Wang Wen: Will COVID-19 Launch a Coming Global Crisis?


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Wang Wen: Will COVID-19 Launch a Coming Global Crisis?


By Wang Wen    Source: Valdai Club    Published: 2020-3-2

Since the second half of February, the novel coronavirus has been contained in China for the time being; however, it has spread across the world. The world is on high alert; the US stock market has plummeted and global markets are in a state of panic. The epidemic has spiralled out of control in Japan and South Korea, and lockdown measures have been imposed in European cities, increasing the likelihood of a global geopolitical crisis.

I will present three kinds of scenarios regarding the future impact of the epidemic on world geopolitics.

The worst-case scenario: a global crisis. If the epidemic spreads across the world due to a lack of control measures and cannot be contained for a long time, we are likely to see a global crisis: a reverse of globalisation resulting from the collapse of industrial supply chains. Currently, anywhere from tens to hundreds of infections have been reported in countries including the US, Italy, Japan, South Korea and Iran. There are speculations that the US has failed to reveal the true extent of the outbreak on its soil and the actual situation is much worse.

If the virus continues to wreak havoc, it is possible that more and more countries will close their borders and impose restrictions on flights and the movement of people. This will result in the currently interlinked international community becoming atomised and countries becoming isolated from one another. Eventually, the global industrial supply and value chain that took a century to develop could retreat to what it was during the initial stage of the industrial revolution. Such an evaluation sounds over-exaggerated, but the world must be prepared for the worst.

A relatively worse situation: a regional crisis. If the virus only hits parts of Asia, Europe and the Americas, then only some countries’ economic and social development will be dealt a heavy blow, and the growth of the world economy in 2020 will only recede to what it was before the 2008 global financial crisis.

The biggest sporting event of the year, the 2020 Tokyo Olympic Games, may end up being the bleakest and most desolate Games in decades. Meanwhile, the integration of East Asia will be thwarted, the decoupling of China from the US will become exacerbated, populism in each country will rise and notions of a “yellow peril” will prevail. At the current stage, such a scenario is more likely.

A relatively positive situation: middle- or short-term risks. If progress is made towards the development of a vaccine, if every country can actively get involved in preventive work and international coordination, and the epidemic can be effectively curbed in China, East Asia and at the global level, it could effectively end in March or April. Under such circumstances, it will have only exerted a short-term negative impact on globalisation, global governance patterns and the global industrial and value chain. Meanwhile, the Chinese economy, especially in the first and second quarters, will have suffered a major setback. In the second half of 2020, the economy will experience a retaliatory rebound in every affected country. Therefore, it will just be a middle- or short-term international hazard. China’s strategic goal of achieving targeted poverty alleviation and building a moderately prosperous society in all respects can still be accomplished according to schedule. In light of the current situation, this outcome might be a bit optimistic.

This epidemic may lead to a great geopolitical crisis throughout the world, but a crisis also creates opportunities.

The spread of the coronavirus has highlighted the significance and urgency of global governance. The international tête-à-tête which has characterised the “great game” between China and the US since 2018 has been set aside to some extent, and the possibility of a showdown between the two powers is declining. China’s all-out efforts to counter the epidemic as well as its experience in balancing epidemic control and socio-economic development are very likely to be held in high regard by the entire international community.

Before the outbreak, in 2018 and 2019, the China-US trade war was always the focus of world attention. The trade war also caused great negative shocks to China’s foreign policy and foreign trade. The unilateralism, neo-isolationism and populism advocated vigorously by the Trump administration have not only impeded US-China relations, but also driven some other countries to push back on globalisation, undermine the existing global governance structure, and weaken the authority of various international organisations, such as the United Nations.

The author is professor and executive dean of Chongyang Institute for Financial Studies, at Renmin University of China and executive director of China-US People-to-People Exchange Research Center.