As Covid-19 vaccines are gradually delivered and received by people all around the world, we gradually move towards the end of the pandemic and the expected return to normalcy. The moment when no more lockdowns, social distancing or other Covid-19 restrictions are needed is getting closer by the day. But once the dust settles down, another discussion will begin regarding how the global economic and political system will function after the pandemic. A discussion in which China is going to have a very amplified role. It looks like China is the only major country that has not suffered tremendous economic consequences during this pandemic, even though it was where it all started. The following period looks more and more promising for the Asian superpower.
For the past months, while Europe and North America were on lockdown or under severe restrictive measures, affecting businesses, productivity and the output, Chinese corporations have been steadily recovering since the spring of 2020, uninterrupted, strengthening and building up on their potential. Additional investments and capital are attracted this whole period by China, keeping up the accumulation of wealth, debt and foreign exchange reserves, solidifying its domination in global economy and international trade.
Especially foreign exchange reserves are of high importance for China’s power as they support the yuan’s fixed exchange rates to an extremely low level to maintain competitive exports. This policy has been criticized repeatedly by the United States as currency manipulation and even though this criticism is valid, if the Chinese government has enough reserves to maintain this system no one can do anything about it. China’s foreign exchange reserves are now around 3.2 trillion dollars, only growing in recent months! These levels of reserves are more than enough for China to go on indefinitely. Practically, they are almost three times the reserves of the second country in this list, Japan, followed by the world’s banking safeguard, Switzerland. China’s trade power seems almost undisputed.
Although President Trump’s antagonizing trade policies have begun to look effective over the past years, as China recorded slower growth for the first time in decades, the pandemic created a new opportunity that the Asian giant seized. It is a fact that the tariffs and the trade barriers imposed by the US have evolved into a silent economic war between the two world’s superpowers and China has seen some mild negative effects. Coronavirus closed the American and European economies, while China never went on complete national lockdown; it only had strict regional quarantines to slow the spread of the virus. Their totalitarian regime has been particularly effective on forcing people to stay home and thus stopping the spread of Covid-19 timely, which resulted in a minimized economic downside. This could never happen normally in any democratic country, without public outcry. But for communist China, such obstacles do not exist. That is why they operated as usual when the rest of the world under functioned, and that reality gave them a competitive advantage for additional many-sided gains.
During 2020, out of 193 economies, 167 economies saw a negative growth rate. These 167 economies account for almost 79% of the world economy, including Europe and the Americas. While global powers like the US (-4,3%), the UK (-9,8%), Russia (-4,1%) or Germany (-6%) recorded negative growth, Chinese GDP rose by almost 2% in 2020, falling just short of 15 trillion in US Dollars! On the contrary, the American GDP fell from 21.4 trillion to 20.8 trillion dollars. The gap is shrinking at an alarming rate. Given the macroeconomic projections, this trend seems likely to go on steadily towards China’s complete domination of the global economy.
At the same time, China’s economic power might also mean more political and geopolitical power, influencing international organizations, like the UN or the WHO as we witnessed during the Covid-19 pandemic, and in the end a more significant role in the international decision-making process. This affects multilateral decisions and efforts like those to fight for human rights, promote democracy worldwide or combat climate change, that the international community is determined to address, shaping the world’s culture and civil process. What would this mean for these objectives if a country governed by a communist, authoritarian regime with limited respect for human rights and the rule of law takes charge of the global economy?
All in all, the day when China officially becomes the strongest economy on earth, by surpassing the US on GDP, is now on the foreseeable future. While China’s influence will only keep growing in global trade, international fora and key international organizations, what would be the underlying effects on the shape of our world and our culture during the fourth industrial revolution?