The global spread of an infectious disease often creates urgency for international cooperation. During the 2009 H1N1 pandemic caused by a novel influenza A virus that was detected first in the US and quickly spread across the world, for example, health authorities in the US and China closely worked together, exchanging technology and information in monitoring the spread of the flu and accelerating the development of a vaccine. The US provided China with virus samples and diagnostic kits, helping China become the first country to mass-produce an H1N1 vaccine. Chinese scientists, in turn, shared their method with the world, facilitating vaccine development efforts by pharmaceutical companies.
The Covid-19 pandemic has a different script. It brought US-China relations to its lowest point. A Deutsche Bank survey in May shows 41 percent of Americans will not buy “Made in China” products again, while 35 percent of Chinese will avoid US goods. Washington closed a Chinese consulate in the US, and Beijing retaliated by closing a US consulate in China. The China-US relationship has fallen into outright hostility.
In a Bloomberg Opinion article—Think It’s Too Hard to Decouple From China? Think Again—Michael Schuman said that China was supposed to be the Promised Land for American business—the lucrative, indispensable market of the future. But, as US-China tensions escalate and calls grow louder for their two economies to decouple, CEOs across the US are confronting a prospect that only a couple years ago would have seemed unthinkable: China may no longer be a reliable source of profits and production. “Politicians on both sides of the Pacific are already taking steps to disentangle the world’s two largest economies, at least to some extent. The Trump administration, for instance, has curtailed American exports of certain technology to China, while Congress is moving to restrict Chinese access to US capital markets. Beijing has if anything been even more determined. Core elements of China’s foreign and economic policies—from the infrastructure-building Belt and Road Initiative to subsidy-rich, state-led industrial programs—are designed in part to reduce Western influence over the Chinese economy. There’s little reason to believe the trend will reverse,” he said.
In a Harvard Business Review article—Prepare for the US and China to Decouple—Michael A. Witt said:“Arguably, we’ve been headed towards this moment for a long while. De-globalization has been under way for more than a decade: At best, international trade was stagnating before the pandemic hit, and foreign direct investment had fallen by 70 percent in 2018 from its peak in 2007. Never easy, Sino-US relations have taken a more confrontational turn under Xi Jinping. By 2018 we were already witnessing the opening skirmishes of a new Cold War. As de-globalization accelerates, two hostile economic blocs are emerging, one centered around China and the other around the United States.”
FromThe Diplomat: “Political battles aside, many Americans believe that Covid-19 revealed the danger of relying on China for manufactured products. Indeed, the United States was incredibly ill prepared for the global pandemic, which revealed a lack of basic medical supplies and personal protective equipment such as face masks, nasal swabs, and ventilators. The disruption of China’s supply chain due to the pandemic and lockdown also sent negative shockwaves to US production and markets. The lesson seems to be that production must be brought back home, while the United States decouples from China. Support is rising for economic nationalism.”
Is it possible to decouple the two largest economies in the world? To a certain extent yes, and it will impact the whole world. Unfortunately, there’s no international organization that can pull the brakes or mediate in this predicament.
However, despite President Donald Trump’s recent threat that the US could pursue a complete decoupling from China, sober voices still prevail. Answering a question by syndicated radio show host Hugh Hewitt about prospects for a new cold war with China, Secretary of State Mike Pompeo said on Tuesday “the US economy was far more integrated with China’s than with the former Soviet Union.” Treasury Secretary Steven Mnuchin, asked about decoupling in a Bloomberg-Invesco forum, said it would occur if US companies were not allowed to compete fairly in China’s economy.
We hope the extreme predictions about the future of the US-China relations may prove wrong. We hope that the world’s two largest economies will work together to fight the pandemic and help rebuild the global economy. But a wise man has said that hope is not a strategy. It’s always better to be prepared.