Tuesday, February 25, 2020

Epidemic Concerns May Inflame New Wave of Trade Decoupling
Global Times
2020/2/25 1:44:14

A worker at a factory in Zhoushan, East China's Zhejiang Province, produces a molding machine screw on Thursday. Photo: cnsphoto

The G20 economies warned on Sunday that the fast-spreading novel coronavirus pneumonia (COVID-19) posed a serious threat to global economic growth. The warning comes as South Korea raised its alert level to the highest, with more infection cases identified in countries across Asia, Europe and the Middle East.

While it remains unknown when the epidemic will be contained and how big its economic impact will be, some in the West have already been touting the downsides of globalization, calling for a global trade decoupling.

The coronavirus outbreak indicates that countries need to reduce their dependence on other nations for supply chains, French Finance Minister Bruno Le Maire told reporters over the weekend.

Meanwhile, White House trade adviser Peter Navarro said in a recent TV interview that the epidemic shows the US has offshored too much of its supply. "A lot of it is in China, some of it is in India, some in Europe, but we've got to get that back onshore," he said.

These are just a few comments on the vulnerabilities of globalization that have emerged amid the coronavirus outbreak, which, to a certain extent, sends a worrying signal regarding the decoupling of the global supply chain. There is no denying that globalization is imperfect, but blaming it for global problems is neither sensible nor helpful.

With the ongoing virus epidemic, disruptions to the global supply chain may cause companies to shift orders elsewhere, which will likely be temporary. But what's really worrying and pressing is the epidemic's potential long-term consequences, as some Western countries may return crucial manufacturing industries back home in the long run.

For instance, there have been discussions as to whether it is possible for the US to bring home the supply chain of medical goods like masks and drugs, which is currently heavily dependent on the overseas market.

As for China, while it is still difficult to determine the long-term impact of the coronavirus - that will be possible once the epidemic is contained - focusing efforts on speeding up work resumption may help offset some short-term impacts. The progress of work resumption not only determines the future trend of the Chinese economy - whether or not it will see a big downturn - but is also crucial to ensuring the stability of China's own production chain and its supply chain for the global economy. To a certain extent, it's not just a test for the country but a test for globalization.

Though the epidemic may cause some economic headwinds in the short term, it should be acknowledged that China's integration into the world supply chain is a mutually beneficial process as a whole. In order to prevent a spillover effect from resulting in a further decoupling of global trade, China must prioritize the return to production for certain key products involved in the global supply chain.

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