Economic links between China and the rest of the world in a post Corona world

Webinars

JGBS Pandemic Lecture Series: Lecture 3

Saturday, May 23, 2020, 7: PM (New Delhi)


Economic links between China and the rest of the world in a post Corona world

Speaker: Tridivesh Singh Maini

 

Many analysts have argued, that a large number of companies will re-assess their economic linkages with China. A number of countries including India, Germany, Italy and Australia have made changes to their existing FDI policies, with the objective of regulating Chinese investments — especially in sensitive sectors. Apart from this it has been argued that a number of Japanese, European companies are likely to shift from China to other countries such as Vietnam, India and Bangladesh.  Japan has also allocated over $2 Billion for helping manufacturing firms to shift out from China. During the course of this talk, some of the revisions made to FDI policies of countries like India, Australia and Germany shall be discussed. The possibility of countries like Vietnam and India emerging as preferred destinations for companies wanting to shift out from China shall also be examined.

Tridivesh Singh Maini is a Faculty Member with The Jindal School of International Affairs, OP Jindal Global University, Sonepat, Haryana. He is a former SAV Visiting Fellow (Winter 2016) with the Stimson Centre, Washington DC. His research interests include; China’s economic links with South Asia, the Belt and Road Initiative (BRI) and the role of India’s states in Foreign Policy. He is a contributor for a number of publications including; Modern Diplomacy and The Geopolitics.

Summary by Sanjana N (IBM 2017)

The lecture commenced on the note that geopolitics and economic realities during this pandemic, COVID-19, promotes to look into alteration of supply chains of companies all over the globe, reconsidering the trade relations between the western countries and China and eventually to shift out of China.

Professor Maini started the lecture by discussing some trade figures and FDI Rate between the major countries.

  • Bilateral trade between Australia and China is $215 billion.
  • Trade relations between USA and China is $560 billion.
  • UK and China are 70 billion Pounds.

FDI as on 2018-19 has been:

  • Australia – China is 8 billion AUD
  • UK – China is $8.3 billion.


By these figures we can see that the dependency of these major countries on China is extremely high. Along with this, even the European countries rely equally on China for trade.
Professor Maini discusses what the countries are looking forward to putting in action.

  1. United States of America
    USA has been aggressively making policies and initiatives to alter its trade relations with China. The country aims to relocate majority of its companies back to USA and shift to the south Asian belt of countries to set up relations for example, Japan, India, Vietnam, New Zealand, and South Korea. The country also aims to shift its supply chain towards these counties. The country also plans on reducing its dependency on China for medical support like equipment and due to this, a bill was also passed recently to accelerate the process.

 

  1. United Kingdom
    The intelligence wing of the nation is discussion terms to reassess the relation with China in respect to sensitive areas such as security, telecom, etc. UK recently had allowed Huawei to participate in the its 5G network with a capital of 35% which is now being reconsidered as it might be a security threat to the nation. Along with this, the Chinese student population in UK is about 120,000 and the officials are considering to lessen this number as most stem students have access to sensitive research information  which may lead to theft of intellectual properly and leak of sensitive information of the country.

  1. Australia
    Due to some of the policies initiated previously, China has imposed ban on Australian imports including beef imports. This will affect the economy drastically, the FDI is steeping low. And as per the other 2 big countries, Australia too is reconsidering its trade relations with China.
  1. Other European countries like Germany, Italy and Spain are also shifting out of China and reducing the investment by China on sensitive areas.

The steps that countries are taking in reality are as follows:

  • The US, UK and Japan have come up with stimulus package to relocate out of China and alter their supply chain. Japan’s stimulus package is of $2.2 billion, off which $2 billion is being utilised on getting their companies back to Japan and the rest of the funds are utilised on getting their companies to other countries, mostly Vietnam. In fact, even US has shifted its companies to Vietnam at the beginning of COVID-19
  • In India, various labour reforms are being structured and amendments are being made to labour laws by various states such as Uttar Pradesh, Madhya Pradesh, and Gujarat to name a few. This hints to changing the production patterns and trade of the country.

Professor goes on to talk about how majority of American companies (50-60%) agree that shifting out of China would be tricky due to the demographics that the country offers. China enjoys an upper edge in terms of the productivity of labour, infrastructure, and scale of production in the country.

But realistically speaking, the countries can alter supply chain to an extent and not to a large scale. This shift of supply chain and trade relations is not possible individually by any country but is a collaborative effort of all the countries. This also will give rise to competitiveness amongst countries with respect to tariffs. USA is now looking at Indo-Pacific countries for its shift. Here, the Trans-Pacific Partnership (TPP) is an important player. Japan, Thailand, Malaysia, and Taiwan are wanting to join the partnership as active members.

Professor Maini sums up the webinar by mentioning that China will no more be a default option of trade and that there are alternatives. The dependency level of a country on Chinese students must reduce. In relation to this, it is discussed that the educational sector remains stable during these unprecedent times but however, the number of Chinese students in US, UK and Australia is still high and these students are reconsidering pursuing their education in these countries due to all the new policies and changes coming to play against China.

The accusations on China is constantly on the rise and the country’s links to the outside world stays frayed