There was reason to expect that the Chinese economic juggernaut would be halted in its tracks was the news of a highly-infectious virus spreading like a pagan plague through the city of Wuhan in January 2020. However, almost a year later, remember the headlines about China’s economy, almost all of which point to the strong reliance of the world on China. Paradoxical enough? Isn’t it?
Well, through this article we’ll be walking through the gigantic economic success of the Republic of China despite the devastating coronavirus birthed in Wuhan.
Ahead of Christmas, enormous quantities of Chinese goods were exported to the West that the world experienced a lack of shipping containers because China ships three times the amount of sea freight it imports. In December, a Reuters report noted that “the cost of chartering a 40-foot container from China to the US East Coast increased 85 per cent from June 1 to a record $4,928 this week.”
In November, exports from China amplified by 21 per cent. In fact, the economy of this country is the only major economy in the world on track to report positive growth of about 2 per cent in 2020 and potentially 8 per cent in 2021.
For the time being, despite the Narendra Modi government’s astonishing claims that India could supplant or greatly complement the position of China as the factory of the world, there is little evidence of this. Well, talking about the numbers to support this claim, in the month of November, India’s exports decreased by 9% which is the utmost contradiction to what the government claimed. On these pages, I argued earlier that the dense and interconnected supply chains of the Chinese economy and the immense share of global exports made such a change in India’s favour almost seemed unlikely in the short term.
In reality, for the first 11 months of 2020, China’s global trade surplus was $460 billion, up by a quarter. To give you goosebumps, this surplus is greater than India’s cumulative annual exports of merchandise. If evidence was needed that China has conclusively won the trade war with the United States, it could be resolved by posting a record trade surplus of $75 billion in bilateral trade between the two giants in November.
Arvind Subramanian, former chief economic advisor and author of “Eclipse: Life In The Shadow Of China’s Economic Supremacy”, published about a decade ago, said, “Round one has gone to China and it is a knockout.”
This strong economic lead taken by China in 2020, combined with China’s highly aggressive geopolitical position in Asia and beyond, needs to be treated seriously. In pursuit of methodical deregulation and the building up of our manufacturing and military capacities, wishful “Chindia” economic convergence formulations spoken by Indian businessmen and ministers at Davos-style events must be discarded.
India must strive to join them instead of being tentative and opposing trade groups such as the Regional Comprehensive Economic Partnership, particularly in the case of a reshaped Trans-Pacific trade grouping that the Biden administration is likely to press for with wider involvement so that India’s producers are embedded in global supply chains.
Subramanian expects that 2020 would only raise the morale of Beijing. “Referring to China’s massive stimulus, which supported global demand after the collapse of Lehman Brothers, led more than a decade ago to the global financial crisis, and now to China’s resilience in the face of Covid-19, he said: “In the wider sense of the US competition, he said: (Beijing would argue) ‘They cluttered on the GFC and now we’ve easily come out of it again on covid and saved the planet.’
This image of a gigantic but still agile Gulliver with a rising stranglehold on global trade is a troubling one since 2020 was also the year when Beijing seemed systematically hostile in its relations with the world, from frequent incursions into the airspace of Taiwan to blatant de facto annexations along the Line of Actual Influence with India.
In Hong Kong, the increasingly direct ownership over one of the world’s leading financial capitals defied the terms of the power transition deal negotiated with the United Kingdom decades earlier, pledging a decentralized local government and a UK-style independent judiciary. Global investment banks can only stand by and wait, and the world at large. Hong Kong’s most influential media tycoon was refused bail on accusations of unlawful use of company property in early December.
Disproportionate reprisals have been faced with threats to stand up to Beijing. A case in point is Australia’s condemnation of China’s actions in Hong Kong and its call for a foreign inquiry into China’s initial treatment of the virus outbreak, as well as Canberra’s decision not to allow Huawei to be eligible for 5G procurement.
Long customs inspections armed as non-tariff obstacles in November led to the death of Australian rock lobsters worth $3 million as shipments waited to be unloaded at Shanghai’s port. China dramatically raised tariffs on Australian imports ranging from wine to iron in contravention of the newly inked RCEP.
Ironically, in order to emerge ever stronger, China has used the uncertainties of the year and the current trade war started by the Trump administration. President Xi Jinping has consistently spoken in recent months about China’s “dual circulation” approach aimed at reducing its dependency on international markets and technologies.
What sounded like another impenetrable example of Communist double-speaking has turned out to be a proactive reaction to the efforts by the Trump administration to refuse China access to imports of high technology.
The facts of the trade war were aggressively challenged by Beijing and bolted on its Made in China 2025 goals declared five years ago. Beijing, in effect, needs to speed up the timeline and place it on a (Cold) war basis. As the New York Times explained in late November, “China wants to become less dependent on the world for its own needs, while making the world as dependent as possible on China.”
Some analysts caution that a preparation for further hostilities may be “dual circulation.” James Kynge, author of China Shakes the Globe, said, “If you ask me what dual circulation is, it’s to isolate China. Speaking of China’s belligerence on many fronts, ranging from the fake photo of an Australian soldier slitting the throat of a child in Afghanistan tweeted by a Chinese foreign ministry official in December to his border battle with India.” (The mentality is) ‘If we attack Taiwan, we do not suffer.’
He cautions that the risks of nuclear conflict over Taiwan, which Beijing considers as part of China, are rising dramatically over the next few years. “If I were an investor, I would be very serious about taking a political risk,” Kynge said.
When President Tsai Ing-wen of Taiwan won a thumping 57 percent of the vote in January 2020 to secure re-election, her first press conference was bold and clear. She said China should take back its often-repeated attempt to forcefully retake Taiwan. President Tsai said, “Taiwan shows the world how much we cherish our free, democratic way of life.”
2020 heralded a new unipolar future around the colossus that is China, in commerce and arguably also geopolitics.