Bright side to a dark cloud

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By WANG DONG

The outbreak of the novel coronavirus has become the greatest global crisis for humankind in the 21st century. Economic and trade globalization have been heavily impacted by the pandemic.
The latest World Economic Outlook report released by the International Monetary Fund predicts that the global economy will contract by 3 percent in 2020; and the economic recession inflicted by the pandemic will be greater than the 2008 global financial crisis and probably the most severe one since the Great Depression in the 1930s.
To cope with the pandemic, many countries have restricted the free flow of production factors such as raw materials, products and personnel. With the shutdown of factories, shipping restrictions and the cancellation of orders, international supplies of goods and services have been suspended.
The pandemic has disrupted the normal operation of the global supply chain, exposed its vulnerability and fueled people’s concerns about economic globalization.
Those opposed to globalization believe that the pandemic marks its end. However, that view is just wishful thinking on their part for globalization has evolved into a new stage, or “re-globalization” as it is called, with the emergence of new technologies. An upgrading and expansion of globalization is under way. China will further promote this new wave of globalization by means of its international anti-pandemic cooperation.
By trying to hype the pandemic as an outcome of China’s actions, or lack thereof, the US hawks have attempted to further decouple China from the United States, blamed China for the vulnerability in global supply chains and taken national security as an excuse to promote US companies in China to return to the US or else relocate production lines to other countries to diversify risks. However, China occupies a key position in the global supply chain. Since decoupling from China would mean decoupling from the global supply chain, de-globalization will not prevail in the global anti-pandemic battle.
Globalization is essentially economic integration based on the division of labor in accordance with comparative advantages and returns to scale. The connection between the Chinese and global economy is in line with the laws of economic development.
Some enterprises will find China’s market important after experiencing the pandemic-induced pains, and may seek to diversify risks while not leaving the Chinese market. Enterprises will weigh the costs and benefits of transferring production chains in the short term and are unwilling and unable to abandon the existing global supply chain to develop a new and complete one.
The return of US manufacturing industries to the US is only a short-term phenomenon generated by tax cuts, for the US industrial structure focusing on the service industry has already taken shape with a fixed position in the global industrial chain. Profit-seeking US enterprises will not go against economic laws for political reasons.
Therefore, de-globalization is not in line with the fundamental principles of efficient allocation of global economic resources and effective organization of the factors influencing industrial productivity.
On the other hand, technological innovation is driving the new wave of globalization and it will weaken the de-globalization trend. The fourth industrial revolution characterized by digital globalization has emerged.
Although the pandemic has had temporary impacts on the Chinese economy, it has also accelerated the digital transformation of social life in China and the manufacturing industry and given a boost to remote working, cloud services and new infrastructure, which will further improve and strengthen China’s position in the global industrial chain.
Finally, pandemic prevention and control as well as the restoration of normal economic activities call for global cooperation. There is still much room for cooperation in pandemic prevention, containment and to ensure a post-pandemic recovery.
The pandemic will generate new platforms and opportunities for global cooperation. The US will find it hard to decouple from China during the pandemic and other countries will not follow its lead in this respect.
On the contrary, a new wave of re-globalization is needed to promote and reshape the global cooperation. China needs to seize the opportunities and further break the vested interest chains while advancing reforms in an all-round manner.
–The Daily Mail-China Daily news exchange item