Coronavirus is reshaping global economy

COVID-19 is dramatically reshaping global industry landscape. Tesla has supplanted Toyota Motors as biggest carmaker in the world in terms of market capitalization. In finance, the rankings of PayPal, an online payment service provider, and the Bank of America, the traditional banking powerhouse, have been swapped. Given that market capitalization often serves as bellwether of the company’s future value, all these recent developments reflect the fact that the coronavirus is accelerating the shift of the global economy.

The change is afoot in Korea as well. Of the 100 biggest companies in market capitalization, the fortunes of 97 entities have reshuffled except for the two on the top over the span of six months, and 10 are now missing from the list. Companies specializing in bio-tech, batteries, and IT have emerged, and businesses of cars, petrochemicals, aviation, and distribution have tumbled. Kakao and Naver have subdued Hyundai Motor Company in terms of market capitalization, and the first-generation ventures such as Celltrion and Seegene prevailed.

For now, the prospect of global economy is as murky as it gets. This year, the IMF put the growth of the world economy at -4.9%. The Korea Economic Research Institute estimated that the growth of the Korean economy will further dip from -1.7% in the first half to -2.9% in the latter. Exports are posting deficits for fourth months, service sectors are contracted, and even the manufacturing and the mainstay industries are faced with trouble.

The pressure from U.S.-China trade conflicts and the decoupling of supply chains will intensify down the road. The Trump administration is envisaging a new global supply system, dubbed the Economic Prosperity Network, that excludes China in the picture. Protectionism will be further entrenched in the U.S. regardless of the outcome of the U.S. presidential re-election in November, with Democratic presidential nominee Joe Biden who is vowing to mobilize an oversized budget for the purchase of American products. The rule of the game will be written anew as European and Japanese players serve mutual interests when necessary, exploiting the vacuum left by Beijing and Washington.

But a crisis always accompanies an opportunity. In 1997, Korea faced the financial reserve crisis but managed to turn it into a new opportunity through restructuring and downsizing on a massive scale. Many firms went belly up, but survived companies, which grappled with poor governance and excessive debt, have morphed into global players with efficiency and competence.

COVID-19 will nudge not only traditional industries such as auto, electronics, and distribution, but other sectors, including medicine and education, into pursuing digitalization, untact service, and eco-friendly business. Industries that lack a competitive edge or a future prospect must be cut off to improve the fundamentals and nurture a new growth potential. Companies must spearhead innovations, and the government must provide ample support to revamp our economy.