With increased confidence in the Chinese bond market and lagging health measures taken in many of the worlds richest countries, Beijing may come out as an economic winner after the global coronavirus pandemic.
Just three months ago Coronavirus hardly registered outside China. The US-led push for “decoupling” of the global system as part of a far-reaching strategy to push back and contain China was building momentum around the world, and of course enthusiastically in Australian policy circles.
Be careful what you wish for.
With the virus, decoupling has taken a giant step forward. As China recovers well ahead of the rest of the world, it may be that China takes the lead on decoupling from the US.
CNN is reporting that all controls in Wuhan where the virus began, and which has experienced draconian restrictions on people’s lives, will be lifted on 8 April. Ironically, just before President Trump’s vain – if not utterly irresponsible – claim that the virus emergency will be over in the US by Easter.
For three weeks, China has been claiming that there have been no new local infections reported (new infections have come from people returning to China, mainly from Europe and the US). Reports from the foreign community living in China is that things are gradually returning to normal. An American friend in Beijing, cheerily advises that, after over two months of lockdown, he has a full calendar of social activities in the weeks ahead.
The Financial Times was reporting late last week that in times of great market instability across the developed world, China’s bond market was attracting a large amount of investment from around the world. Global asset managers have assessed China’s renminbi dominated bond market – the third-largest in the world – as a “safe haven”. During this period, it has been more stable than most, as has the Shanghai index and the renminbi.
It is of course right to be sceptical about official numbers from China, but the government’s actions speak for themselves. Across China people are being encouraged to return to work, public places like cinemas are cautiously being re-opened and even at the epicentre of Wuhan, some greater mobility for citizens is being permitted. People are optimistic that the worst of it is well behind. At the same time, fear of importing the virus has led to a complete ban on foreigners travelling to China.
The contrast elsewhere in the world is stark. Italy and now Spain’s respective death tolls have surpassed China’s. A shocking reality when considered on per capita basis. The deep flaws in the UK’s underfunded NHS are revealed and the conflicting statements between the US President and, for example, the Governor of NY Governor Cuomo only serve to highlight the confusion and chaos in the US response.
The image of the US president last Sunday on the docks farewelling the US Navy’s huge hospital ship Comfort as it heads to New York City on a rescue mission was extraordinary. The President, as ever, was oblivious to the national shame and humiliation of this act. In times past, the international community would have expected this ship to be going on a humanitarian mission to some distressed developing country, not one of the wealthiest cities in the world.
In addition, 22 charter flights are planned – one a day starting last Sunday from Shanghai – of emergency medical equipment to be sent to different cities across the US. It is now China that is despatching medical and equipment to wealthy countries, including the US and most notably Italy, Spain, Austria and across eastern Europe. Expect soon to see President Xi farewelling a hospital ship to Africa or the Pacific.
As offensive to liberal sensibilities as the heavy-handed Chinese Government’s response may be – and with good justification – the Government’s performance is what will be recognised and rewarded within China and what will most likely create the biggest impression on the rest of the world.
Earlier this month, this column suggested that if the Government got on top of the virus it would be played as a major propaganda achievement for the CPC and President Xi’s leadership. The coverups and victimisation of whistleblowers in the early stages would be subsumed by a narrative of a heroic patriotic victory led by the Party.
That is exactly what has been happening the past couple of weeks since the rate of new infections began to fall steeply. Xi Jinping over the weekend was walking the back lanes of Beijing in sunny early spring weather under a brilliant blue sky, merrily waving from behind a mask to grateful citizens.
The Party has also moved swiftly to capitalise on the turning of the COVIN-19 tide by claiming global leadership from its apparent success. In this soft-power push, it has much ground to make up for its earlier deceit which has become a potent additional source of friction in the bilateral relationship with the US.
South Korea and Taiwan are also significant examples where the virus was expeditiously controlled under well-functioning democratic institutions – but not Japan where systematic under-testing, presumably because the government was trying to protect the Olympics, has seen the virus continuing to spread much to its citizen’s chagrin. Meanwhile, in democratic India police are seen brutally enforcing some of the most illiberal and draconian measures anywhere, even compared with Hubei Province. Everywhere, civil liberties have been draconianly restricted and more is to come, especially in the US which is now playing catch up.
Although the Communist Party’s propaganda machinery is trying to claim the high moral ground, what will matter more is that the Chinese Government managed the crisis and went into economic recovery well before all others, with the possible exception of South Korea and Taiwan.
Once again, the G20 was found wanting at its last meeting in the face of this global emergency. Multilateral action requires a level of cooperation among the great powers that is completely lacking at this time. Besides, under Trump, the US is deeply mistrustful of multilateral institutions. In this, it has opened the way to greater Chinese influence, as we have seen with the WHO in this crisis.
Beijing may now see little to fear from a decoupled world which may occur increasingly on its own terms. Its capital markets are strong, stable and attracting more inflows, in turn strengthening the renminbi as an international currency, it is attracting gratitude from many countries for leadership and support in the international response to the virus, it is exerting much more influence in multilateral institutions than before – mainly because of its strong bilateral relationships around the world which will be bolstered substantially by its COVIN-19 aid. Meanwhile, Beijing is pushing on with its ambition to host a parallel internet universe. Most of the world is closely observing the palpable contrast with the US.
Geoff Raby is a former Australian Ambassador to China