operated its production and distribution facilities.
  • The gradually shift from an export driven economy to a domestically driven economy has helped China in these tough times. Even as exports shrank 17%, the Chinese economy essentially remained intact and de-risked.
  • During the crisis, the advantage of a ‘disciplinarian’ state served better than a ‘liberal’ polity. The world has no option but to rely on a prospective supplier like China for their own survival. This also means that China gets an upper hand in pricing.
  • China owns the largest transport footprint globally. Its railway networks extend to Southeast Asia, Middle East and even to European nations. These will provide China with a clear economic advantage vis-a-vis its partners.
  • Most countries are now likely to look at China for help to contain the pandemic. In a matter of months, all these severely affected countries with production and supply chains badly disrupted will have no option but to import basic consumer commodities and medical supplies from China.
  • With most countries deep in debt, shifting production out of China is an unlikely option. At least the big guns like Apple are unlikely to do the same. The onslaught of the Covid-19 has pushed all other major world economies towards uncertainty with massive job and productivity losses. Ironically, China may emerge stronger from the crisis.

Covid-19 crisis may prove to be a blessing in disguise for China in terms of increasing its strategic influence globally.

 

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