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Another crisis awaits China, the biggest beneficiary of globalization

Another crisis awaits China, the biggest beneficiary of globalization

Posted March. 23, 2020 07:37,   

Updated March. 23, 2020 07:37


All eyes have recently been on a Chinese student named Yao Yao across Chinese social media platform Weibo, who successfully came back home from Italy where he studied. With the COVID-19 pandemic worsening across Italy, he decided to return to his hometown, Shenzhen in Guangdong Province, China.

Yao Yao did neither eat nor drink anything with his mask on for 28 hours all the way from Italy to his final destination via Abu Dhabi and Beijing. His pitiful story has garnered widespread support online being described as a so-called “textbook way of return.” However, the number of coronavirus infections from overseas are worryingly on the rise in China due to an increasing number of Chinese citizens evacuating European countries and the United States in the belief that China is a safer place to stay. The unexpected development has puzzled Chinese health authorities, which have confidently boasted about having none of new infections reported at home.

In response, the Chinese government has put tight entry control in place while ordering international flights to Beijing to arrive at an airport near its capital city instead. The recent prohibitive measures are not line with Beijing’s criticism over other countries closing the door to Chinese citizens at the peak of the pandemic across China. A series of aviation limits have wreaked havoc on major Chinese airlines, including Air China with the number of their passengers in February nosediving over a whopping 80 percent on a year-on-year basis.

Added to that, the global supply chain is suffering from the ever-tightening of border controls across the world. It is a relief that China-based factories have resumed production since the slowdown of the virus at home. Nevertheless, their comeback does not translate into 100 percent operation as they fall short of raw material due to global supply disruptions. According to the U.S. Chamber of Commerce’s survey of 237 businesses located in southern China, 32 percent face supply shortages of raw material.

Overall, the Chinese economy has been hit hard by the decreasing consumption demand across the globe. Despite the resumed operation last month, a Hangzhou-based auto part company sees its orders decline 30 percent in volume compared to normal levels due to decreases in demand not only in China but also in South Korea and Japan, according to The Washington Post. U.S. shoemaker Steve Madden and electronics fabricator Best Buy produce 73 percent and 60 percent of their products within China, respectively, said U.S. analysis firm Coresight Research. This implies that decreasing demand in the U.S. market driven by the COVID-19 outbreak can shrink factory production in China, then affecting the Chinese economy as a whole.

Beijing finds itself in a position to face the economic consequences of global supply disruptions and shrinking demand although it has been waiting for the perfect timing to declare its victory in the war against COVID-19. The world’s No.1 beneficiary of globalization seems to be just a few steps away from becoming the biggest victim of a growing headwind in the globalized market. The Chinese government alone is not able to fight against the second crisis coming on the scene unlike COVID-19 within the country.

Regrettably, the United States and China, the two biggest economic powerhouses highly interdependent in terms of production, consumption and trade, are pointing an accusatory finger at each other while wasting time arguing over coronavirus responses and accountability as an epicenter. Worryingly, the ongoing U.S.-China tug-of-war will inevitably offset efforts by the rest of the world to beat the coronavirus-induced shock to the global economy.