The world is angry. From Australian graffiti artists to German tabloids, everyone wants Chinese blood. But all this aggression won’t matter. Economically and diplomatically, China has latched itself on to the world. And even a killer virus won’t be enough for the world to let go of China’s sweet nectar.
For a number of reasons, this virus could not have come at a better time for China. The US is firmly set on isolationism, and its web of international influence is slowly disintegrating. From debt diplomacy to economic growth and global collaboration, China is filling in the void the US has left.
Powering the bounce back
China was the first to get the virus, and consequently it’s the first to rid itself of the virus. While every other nation on Earth is ravaged by the chaos of the virus, China’s getting back to work (albeit with restrictions). Cars are on the roads again, people are free to leave their homes, and factories are reopening.
Everyone else is going to sleep and China’s just waking up. And this has enormous implications for the global economy, now and in future. The IMF has forecast the world economy to contract by 3% in 2020, with advanced economies falling by 6%. In contrast, China is expected to grow by 1.2%.
But what’s more important is how countries will respond after the crisis is over. No doubt their economies will recover in time, but will they bounce back or crawl back? Well, the IMF predicts in 2021, advanced economies (like the US and Western Europe) will grow by 4.5%. And China? More than double that; at 9.2%!
So the West will merely recover their original positions while China will have a mini golden age of economic growth. International corporations will have to choose between faulty supply lines from ‘allied’ countries or being a part of China’s growth success. Keep in mind that corporations don’t answer to governments or citizens; they only answer to shareholders. And shareholders want growth, regardless of the political implications. In a global economy paralyzed by the virus, China will see itself become the paragon of economic success. And everyone will be watching.
Debt diplomacy
While the world is completely shut down, China is using this unique opportunity to accelerate its expansion across the globe using debt diplomacy.
Where other countries (notably the USA) influence through military might, China prefers to be more discreet about it. Their version of expansionism involves financing building projects overseas and getting paid for them later. Only, getting payment later was never really part of the plan.
China’s loan terms are usually designed to capitalize on the fact that the countries they loan to are especially vulnerable and will never be able to pay them back. Underdeveloped countries in Africa and Asia are prime targets. When these vulnerable nations default on their loans, China pounces and claims some of their sovereign infrastructure as collateral.
They did this to Sri Lanka in December 2017 and the same will likely happen to Kenya later this year. Some countries like Djibouti have up to 71% of their GDP owned and financed by China. Much of the same will likely happen to anyone of Madagascar, Maldives, Tajikistan or even Pakistan who share the same scary statistics as the former three countries.
Right now, China’s debt diplomacy is working tremendously in their favour. With the economic crisis in full swing, every nation on Earth has a choice; shut down its economy or leave it open and let thousands die from COVID-19. But shutting down an economy is expensive, and people still have bills to pay that they can’t anymore. The only solution is to borrow. And the only one lending is China.
What we’re seeing is basically international pay-day loans being approved by China. Loans that no country will be able to pay back before, during, or even after this crisis. So China will find itself with lots and lots of foreign assets for cents on the dollar. Or is it jiao on the yuan, now.
International leadership
Up until now, there’s really only been one country running the global show; the US. But faced with possibly the greatest challenge yet in the 21st Century, the US has clearly shown its inability to lead and collaborate in trying times.
With Donald Trump at the helm ushering in an age of isolationism, the US has severed its ties to the outside world, choosing to help mainly domestically, instead of internationally. Meanwhile, China is proactively doing everything it can to help, from manufacturing medical equipment to sending experts and sharing intelligence. According to the Chinese Foreign Ministry, China has sent medical supplies, test kits and ventilators to 120 countries and four international organizations.
Yes, the world knows it caused this whole situation in the first place. But China’s apology comes in the form of genuine assistance rather than empty words. People will remember the origins of the virus, but they’ll also remember who showed up to help as well. And who showed up just to save face.
More significantly, global organizations are turning out to be the prime battleground where US leadership is being challenged. The WHO, who’s leading the global response to this crisis, received threats from Trump to withhold funding, while China donated $20m to them to help developing countries with their response.
The virus and the ensuing crisis has effectively shown the world that China rises up to a challenge, while the US cowers away and saves itself. Nevertheless, while this doesn’t exactly mean the US is going anywhere any time soon, it also means China isn’t either.
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