The world is waking up to the risks of relying on China for its critical medical supplies

For the US and Europe, the coronavirus pandemic has highlighted China’s dominance in critical medical supplies.
The reliance is now an issue of national security and geopolitical risk, with more countries seeing it as an imperative to decouple and diversify away from China

Cary Huang

Published: 7:00am, 22 Apr 2020

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“Deglobalisation” and “decoupling” were buzzwords that dominated the global media amid the escalating US-China trade war, before the coronavirus outbreak began in January.

The worldwide spread of Covid-19 has only strengthened the arguments against globalisation and convinced many in the developed West that the process of decoupling is imperative. As the pandemic spreads and its epicentre has moved from China to Europe and the US, such voices have only become more prominent and, indeed, overwhelming.

In the beginning, the supply-side shock from China’s lockdowns disrupted the global supply chain and brought many major economies to their knees. The disruption not only caused a shortage of China-made consumer goods in many countries, it also laid bare the globalised manufacturing industry’s over-reliance on China’s supply of intermediate products.

The disruption starved many multinationals of needed components and equipment, particularly those making hi-tech products, consumer electronics and smartphones, depressing or disrupting their production at home. Still, the supply-side shock is more of an economic issue, and has little to do with national security or geopolitics.

But when Covid-19 spread to the rest of world, policymakers and politicians in the West were faced with a more critical challenge concerning national health, state security and geopolitics, as they all depend on China for critical medical supplies in their life-and-death battles against the lethal pandemic.

Most developed economies rely on China to supply products such as personal protective equipment, testing materials, face masks, medicine and pharmaceutical materials. In this pandemic, China’s dominance in some strategically significant sectors, such as the active pharmaceutical ingredient industry, may well serve as a wake-up call for political elites in Washington’s corridors of power and the chancelleries of Europe.

Covid-19 has also awakened the need to reassert national security and state sovereignty, leading to a rising nationalist sentiment with loud calls for greater self-sufficiency in areas such as medical supplies. For instance, nearly 70 countries have limited or banned the export of medical supplies.

The Covid-19 pandemic is simultaneously a supply-side and demand-side shock, underscoring the potential public health, humanitarian and geopolitical crisis, and exposing flaws in the global system. Economically, countries have become more connected and interdependent. Politically, however, governments rule in totally different ways with different objectives.

Yet, Adam Smith’s The Wealth of Nations does not take into account the conflicts of politics, economics among them. Similarly, David Ricardo’s theory of comparative advantage espouses the effectiveness and efficiency of free-market competition, but says nothing about geopolitical rivalry.

Covid-19 comes amid escalating tension and rivalry between US-led alliances and China, given China’s fast-growing clout and Beijing’s pivot towards greater authoritarian rule domestically and a greater assertiveness internationally in the past decade or so.

The pandemic has served to convince policymakers and strategists in the West not only of the economic risk of their over-reliance on a single country for critical supplies, but also the geopolitical risk of relying on a nation they call a “strategic rival”.

Covid-19 will undoubtedly hasten the efforts of Western nations to not only diversify their supply sources to reduce economic risks, but also to diversify away from China to reduce the national security and geopolitical hazards.

Since it joined the World Trade Organisation in 2001, China’s steadily increasing trade surplus with the US has been at the centre of the row between the two countries. However, it is now the increasing political deficit that is dictating relations.

And Covid-19 has added to the strategic suspicion and political distrust. For political doves, globalisation and integration may be a matter of shared welfare between economic partners. For China hawks, however, deglobalisation and decoupling with China are a matter of warfare between political adversaries.

Cary Huang is a veteran China affairs columnist, having written on this topic since the early 1990s

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