Why China – not the US – remains key to Asia’s trade and economic recovery after Covid-19

China’s economy is expected to grow this year, it is capable of generating the jobs and trade needed for recovery, and looks ready to lead

In contrast, the US economy is shrinking and champions of free trade and investment are lacking in Trump’s ‘America first’ White House

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Chinese President Xi Jinping (centre) visits the Xixi National Wetland Park in Zhejiang province on March 31. China is plotting post-crisis strategy like a chess game while the US lacks a game plan. Photo: AP

Published: 1:00am, 27 Apr 2020Updated: 1:02am, 27 Apr 2020

The financial response of governments and multilateral institutions to the coronavirus-related economic crisis has been so impressive and swift that it is tempting to believe matters are under control. But short-term financial fixes do little to soften the coming blow to trade and jobs.

This threatens to be extremely painful and long lasting in Asia unless the region’s economies make determined and concerted efforts to get trade back on track as soon as lockdowns are relaxed. In this, China will inevitably be the prime mover rather than the United States.

There are two main reasons. One is that China’s economy is projected by the International Monetary Fund to grow by 1.2 per cent this year while the US economy is expected to contract by 5.9 per cent. The other is that China is plotting post-crisis strategy like a chess game while the US lacks a game plan.

The Regional Comprehensive Economic Partnership (RCEP), an agreement of 15 Asia-Pacific countries centred on Asean but with China as its most powerful member, is unlikely to be launched this year. With the US having quit the Trans-Pacific Partnership, China is best placed to shape trade policy.

The trade and the jobs China generates, especially in services, are critical to economic recovery. Trade infrastructure had been damaged before the coronavirus struck. Global trade relative to gross domestic product last year was already lower than before the 2008 global financial crisis.

The villain was the outbreak of Trump’s trade wars, against China and others, which ensured that world trade had a pre-existing health condition: the arteries of supply chains were already damaged when the coronavirus struck the beating heart of commerce.

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