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Economically, the aftershocks of China’s coronavirus outbreak are being felt. But the geopolitical rumblings will also be worth watching.
China’s economy, the world’s second largest, has been hamstrung. World carmakers are feeling the repercussions, as are high-tech computer and electronics companies. In Britain, the Burberry clothing firm has seen its share price hit after sales in its Chinese outlets collapsed in recent weeks.
Global economic growth – which had begun to look a bit rosier after a stage-one tariff agreement between the United States and China – is certain to suffer temporarily.
There have been potentially seismic political effects as well. China has increasingly clamped down, even amid open signs of anger toward authorities.
But there’s a further question: the possible effect on China’s influence abroad, especially through investment infrastructure projects. Economic strength has been key in muting political reluctance overseas.
For now, the authorities’ fumbled response to the epidemic has undercut their image worldwide as a functioning, high-tech 21st-century version of the old Communist world’s command economies. It has also served as a reminder of the politics of China: the authoritarian underside of its economic success.
The human cost of China’s coronavirus outbreak is already painfully evident. But another kind of challenge – economic and political – is beginning to take hold.
It’s as if the sprawling city of Wuhan, the capital of Hubei province in China, was not just the birthplace of the virus, now officially dubbed COVID-19, but the epicenter of an enormous earthquake, sending tremors and tsunamis around the globe.
Economically, the aftershocks are already being felt. The only question is how long they’ll persist, and how lasting their impact will prove. And the geopolitical rumblings will also be worth watching, particularly the possible effects on China’s image and influence abroad.
The Chinese economy – the world’s second largest – has been suddenly hamstrung by the need to halt the spread of a virus that the Communist authorities at first tried to hide. Wuhan and other cities have been placed under lockdown. Much of the rest of the country has been subject to large-scale quarantines, restrictions on movement, interruptions in public transport, and the closure of factories and other businesses.
And China’s economy is not just much larger than it was a decade ago. It’s more integrated into the world economy, and no longer merely as a low-cost option for producing household goods for Western consumers. Thousands of overseas firms now have factories or supply partners in China, providing key components in their supply chain for everything from automobiles to electronics and computer products.
China’s own manufacturing and industry rely on commodities from overseas: above all, energy, for which it’s the world’s main importer. Chinese people have also become important customers for Western consumer imports. The more well-off are traveling abroad in ever-growing numbers, spending large sums while abroad.
All that has now been thrown off track.
Supply shortfalls, fewer orders
In Cambodia, textile factories rely on China for well over half their raw materials, and some could be forced to close. In Australia, a major chunk of exports – from iron ore and liquefied natural gas to meat and seafood – goes to China. With the Chinese economy slowed by COVID-19, orders are taking a major hit.
World carmakers are feeling the repercussions. Nissan in Japan and Hyundai in South Korea have had to scale back production at some facilities due to a shortfall in parts from China. In Europe, Fiat Chrysler temporarily shut one of its factories, in Serbia, for the same reason. Jaguar Land Rover has also warned it could face supply-chain problems if the economic disruption in China persists over the coming weeks.
Also affected are high-tech computer and electronics companies, including Apple, whose iPhone production is dependent on factories and component suppliers in China. To make things worse, its retail stores there have been closed, and China is now the largest single market for Apple’s smartphones.
In Britain, the Burberry clothing firm has seen its share price hit after luxury sales in its network of Chinese outlets collapsed in recent weeks, and it is predicting a further effect from the likely decrease in Chinese visitors abroad.
The big picture is that global economic growth – which had begun to look a bit rosier after a stage-one tariff agreement between the United States and China – is certain to suffer at least temporarily.
And there have been potentially seismic political effects from the COVID crisis as well.
The most visible sign has come inside China, where Xi Jinping has departed from the more pragmatic approach of his 1990s predecessor Jiang Zemin. In its place, he has stressed the need for unquestioned loyalty to the Communist Party and his own position as party leader. China has increasingly clamped down on any sign of dissidence, while using high-tech tools to build the world’s most pervasive surveillance society.
None of that seems under immediate political threat. But there have been startlingly open signs of anger toward the authorities. The main focus has been on a young doctor in Wuhan, Li Wenliang, who was among the first to identify the appearance of the new virus. He was detained and forced to swear off this “illegal behavior.” When he died from the virus earlier this month, not just anger, but explicit criticism of the authorities, briefly flared on China’s tightly controlled social media platforms.
The censors have since reasserted control. The hope of Mr. Xi and the ruling party, almost certainly, is that any political blowback will prove temporary. When the crisis is over, they may well seek to make the argument that the tight control championed by Mr. Xi was indispensable in the aggressive measures taken to stem the spread of COVID-19.
But there’s a further, big-picture question: the possible effect on China’s increasingly assertive campaign to extend its influence internationally, especially through the offer of trade deals, investment, and infrastructure projects as part of its trillion-dollar Belt and Road economic partnership program.
Just as the headlong growth of China’s domestic economy has helped limit political dissent at home, Chinese economic strength has been key in muting political reluctance overseas to engage with Beijing.
At least for now, however, the authorities’ early, fumbled response to the epidemic has undercut their image worldwide as a smoothly functioning, high-tech 21st-century version of the old Communist world’s command economies. It has also served as a reminder of the politics of China: the authoritarian underside of its economic success.