Like many catastrophes in the history of mankind, the
novel coronavirus will do much to reshape global geopolitics. But while some form of overhaul is inevitable, the key question is whether China will emerge stronger or weaker in its great power struggle with the
United States.
Thus far China is, predictably, doing better than any other major economy. This should not be surprising as Beijing has outperformed its rivals in controlling the virus. While its record 6.8 per cent contraction in the first quarter was worse than the European Union’s 3.5 per cent and America’s 4.8 per cent, China is expecting a quick turnaround in the second quarter. Neither the EU nor the US can expect the same as this was the period the two regions overtook China as the epicentres of the pandemic.
The global economy is projected by the International Monetary Fundto contract 3 per cent this year, in what would be the worst recession since the Great Depression of the 1930s. Of the world’s three largest economies, the EU is forecast to shrink by 7.5 per cent and the US by 5.9 per cent, while China is forecast to grow by 1.2 per cent. Most other major advanced economies are facing steep declines: 9.1 per cent for Italy, 6.5 per cent for
Britain, and 5.2 per cent for
Japan.
China’s GDP last year was US$14 trillion, two-thirds the size of America’s US$21 trillion. But the coronavirus outbreak will narrow the gap. Last year, China’s annual growth figure was 3.8 percentage points above the US’, while this year the difference is expected to be 7.1 points. Last year, real GDP growth in the US was 2.3 per cent, while China’s was 6.1 per cent. If these trends continue, the two economies will reach parity within the next decade, much earlier than previously forecast.
But this is a big “if”. The post-coronavirus world will pose uncertainties and challenges to Beijing on a scale unknown to the communist nation since it embraced global capitalism in the 1970s. The pandemic, coupled with the escalation in its
rivalry with the US, coincides with a decade-long slowing of the Chinese economy. The downturn has accelerated since
Donald Trump launched his tariff war with China in 2018.
China’s growth of 6.1 per cent last year was its lowest since 1990 and, given the tariff and technology wars with the US, the figure would be lower this year even if the coronavirus had not happened. Despite the partial trade deal reached in January, the US maintains punitive tariffs on nearly two-thirds of Chinese exports, leaving the average US tariff on Chinese goods at 19.3 per cent, up from about 3 per cent before the
trade war started.
Covid-19 itself will not fundamentally reverse the fortunes of the Chinese economy but post-Covid geopolitics will. Beijing will find itself in a very different world, one dominated by an agenda of economic decoupling, disputes over the origin of the virus and compensation claims by the US and other countries.
