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Has The Dragon Run out of Fire?

In the past few decades, China has evolved to become a major player on the world stage. A nuclear power with 1.4 billion people and a GDP of $13.6 trillion, China is big business. It has a Belt and Road Initiative spanning 65 countries and global investment plans worth $900 billion. It also owns $1 trillion of US public debt and, operating in other economies, it has undercut rivals and essentially blackmailed governments through debt traps. But China’s increasing global dominance has been called into question by its role in the coronavirus crisis, with many countries looking at moving away from the Eastern power. Will one consequence of this pandemic be a turn away from China?

Although China’s economic clout cannot be ignored, this crisis has crystallised and made commonplace a long-held opinion; China is a hostile global power only interested in itself and control. The country’s human rights record is appalling and it faces questions over its recent treatment of Hong Kong and Taiwan. Now, as President Xi has extended his term of office, it is likely that China will continue its progression to a technology-enabled totalitarian state, with increasing suppression of its adversaries. On an international front, it is becoming increasingly belligerent in the region and is protecting North Korea from economic and political reprisal. In diplomatic channels, it is pursuing a New Internet Protocol, which would put the internet under the control of governments in the name of “digital sovereignty”.

Although China’s economic clout cannot be ignored, this crisis has crystallised and made commonplace a long-held opinion; China is a hostile global power only interested in itself and control.

China’s response to the coronavirus has hardened opinion against it. Reports by the US security media suggest that China knew about the virus much earlier than it let on and that it knew the disease had transmitted to humans weeks before it instituted a shutdown. Doctors trying to warn the population were threatened and warned not to spread “rumours”, and people were allowed to leave Wuhan (the origin of the virus) for weeks after the first cases emerged. Eventually, China acknowledged the truth and began to release infection numbers, but these too are subject to doubt. There are also reports that people were being paid not to report new cases, and that officials are too afraid to report numbers lest they be fired or jailed.

Scientists suggest that 95% of virus cases may have been prevented if the Chinese government listened to whistleblowers, rather than trying to silence them. Instead of taking action, China began circulating conspiracy theories blaming Italy and America for the viral outbreak.

In a time when countries are being encouraged to work together, the Chinese state media essentially threatened to withdraw medicine and pharmaceutical ingredients from the USA – 80% of all antibiotics are imported from China. And the US, currently in the middle of a cold war of words with China, is seeing an unusual level of bipartisan support on the China question. As The Washington Post’s Josh Rogin reports, “Republicans and Democrats now largely agree that the Chinese government bears responsibility for the spread of the pandemic, that it can’t be trusted on this or any other issue, and that the US government should maintain a tough position on China on trade and overall”. Meanwhile, White House advisor Peter Navarro (who is know for hawkish views on China) hinted at a major change in the country’s trade policy with China when the crisis is over.

It’s not just the USA, however. In its coronavirus stimulus bill, Japan has put aside hundreds of billions of yen to help move its manufacturers out of China. The crisis has renewed talk of Japanese firms reducing their reliance on China as a manufacturing base, moving many key products back home and diversifying production across Southeast Asia. Imports from China slumped by almost half in February, forcing many Japanese companies to shut as they lacked necessary components. Here in the UK, the government is being heavily urged to reconsider a decision to allow Huawei to install a new 5G network. The company is openly backed by the state, and questions over security will be more pressing than ever.

There will likely be a turn away from countries importing so many of their key products, because these supply lines shattered as the virus struck. This would be bad news for the country – it is the world’s largest exporter, accounting for about 14% of all exports. Its growth rate slowed to 6.1% last year as a result of Trump’s trade war and, as a result, its GDP has shrunk this quarter – the country’s first decline since 1976. There is likely to be little domestic and international demand for goods, leading to an oversupply and many countries will be reticent to trust China’s activity in the crisis’ immediate aftermath.

China has very high exposure to the global economy and therefore will suffer the most from domestic and external threats, particularly as companies review their over-reliance on China.

China has very high exposure to the global economy and therefore will suffer the most from domestic and external threats, particularly as companies review their over-reliance on China. Production bases will be diversified and there will be repatriation to their home markets, weakening China’s grasp on trade. Its reputation will also be shaped by how it responds in the international sphere. As countries seek damages, with the US and others also mooting economic sanctions, China will either be forced to change some of its trade and business policies or become an international pariah state.

It should be clear – China will not become less powerful any time soon, but its role in the world is going to be scrutinised more heavily than ever before. China will remain important, but other countries are going to assert themselves in the face of Beijing after coronavirus. One major question remains: will the new global order see a reformed China as an ally, or the same China as a competitor and adversary?

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