The Pandemic May Increase China's Economic Strength vis-à-vis the U.S.
The Pandemic May Increase China's Economic Strength vis-à-vis the U.S.
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April 11, 2020

‘Well, I think people around the world are rightly suspicious of the Chinese as they are probably equally suspicious of the Americans.'

On Friday, I had an excellent interview with John Quelch.

  • We will post the video of the interview as soon as it's edited.

John Quelch, CBE, is the Vice Provost, University of Miami; Dean, Miami Herbert Business School; and Leonard M. Miller University Professor.

John has served as an Associate in Research at Harvard's Fairbank Center for Chinese Studies, fellow of the Harvard China Fund, and member of the Harvard China Advisory Board.

John Quelch: ‘A very interesting issue is whether or not China's relative economic strength vis-à-vis the U.S. is going to be enhanced by this crisis.’

‘My view is that there's a strong chance that might occur.’

  • ‘First, because the rapidity with which the Chinese, given their political system, were able to deal with the outbreak and has enabled them to restore their economy faster.’
  • ‘Secondly, that the amount of stimulus that they have injected into the economy in order to facilitate its restoration is significantly less as a percentage of GDP than what the U.S. is putting in, and therefore the long-term debt overhang incrementally will be lower in China than in the U.S.’
  • ‘Thirdly, China has been able to pivot its manufacturing capacity for PPE and the test kits pivot that from dealing with the situation in China to now manufacturing on behalf of the rest of the world.’

‘And you're going to see massive exports of Chinese PPE and drugs, et cetera, to emerging economies around the world on, not a profit-making basis, but on a soft power bargain-price basis.’

  • ‘That way China is going to enhance its soft power internationally.’

Malcolm Riddell: ‘Before we get to the soft power issue, let me ask, there's a concern that China's economic recovery will be inhibited by the slowdown in its large markets in the West and therefore even though they'll have the supply, the demand will be lacking.’

  • ‘How big is that problem going to be?’
  • ‘And second, do you think that China's own domestic market can absorb enough now to allow it to recover rapidly?’

John: ‘So the government has been attempting for the last five-plus years to shift the economy from an export-driven economy to an economy more reliant on domestic consumption.’

  • ‘This will be an added motivator to that process.’

‘Obviously in the short term there will be some markets internationally that won't be able to absorb Chinese production capacity, but I believe that the domestic economy will continue to grow. ‘

  • ‘Actually - I don't know exactly what the number will be - but I believe you could see positive GDP growth in China this year, even as the U.S. experiences the biggest drop in GDP in living memory.’

Malcolm: ‘And you mentioned also China's using this crisis to develop its soft power, especially with emerging markets.'

  • 'How successful do you think that can be?’

John: ‘I think it's going to be very successful.’

  • ‘If you're the minister of health in a country like Ecuador, for example, and the Chinese come and offer to donate 100,000 test kits and a million masks, you would probably be very interested.’

Malcolm: ‘And the question of soft power.’

  • ‘There's been a lot of discussion that President Trump's America first policy and his withdrawal from being the leader internationally in this crisis gives China an opportunity. How do you see it?’

John: ‘Well, I think people around the world are rightly suspicious of the Chinese as they are probably equally suspicious of the Americans and the same equal suspicion probably prevailed during the Cold War between the USSR and the USA.’

  • ‘So I don't think that anyone is naive enough to believe that China is knocking on their door on a purely humanitarian mission.’

‘Nevertheless, the fact is that China does have the manufacturing capacity to be able to deliver an enormous amount of help to countries that have very fragile public health systems at the best of times, and certainly not strong enough public health systems to deal with this kind of onslaught.’


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