Will America’s Coronavirus Recession Accelerate China’s Rise to Power?
The World Health Organization (WHO) confirmed 168,019 cases of the novel coronavirus, with 6,610 confirmed deaths in 148 countries and territories worldwide as of March 16.
Nations in Lockdown
Italy, Spain, China, France and the United States are all in lockdown. Countries in Africa and Latin America, meanwhile, where the outbreak is still relatively small, have closed their borders to foreigners, as schools, universities and businesses shut down worldwide.
As the crisis shifts westward, China has begun to relax its tight quarantine restrictions. On Friday, March 13, China reported only 8 new cases of Covid-19, three of which were reportedly imported by foreigners. With governments worldwide struggling to contain the spread of the virus, the China-US imperialist war rages on, as both governments blame the other for the introduction of the virus to the world.
Global Health: a New Battlefield in the US-China Showdown
US media, such as the Washington Times and the New York Times, have published pieces discrediting Chinese-boosted claims that the virus originated from US laboratories. The World Health Organization – often another battlefield between the US and China – also refuted China’s claims last week.
“We have neither seen the allegation nor any evidence to support it,” WHO spokesman Christian Lindmeier told the Washington Times.
On the other side of the trenches, China’s spokesperson and deputy director general of the Foreign Ministry Information Department blamed the US. In a post on Twitter, he wrote: “What are the names of the hospitals? It might be U.S. Army who brought the epidemic to Wuhan. Be transparent! Make public your data! U.S. owe us an explanation!”
The Inevitable US Recession
On March 12, the S&P 500 and the Dow Jones Industrial Average registered the biggest one-day percentage drop since the October 19, 1987 crash, amid fears of the coronavirus, and the crude oil price war between Saudi Arabia and Russia.
Michael Wilson, Morgan Stanley’s chief US equity strategist, has predicted a US recession because of the coronavirus. Goldman Sachs’ economists had originally stated at the start of 2020 that the US economy was recession-proof. Their prediction had not taken into account a global pandemic.
US experts have warned that many workers are not adequately prepared for economic emergencies. Businesses have begun to layoff workers in a country where an estimated 53% of people live paycheck to paycheck. Abating the situation, US federal laws dictate that American companies are not required to pay severance during layoffs.
Millions of Americans are in Danger of Imminent Job Loss While China Starts Up Again
Millions of Americans now face losing their jobs, and small business owners are beginning to report limited to no supply, and lost sales. The effect of a pandemic in the plutocratic United States, where free universal healthcare is not offered, could prove to be further disastrous for the country’s potential slide into recession.
Further problems arise with an unpredictable upcoming national election, and President Trump’s widely criticized response of downplaying the pandemic.
China today is the world’s biggest engine of global economic growth. The World Bank estimates that China totaled 35% of global GDP growth (in nominal terms) between 2017 and 2019. China’s factory closures under the lockdown last month have seen problems arise in global supply chains.
Factory production has re-started in China, and shops have begun to re-open, all under tight control measures. Zhang Kejian, Deputy Minister of Industry and Information Technology, told state media last month that over 43% of small and midsize enterprises in China’s manufacturing sector had resumed production.
As the US struggles to handle the pandemic, China has been praised for the way it has managed the coronavirus. Its authoritarian-socialist state was able to implement a complete lockdown, and test and hospitalize citizens at a cost to the state, not the individual.
Since the re-opening of its factories, China’s stock market has rebounded healthily. Investors expect that, similar to the post-SARS outbreak in 2003, the Chinese government will launch a big effort stimulus spending to compensate for the financial loss that the lockdown propagated. The Chinese government, however, is in no financial condition to do so. It plans to extend loans, subsidize rents for struggling retailers and offer tax cuts to affected businesses.
‘No Choice but to Defeat it Together’
“To cope with Covid-19, every country is left with no choice but to defeat it together,” Professor Ali Mohammed Zaki, who discovered the MERS coronavirus said.
US-China relations are presently strained. Without a friendly partnership, the US is likely to succumb to recession, while China’s economy is large enough to withstand its bout with the virus.
“In nominal terms, China’s GDP in 2018 is about two-thirds that of the US, and the gap is closing year by year due to higher growth rate in China than in the US,” said Dr Zheng Wang, Associate Professor of Economics at De Montfort University in January, in an interview given before the impact of the coronavirus become well-known.
“However, the total GDP figures mask the fact that China has a population four times that of the US. In terms of GDP per capita instead, the US is still much richer, six times that of China in nominal terms and 3.5 times in PPP.
“It looks it will probably take at least many more decades—if not centuries—for China to be as rich as the US in terms of wealth per person, and this is based on the assumption that China’s relatively high growth rate can be sustained which itself is highly debatable as in terms of the primary driver of long-term growth —original innovation and creativity in new technology—China is not even close to the US.”
How Can the West Weather the Storm?
The economic circumstances surrounding both countries have changed drastically in ways that experts could not have predicted.
Earlier in March, the Global Times tabloid newspaper (run by the Communist Party of China) wrote an article calling for a “fresh China-EU coordination mechanism”. Although the article stated that without global cooperation and coordination more economic harm would occur to nations globally, this global cooperation coincidentally exempted the US.
China is eyeing an accelerated rise to power as it deflects blame for the virus to its rival, the US. Nations around the world can only defeat the coronavirus through using the same kind of economic cohesion that is granting China greater world power.