COVID 19 is the only original thing that came out of
china after SARS
Please read alongwith my previous article.
Foot in The Mouth Prediction
COVID 19 is a now full-blown pandemic which has
brought the world to a halt in panic. There is nothing like this I have seen in
my life. I am sure many will agree with me. The pandemic is still raging
unabated and bringing misery to nations and people individually and
collectively. Thanks to China. The Sick Man of the East has made us
all sick. Once we get past this stage and reach some level of stability all of
us will realize that the world has changed in some manner irreversibly. One
country which wants to reset everything in a hurry and do a ‘back to the
future routine’ is China. However that will not be and should not be
possible. My foot in the mouth prediction is that China is the country
which will have to contend with the change the most. What will be the contours
of this change? That’s what makes it such an analysis interesting.
Contraction and Reset
There is no doubt that the world economies will
contract and reset themselves to a new future. The definition of this future
will evolve over the next two to three weeks while doctors and governments
battle to save people. In this period, national economies, industry and markets
will have time to sit back and ruminate as to how to avoid such a situation
again. The amount of RED they will see in this period will teach them a big
lesson-never put your eggs in one basket; and if that basket is from
China-beware, you might not get your eggs back. On the other hand China
seems to be already attempting to pick it up from the time it went into a
lockdown as if nothing happened. China seems to be blindsided with its ambition
of being numero uno at any cost. It is in for an
education and let us see why.
A Virus From China
There is no doubt that the COVID 19 originated from China and
Wuhan except in a Chinese mind. Whether it originated from a seafood
market as being claimed or from a botched experimentation in biological
weaponry from the Wuhan BSL-4 lab will never be known since the Chinese have
been as opaque and secretive as ever. They have blocked all
including WHO from the scene. From the start the extent or the misery of
the outbreak has been hidden by the Chinese due to political and economic
considerations. Humanitarian considerations have been given a backseat. Now the
effrontery is so brazen that the Chinese propaganda machinery is drumming up that they
have reduced the global threat and
that it is a counter COVID world leader! The Chinese Ministry of
Foreign Affairs has even made the ludicrous claim that the virus did not originate in China. This
is after they put pressure on WHO not to declare it as a pandemic. The Chinese
government is also attempting to establish its global governance role. It
has also gone on to be insensitive enough to say through its mouthpiece
the Global Times that “it is completely irrational to implement
inter-country isolation to prevent the spread of the disease. It is
unscientific and violates the interests of all countries (meaning itself)”.
This preach comes at a time when nations are battling hard to save their
citizens from the deadly ‘Chinese Virus’ as christened by President Trump. In
fact, if anything, there are serious question marks about Chinas leadership
role in Global affairs. The answer is – NO. China is not a leader. It is a
coercer.
Chinese Future
Having stated all this, the more relevant issue is - what is China’s future? The fact that the Chinese economy will take a knock and is set to contract for the first quarter is not exactly a clairvoyant astrological prediction based on the lunar calendar. The more important issue is the deeper effects on the Chinese economy and resultantly on its power in the light of a few factors. In my opinion these factors are its already cooling economy, the BRI, Trade War, its financial markets and finally the force multiplication effect of the Corona Effect. The emergent picture is a bit frightening.
Having stated all this, the more relevant issue is - what is China’s future? The fact that the Chinese economy will take a knock and is set to contract for the first quarter is not exactly a clairvoyant astrological prediction based on the lunar calendar. The more important issue is the deeper effects on the Chinese economy and resultantly on its power in the light of a few factors. In my opinion these factors are its already cooling economy, the BRI, Trade War, its financial markets and finally the force multiplication effect of the Corona Effect. The emergent picture is a bit frightening.
Corona Virus Effect
Halting the Chinese
juggernaut has been the easy part. Restarting it will be the difficult
side. As per reports most factories in China have started running at
2/3 capacity, but where are the takers? The takers are abroad or are Chinese.
Under the conditions, if I were a Chinese, I would not be buying a car or a
smartphone or anything costly. Markets abroad are in lockdown battling Corona.
If the Chinese go there with their goods, the response would be – Thank You but
no Thank You. Their main markets in Europe and USA will also not have much
appetite for Made in China goodies. Their own buying powers would have
contracted post corona. Then there will also be a move by global companies to
de-Sinicize their supply chains. Last but not the least, Chinese businessmen
will hereafter always carry the Corona Virus calling card. It is a
psychological stigma. It will not go away except in Pakistan and a few of its
other acolytes.
Cooling Economy
The Chinese economy
was cooling even before the Corona Virus hit it. It was growing at the lowest
rates in three decades. Indicators like industrial production, urban investment and
retail sales were dipping. Unemployment was showing up. The real estate market
was in the dumps. Overall the GDP was going downhill. Ever since the Corona
Virus has surfaced all these indicators have nosedived anything between 20-25%.
Unemployment has shot up to its highest levels. China's real estate market is
in pain. Home prices stalled for the first time in nearly five years. Overall
if the GDP goes down by about 1-1.5 % on an annual basis it will not be out of
place.
Trade War
The Trade War forced
China to accept some adverse terms which were thrust on it. Given the current
conditions, China might not live up to the commitments it made in Phase 1 of
the Deal where-in it had to procure a certain amount of US goods (the effective
figure is approx. USD 75 bn in 2020). If renegotiations start, things will get
difficult for China. If the Trade War goes haywire as it could, under the
circumstance, all US businesses will start diversifying. Diversification was
already a process under thought which now gets reinforced by COVID19. So a
permanent reduction in businesses is on the cards. It could be anything between
25-50%.
Financial Markets
Financial Markets are in a mess in China. It was always known
that indebtedness,
banking stress, shadow loans and housing bubbles were part of a mega bubble
that could burst any time. Total private and public debt in China has ballooned
to surpass 300% of GDP in over a decade. Economic
and financial stability is now at huge risk with the outbreak of coronavirus.
As per Wall Street Journal - China’s financial markets are probably more dangerous in the
long run than China’s wildlife markets. Given the accumulated costs of decades
of state-driven lending, massive malfeasance by local officials in cahoots with
local banks, a towering property bubble, and vast industrial overcapacity,
China is as ripe as a country can be for a massive economic correction. The question uppermost
in many minds would be – will the Corona Virus effect bring the house down?
BRI
The mega economic and strategic plan – BRI has hit a massive air
pocket. The BRI is executed by Chinese companies using Chinese Labor, Chinese
material and Chinese credit. This is under massive disruption for two months
now. The Chinese might not be able to return to sites or go
back to China for a while. Input material disruption will be
significant. As it is, projects in Pakistan, Indonesia, Malaysia, Kenya,
Monte-Negro, Myanmar, Bangladesh, Nepal were in problems. Significant delays or
renegotiations or scaling down was under way. They were often christened as a ‘Road
to Nowhere’. Many recipient countries were under strain of a debt trap.
Countries will now renegotiate since they will not be able to afford these
projects anymore. Languishment, delay or even abandonment of projects is on the
cards. Corona has also brought forth the vulnerability of any international
venture with a Chinese initiative or partnership. At
a more fundamental level, there was always resentment directed at the ‘Sinic’
colonial BRI approach. The resentment will now multiply beyond the capacity of
local governments to handle. The BRI as a profit-making venture or as a
strategic gambit was always under question. It will now get reinforced. The
worst hit will be the Jewel in the Crown – CPEC. If its failure in Pakistan was
in doubt earlier, it is clear beyond doubt now. Pakistan will not repay.
Already their PM christened as ‘Katora Khan’ by social media has appealed for
debt write-offs. Will China be able to handle a costlier BRI with its own and
recipient economies shrinking? Despite all this, the
BRI is now being projected as a pathway to Chinese
soft power. In many ways it is pathetic. It is only a viral pathway after
all.
Summation of Factors
In summation, any one
of these factors discussed above have the power to bring the Chinese strategic
bubble down. All these factors now acting in unison with corona as the adhesive
can lead to collapse. With more than 130 countries now restricting Chinese entry,
China will be in extended isolation. An isolated China might not have the
sensitivity, vision, skills or authority in an over centralized structure
governed by deluded decision makers to handle this episode. On a
philosophical note, economic laws are akin to water dynamics. If there is flow
of water, hydrolysis takes place and impurities get washed ashore. If water is
stagnant, the scum rises to the top. Chinese economy has reached stagnancy and
the scum is showing up. Corona Virus will not let the Chinese economy flow
easily again. Something will give.
Future Imperfect
Historically powers
have risen with a predictable pace and scale which makes them and the world
comfortable with each other. China has risen at a scale and pace in geometric
proportions. Neither the world nor itself has understood the nature of this
power and its manifestation. The dash to be the world leader irrespective of
the consequences is not sustainable. At some point it appears that mother
gravity is all set to exercise its influence and bring the gravity defiant rise
of the Chinese back to earth. The COVID19 could well be the unintended medium. In such a situation, the
extremities of an imperfect Chinese future is discernible. One extremity is the
Collapse of China. It is feasible if all factors have taken China past the
tipping point. As the Virus extends its influence in time, the
probability increases. If China collapses, we are going to see a new world
order. On the other extremity, if China manipulates well, then it will survive.
However its survival will not be at its terms but that of the rest of the
world. In such a case we will see another kind of a new world order where China
might still be the second largest economy but short of the power it wields now.
In any case it is doubtful if we will see a world order where China is at the
pinnacle. A new world order is emerging whose contours seem to be based once
again on unipolarity with new sub poles.
The Unknowns
If we look at it from
any direction, there is little or no doubt that China will not be able to fund
its great militarization drive. In any case with impending contraction of
economy and overseas assets, China might not need such a strong outbound
military for some time. On the other hand China might see internal turmoil on
two counts. Firstly authoritarian and communist systems are known to have
purges. As this settle, we might see a purge and a degree of
internalization. Will the purge result in a regime change or not is
a million-dollar question? In any eventuality PLA will have its plate full with
protecting the regime. After all one of PLAs primary roles is regime
protection against its own people. The second issue is historical. Historically
the outlier areas like Xinjiang, Tibet and Mongolia were under suzerainty
arrangements with the reigning Chinese dynasties. Whenever central authority in
Beijing waned, these outliers have raised their flags of independence. A
decelerating economy and reduced role in world affairs, might embolden the
outliers to again raise their flag of revolt. In any case they can take heart
and help from other social tensions like the Hong Kong issue and Chinese
treatment of Uighurs and Hui Muslims.
Corona Handwash
Overall it is very
evident that China will experience rough seas ahead. Its effort to obfuscate
matters, shift blame and dictate issues to the world will no more be acceptable
to the developed world. Even the developing world will push back except maybe
Pakistan. A Viral China has caught a Virus which will not let it off the hook.
We are going to see a period of change. The road ahead for China will be steep
and hard. More than anything, they must get over a prevalent sentiment of lack
of trust best exemplified by a thought expressed in vernacular by a common
Indian. – what is it that China has eaten that the whole world is
made to wash its hands nonstop? ( yeh Chinion ne kya kaya? Poora duniya ko baar
baar haath dohna pad raha hai) Is it time to wash our hands off a viral
China?
Parting Shot
Chinese Gabbar to a Pakistani – tera kya hoga
kaaliya?
Pakistani to Chinese Gabbar- namak kaya Sarkar.
Chinese Gabbar to Pakistani – ab virus ka!
This
analysis is not a figment of my imagination but a distillation of international
views and my own articles from links below :-
International Views
https://carnegieendowment.org/2020/03/11/what-coronavirus-means-for-china-s-foreign-policy-pub-81259
https://economictimes.indiatimes.com/news/international/business/chinas-belt-and-road-plan-is-getting-lashed-by-coronavirus/articleshow/74499725.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst https://jamestown.org/program/limited-payoffs-what-have-bri-investments-delivered-for-china-amid-the-coronavirus-outbreak/
https://economictimes.indiatimes.com/news/international/business/chinas-belt-and-road-plan-is-getting-lashed-by-coronavirus/articleshow/74499725.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst https://jamestown.org/program/limited-payoffs-what-have-bri-investments-delivered-for-china-amid-the-coronavirus-outbreak/
Own Articles
Very well written sir..since china hid the virus eruption for a long time i think in future ours and other countries intelligence agencies should focus on getting information of these virus outbreaks in china beforehand..
ReplyDeleteThe world is reeling under the unexpected attack of Covid19!! None more than Italy!! They took it lightly at first; and when they got hit, the number of cases overwhelmed their medical facilities.......and then there was hell to pay!! Hundreds of deaths a day, this week!! Already more deaths in Italy due to Covid19; more even than China had!
ReplyDeleteWhere does this leave India? We are NOT prepared! Even testing has been limited; and will we even know how many cases are due to Covid19? If we go the way of Italy; with our medical facilities overwhelmed, will we be staring at tens of thousands of deaths in the next month!
I pray to God to save India from this deadly menace!
Dr. Sankaran
Summed up so sure overview in resetting and contracting economies and forgetting self defeated destruction plan of delusion of development, whomsoever you are fooling around your application of ignorance is fit for isolators in the world.
ReplyDeleteChina virus as President Trump calls it has affected the whole world and for clear picture to emerge will take time.China and Pakistan will both be affected surely.Ad regards India the next 2 to 3 weeks will be critical.
ReplyDeleteSuperb ! I'm quite sure that business will leave China fast. India will be the gainer if we are ready to absorb all this.
ReplyDelete