Existing World Trade Format Needs Decoupling In View of Current Type Of Epidemics
The G20 economies warned on Sunday that the fast-spreading novel coronavirus pneumonia (COVID-19) posed a serious threat to not only the Chinese Economy but also to global economic growth. The warning comes as South Korea raised its alert level to the highest, with more infection cases identified in countries across Asia, Europe and the Middle East.
While it remains unknown when the epidemic will be contained, it is very clear that it will have a devastating impact on the Chinese economy. Many countries have already begun taking cautious steps for a global trade decoupling and anticipating major downsizing in volume
The coronavirus outbreak indicates that countries need to reduce their dependence on other nations for supply chains, French Finance Minister Bruno Le Maire told reporters over the weekend.
Meanwhile, White House trade adviser Peter Navarro said in a recent TV interview that the epidemic shows the US has offshored too much of its supply. “A lot of it is in China, some of it is in India, some in Europe, but we’ve got to get that back onshore,” he said.
These are just a few comments on the vulnerabilities of globalization that have emerged amid the coronavirus outbreak, which, to a certain extent, sends a signal regarding the decoupling of the global supply chain. There is no denying that globalization is not only imperfect but leads to many kind of problems too.
With the ongoing virus epidemic, disruptions to the global supply chain will lead to companies to cancel or shift orders from China to elsewhere permanently. This is what’s really worrying and pressing as the epidemic’s potential long-term consequences for China. Many Western countries may shift crucial manufacturing to India and Bangladesh or even back home in the long run.
For instance, there have been discussions as to whether it is possible for the US to bring home the supply chain of medical goods like masks and drugs, which is currently heavily dependent on the overseas market.
For China, it is still difficult to determine the long-term impact of the coronavirus – that will be possible once the epidemic is contained. Presently the Country must focus efforts on first containing the epidemic and then curing it. Work resumption may be left for later. The progress of Virus control will determines the future trend of the Chinese economy – whether or not it will see a big downturn. At the same time China should for the time being start thinking locally and ensure the stability of own production chain and its supply chain within the country. To a certain extent, it’s a test for the country’s Government and its administration. Other countries will look after themselves.
The epidemic will surely cause major economic headwinds in the short term and other problems even in the long term. it should be acknowledged that China’s integration into the world supply chain needs a decoupling and a new model thought of.