Post-covid economy can’t ignore China role1 min read . Updated: 28 Oct 2020, 10:20 AM IST
China’s worldwide infrastructure and capital investment has made it irreplaceable in the global economy, says an EPW article
Anti-China sentiments have been on the rise ever since the coronavirus pandemic broke out. A narrative has emerged that China will become a weaker economic force in the post-covid world as businesses will leave the country and move elsewhere. But a new article in the Economic and Political Weekly suggests this won’t happen.
Academics Biju Paul Abraham, Biswajit Nag, and Partha Ray argue that China is so integrated into the global economy now that any shift will be “neither quick nor painless".
The rise in China’s exports over the years has helped China build considerable financial clout. Its outward FDI stock was worth $1.98 trillion in 2018, the third largest in the world. This extent of investment has allowed China to improve the efficiency of supply chains and backward and forward connectivity, the article says.
China is still irreplaceable as the optimal destination for large-scale manufacturing, the authors say. For instance, Disney, with its production units spread across over 100 countries, has one-third of its factories in China. Shifting supply chains won’t work as the readjustment might take time and it could lead to shortage of goods and inflationary pressures.
Even if companies were to move, Chinese firms and their partner MNCs could join hands with local partners in South East Asia. These countries are already part of China-led value chains. Such readjustment would be easier for companies.
China has extensively invested in state development, transport and storage, and construction worldwide over the last 15 years. And it plans to build a network of 50 special economic zones that would establish a new trading regime. It has been securing supplies of critical minerals and building its competency in high-end technology. Rather than the global economy moving away from China, the country could become even stronger in the post-covid world, the authors argue.
Also read: China-bashing and Post-COVID-19 Narrative
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