What The Worst- And Best-Case Scenarios Look Like For China In A Post-Covid-19 World

As the COVID-19 pandemic puts the global economy into quarantine, people are beginning to ask what this might mean for the world.

They are not thinking of the economy alone. There is a palpable sense of unease in the mainstream, as well as social media that geo-political balances, livelihoods and the socio-economic situation in general are about to take a turn for the worse, i.e. the unknown.

Are we entering a phase where assumptions about stability are going to be seriously stirred, if not shattered?

The short answer to that is ‘Yes’.

Let us consider just one aspect of this step into the unknown. The place of China in the world, going forward. Here is a perspective on what the coming months and years might look like for that country.

No matter its protestations, the world – for the most part at least – has concluded that China is the source of the COVID-19 infection and that the first cases of the outbreak happened in Wuhan.

Beijing has disputed this, but will not find many takers for that line of discussion.

Outside China, the debate is only about (a) whether the virus was lab generated or a species jumper, (b) if it was a lab-creation, then how to deal with China on this issue, and (c) if it is a species jumper, then what to do about Chinese dietary habits that apparently facilitated that transmission.

Then there is the reality that China informed the world too slowly and that the World Health Organization (WHO) was acting as its surrogate when, even as late as 14 January 2020, it tweeted that there was no conclusive evidence of human-to-human transfer.

The geo-political impact is hard to gauge now, as most countries are still reeling from the socio-economic impact of the virus and are trying to restore a sense of normalcy and routine.

Most governments are being reticent in their assessments about how the world got where it is today, from where it was at the turn of the year.

But the early signals are there for all to see – as the US, European countries, India and Japan issue statements or directives that allude to these issues.

What next? It is near-certain that there will be no return to business as usual with Beijing. It is also clear that the fall-out will have a wide spectrum impact on China, and not just on its economy.

The best-case scenario is a “limited responsibility consensus”, i.e. that China was responsible only for letting the world know about the outbreak too late as a result of confusion and incompetence (rather than deliberate choice to delay information spread for malicious reasons).

This has cost, at current count, over 130,000 deaths in the US and Europe, of which over 90,000 are in Europe alone.

In response, at the very least, we could anticipate that these countries would want – probably via the UN – the creation of a mechanism to monitor, check and report on the wet market scene in China as well as the virus research laboratories.

It is unlikely that Beijing will accept any such thing, through the UN or otherwise. I repeat, a limited responsibility consensus is the best-case scenario for China.

Still, what will Beijing’s rejection of an approach through the UN mean? It will mean that, ultimately, the geo-strategic fallout from COVID-19 will dovetail towards one reality: global socio-economic distancing from China.

This will unfold, uncertain step by uncertain step, over the next few years.

The only difference between limited and maximum responsibility scenarios is the speed at which this distancing will happen. So, let’s take a quick look at what a “maximum responsibility scenario” might imply.

It would mean that evidence emerges that China (a) was not aware it was about to be hit by the virus, but nevertheless acted deliberately to spread it; (b) designed, developed and released a bioweapon for the purpose that is unfolding. This would mean the Communist Party leadership assessed that the country could easily absorb a significant death toll, while the rest of the world would be in total disarray as it is now – with greater dependence on China.

Whichever scenario proves right, whether at the extremes or in between, we can expect some of the following developments:

1. Private companies will start looking to relocate their supply chains away from China. Japan has already set up a fund specifically to assist its companies in doing so. In the US, this was a subject of discussion before Donald Trump was elected president, and his erstwhile Svengali Steve Bannon has spoken of it innumerable times since.

2. Private sector contacts with Chinese companies having state connections will be degraded gradually, as a matter of policy. The Huawei precedent may be applied in other pseudo-private enterprises too.

3. Trust issues at the governmental level will be inevitable, considering that the democratic states will have to account for public opinion – which in the current situation does not favour China. Anecdotal evidence of public hostility towards anyone who looks Chinese is spreading on social media.

4. A ‘trade surplus tariff’ or other similar mechanisms based on reciprocity can be expected to materialise. It has already been clear to the general public in the EU, US and much of the rest of the world that the Chinese trade surplus is directly linked to the death of manufacturing in many of their towns and cities. Few politicians will be able to resist such impulses in the public mood in the post-COVID era.

All this will have a significant impact on the Chinese economy, while the rest of the world - slowly but surely seeks alternatives that are closer to home and are likely to generate more jobs locally.

In reality, the above means a deep realignment of the global power structure in the years ahead – to China’s detriment.

It will also likely mean the end of Xi Jinping, as the Chinese Communist Party moves towards damage control – something one might expect before the end of 2021.

Much of this will not be visible on the newspaper pages, only hints here and there as a shadow-boxing tournament goes on behind the scenes.

These are just some of the normal vectors to be expected, depending on how the international community comes to assess the COVID-19 outbreak and its causes.

But there are worse outcomes possible – depending on how long this pandemic continues to scythe its way through populations. It could mean anything from the collapse of the UN, starting with efforts to expel China from the Security Council permanent membership, to flashpoints flaring on the Taiwan Straits, North Korea, and against Chinese interests across the world.

Any way you cut it, the pandemic pie is taking us towards a world of bitter instability. Unless, of course, the world simply accepts the SARS-CoV2 virus as a fact of life and resumes business as usual with China. The latter is possible, but not probable.