Economic Downturn: Is China Better Prepared than Rest of the World?

Economic Downturn: Is China Better Prepared than Rest of the World?

China has managed to grow its exports in April as the rest of the world grapples with screeching halt for economy. The country where novel coronavirus was first detected is already ranking on number 11 worldwide in terms of infections. China has managed COVID-19 outbreak and its economy is already back with full force.

China is set to gain in many ways from the COVID-19 pandemic and Chinese government is in a much stronger position compared to other governments regarding support it can provide for economic revival. Chinese economy will also gain from lower oil prices.

Countries depending on oil exports will face massive cuts in government spending and this will further cause troubles for these economies. These countries include Russia, Saudi Arabia, Canada, Norway, Venezuela, Nigeria, United States and other oil producers in the Gulf.

Reports from India in April suggest that China had picked up stake in one of the biggest financial services company HDFC in India. As stock prices tumbled, Chinese funds planned to buy stake at cheap valuations. Indian government moved quickly by adding new regulations for any investments in stock market from Chinese funds. China opposed the move taken by India but for the moment, India has safeguarded its interests. If China was allowed to buy more stake via stock markets, Chinese move would have given them the power to comment on management decisions in some of the Indian companies.

Talking about China’s long term strategy, Andrew Leung, international and independent China strategist said, “The state can direct massive funds and mobilize businesses and people more effectively than the West. The same capability was demonstrated during the Asian financial crisis of 1997-98 and the world financial crisis of 2008-09.”

After US President Donald Trump blamed China for not informing the world about the risk associated with coronavirus, many other countries have put the blame on China for the major trouble caused by pandemic. Chinese diplomats have been working hard to counter any such ideas via local news media, social media and policy talks with different countries. Trump has been vocal about China and its policies but his trade war with China hasn’t helped US business to the extent he claims. It has helped the government to generate more in terms of tariffs but this money has come from the pockets of American consumers, not from Chinese manufacturers.

Leung added, “There is a tsunami of negative views about China as a result of the spreading coronavirus crisis. America’s bad-mouthing has also helped. But China remains by far the second-largest economy, bigger than the rest of the BRIC countries combined.”

The world can blame China for the spread of coronavirus but the fact remains that the world depends on China for many goods and commodities. In order to bring a change in sourcing from China, countries will need a long term strategy, investment in local business and investment in infrastructure. And, considering the economic impact of coronavirus, no government will be in a position to spend so much of money to help local industry to be competitive with Chinese industry.

So, it would be prudent to skip the talk about ban on Chinese goods or shift production locally. To put things in perspective, majority of fresh and dry ginger imported by Europe comes from China. And, this is happening while Europe has many regions that could be developed as hubs for agricultural production. If Europeans choose to be lazy and move away from basic agri-commodities, it will quite a difficult task to compete with cheap Chinese manufacturing.

(The opinion expressed in this article is of the author and not TopNewsMedia)