With COVID19 becoming a Global Pandemic, the spotlight is on Chinese Foreign Policy behavior and economic planning. The Security & Economic strength of the Indo-Pacific is going to increase exponentially, with the prime focus on re-establishing broken supply chains and opening new transportation avenues for faster trade deliveries.

The United States, as the foremost economy in the world, and at present one of the worst-hit nations by the pandemic will be expected to take the lead along with its Indo-Pacific partners.

Competition between China and the US, along with other stakeholders, in enhancing infrastructure connectivity in the Indo-Pacific might witness a new mode of politics in the post-COVID Order.

China’s Belt & Road Initiative (BRI) and its “Charm-Offensive” strategy will have to adapt to the new scenario either by enticing new partnerships or by addressing existing concerns in the region.

Further, China has to address the issue of its labor and manufacturing exports being banned from entry at least until the third quarter of 2020. It is hard to say if such geopolitical complexities have entirely dismissed the lucrativeness that the Chinese economy always offered to the global economic growth cycle.

The World Bank, in its “East Asia and Pacific Economic Update”, however, has stated that the countries that are a part of the Association of Southeast Asian Nations (ASEAN) will be hit hard not just because of the spread of the pandemic within their borders, but also because of the COVID19 impact on the Chinese economy.

ASEAN has emerged as China’s largest trading partner and has been witnessing severe supply chain disruptions in the past three months. In Africa, however, Chinese investments have steadily increased over the years, especially by Chinese private business moguls.

The co-founder of Alibaba, Chinese tech-billionaire Jack Ma has donated testing kits worth $1.1 million, 60,000 protective suits and six million masks to 54 African nations in the continent’s fight against the pandemic.

China is taking further measures to expedite its BRI process despite running the risk of its diplomacy seeming obnoxious in the post COVID period. In other words, Beijing’s health diplomacy will be acting as a mask to expedite its silk road ambitions.

What will be more important to observe is the future of the Chinese economy and its foreign policy. Looking at the many estimations that have come about, including UNCTAD’s (United Nations Conference on Trade and Development’s) recent prognosis, the Chinese economy will not face a recession in the post-Covid period.

The veracity of this claim, however, remains unproven. Trade between China and the rest of the world has already gone down and international supply-chain networks have also been disrupted. So, how can it be posited that the Chinese economy will not face a recession?

The Chinese economy is not an ordinary one; Beijing has long been prepared to overcome such crises since Xi Jinping came to power in 2012-13. That was the period when the economy had started slowing down, and was struggling to meet the double-digit growth rate that it used to enjoy previously.

In the rubric of the “new normal”, the economy has evaded any crises that could sway Xi’s presidency. In fact, propounding their impressive economic growth has been a survival tactic of the Communist Party of China (CPC) for long.

COVID19 has undoubtedly crystallized a large-scale negative impact on the Chinese economy. The decline in Purchasing Managers Indices (PMIs) and plummeting automobile sales are cited as one indicator. In the first two months of 2020, fixed asset investments in China fell by almost 25% as compared to 2019; the decline includes numbers from private as well as public sectors.

Notably, the corona impact has led to a decline in industrial production, first time since the 1990s, of almost 13.5% with further large-scale reductions in sectors like machinery, textiles and transportation anticipated.

As compared to 2019, industrial exports have fallen by almost 19%, which is consistent with the disruption in global manufacturing supply chains. Under a lockdown, the Chinese citizens have been prevented from engaging in discretionary shopping, with sharp declines reported in domestic retail sectors of clothing, home products, furniture and building material.

Further, reports suggest that over 5 million people have lost jobs in January and February, with urban employment rate rising to its highest ever of 6.2% in February.

However, new data coming from China is showing an improvement in the economic tide. PMIs are evaluated on a monthly basis and anything above 50 is considered to be positive. March figures by China’s National Bureau of Statistics (BS) have shown Manufacturing PMI at 52, while Non-Manufacturing PMI is at 52.3.

If this trend continues, the Chinese economy will continue to survive with modest growth. This is irrespective of the fact that the COVID pandemic has led investment firms to heavily cut growth forecasts, with S&P Global forecasting global growth to be 0.4% in 2020. Economists, for instance, have expected China’s foreign reserves the largest in the world to fall by US$15.497 billion to US$3.1 trillion due to fluctuations in the prices of international bonds China holds and a drop in global exchange rates.

However, the People’s Bank of China has released its data stating that the Chinese forex have fallen less than expected, with the yuan weakening over coronavirus fears, by only US$8.779 billion to US$3.107 trillion in March. This could be because China had installed strict capital controls in 2019 during the trade war with the US to control its outflows.

China may escape recession for a variety of other reasons too. Under Xi Jinping’s BRI, China has continuously explored New Markets. Lured by low wages, Foreign Direct investment has permeated interior parts of China, which has been instrumental in reducing the gap between Urban and Rural China.

Even though one may assume that the manufacturing sector will decelerate now, the same cannot be claimed about the services sector. New areas of economic engagement through hi-tech manufacturing will be handy.

Bio-technology, next-generation of information technologies, new energy resources and infrastructure investment plans will support China in renewing contacts with emerging economies, including India.

It should be noted that as faith in China’s global governance regime sullies due to widespread denigrations, Beijing would want to explore pockets which would aid in enduring the legitimacy of the CPC.

Thus, China might want to look at India as a possible option, where India’s balanced response could come as a ploy. India’s non-partisan approach would only advance greater regional peace, while making China acknowledge India’s rising power status, though to an extent hesitantly.

In retrospect, India has refrained from condemning China over the pandemic, with External Affairs Minister S. Jaishankar tweeting about forward-looking efforts that the two countries are taking to fight the pandemic. China has also been forthcoming in its willingness to share “its experiences in epidemic prevention” with India.

Nonetheless, given the tag that China holds as a “suspect” power in India’s strategic outlook, it is too early to expect stress-free India-China ties ahead. For India, the pandemic might have only heightened its view of Beijing as a selfish actor, given the strong anti-China public perception at present.

China’s recovery could also be ascribed to the systemic control exercised by the CPC. The State-Owned Enterprises (SOEs) are expected to expedite commercial contacts with overseas companies.

China’s state power has always relied on internal institutional adjustments, that is, to choose between growth versus reform when it comes to the overall development of the country. At this point, the Chinese state authorities would like to ensure a stable economic growth since any outright economic reform could lead to political difficulties.

To put it briefly, COVID19 might have posed unseen challenges to the Chinese authorities, however the party-led economy is bound to survive despite the current emerging criticism.

The CPC already has a solid foundation in terms of its political economy. China’s economy will therefore be secure, as it is the party-led economy that offers fillip to the CPC’s rule and authority which the democratic world would always find difficult to subscribe.

Author: Jagannath Panda
Editor’s Note: The article reflects the author’s opinion only, and not necessarily the views of editorial opinion of Belt & Road News.