Coronavirus News Asia

Pandemic narrows scope of economic interdependence

There was a time when political scientists and international-relations scholars were high on the euphoria of an interconnected world – a globalized world. But now, locked down inside their homes, people all over the world are losing hope in the future of globalization. The quarantined world, in fact, has dashed the hopes of an interconnected world, especially one that is linked economically.

There have been multiple times that the world has been hit with financial storms and survived. In modern history, the Great Depression after World War I set the stage for a highly interconnected world. In those trying times, it became a pressing need, for the Western countries particularly, to establish a globally interconnected trade network. After World War II, the world was fully ready to believe blindly in the prophecies of economic interdependence.

Factory of the world

In the second postwar era, China erected a facade of financial prestige by integrating itself deeply into the global economy. It has established itself as the “factory of the world,” since it manufactures one-third of global goods. It is the world’s largest exporter as well.

The benefits of such deep economic interdependence were not only reaped by China itself but others as well. However, the US, a self-proclaimed global hegemon, was not happy with the status quo. Before the coronavirus pandemic hit the world, US-China trade wars ensued. And not so long ago, Beijing was being accused of being a “free rider” of the liberal global economy.

It seemed as though China was sailing smoothly on the path to becoming the next great power with the everyday miracles of global economic interdependence. The pandemic, however, narrowed the scope of interdependence.

With the outbreak of Covid-19, the factory of the world shut down, and the rest of the world began to feel its ripple effect. Industrial production, sales, and investment all started to witness a steep fall just within two months.

This could have far-reaching implications for the countries that are the largest trading partners of China. This is the first time in history that the demand-supply chain has been disrupted at both ends. The pandemic has created an economic void where shortages of supply and demand both exist. This vacuum cannot be filled without involving all the parties participating in the trade network.

Linked with this is the issue of debt and protectionism. After the US reverted to protection with Donald Trump assuming Oval Office in Washington, his Chinese counterpart filled the world with the air of “shared destiny” and tried to revive the glory of globalization. Rolling out the ambitious Belt and Road Initiative (BRI), Xi Jinping promised to invest billions of dollars in partner countries.

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