Coronavirus: from helping firms exit China to sourcing Chinese medical supplies for US states, here’s what I learned
- China made several initial missteps in the pandemic but quickly adapted to contain the spread of the coronavirus
- Despite moves to reduce dependence on China, it remains the producer of last resort for medical equipment worldwide in this crisis
Just six weeks ago, I was interviewed by the South China Morning Post and said that the black swan of the novel coronavirus would likely push both the Chinese and American economies into recession.
My business helps companies set up and manage operations around Asia, with much of the work taking place in China. From this vantage point, I have seen the coronavirus affect both sides and observed how markedly the situation has changed.
Of our firm’s eight offices in Asia and one in California, the only one open is in Shanghai. The rest are either on mandatory lockdown or have instituted a work from home policy at the recommendation of the local government.
At the start of the outbreak, my phone was ringing continually with prospective old or new clients looking for help in moving their production out of China, the sort of work we have been busy with since even before the trade war began in 2018.
We’ve scoured hundreds of potential sources all across Asia, but the vast majority of viable sources are in China, especially since other nations have restricted exports to conserve them for their own Covid-19 containment strategies. Had China not subsidised and ramped up its own production of masks, gowns, goggles, test kits, thermometers, and, most importantly, ventilators, there would be an even greater shortage.
Of course there are examples of unscrupulous traders profiteering on skyrocketing global demand and Chinese companies manufacturing substandard quality products. But the truth is, China is the global supplier of last resort for PPE and medical equipment to fight the Covid-19 pandemic. The US should be grateful that China is in this position until it ramps up its own production.
We may not agree with how China initially reacted to the crisis. China’s leadership failed to recognise the severity of the virus, clamped down on its doctors for speaking out, and withheld information from the rest of the world.
However, we certainly can and should learn from how China adapted to it. We need to acknowledge our cultural, economic and political dissonance with China and accept the fact that our initial disinterest in a crisis we thought was an Asian issue has come home to haunt us.
The debate in the US is not whether the economy will go into recession, but when, and whether a depression is on the horizon. Many of our American and European clients are now cancelling or postponing their Asian projects as they deal with crisis management at home.
While understandable, this may be ill-timed, as the Chinese and other Asian economies begin to spring back to life.
Meanwhile, the accelerating trend of the redistribution of the manufacturing supply chain will continue, but the process has been complicated by the virus.
The concentration of production in active pharmaceutical ingredients, electronics, medical devices and supplies needed for treating Covid-19 infections is forcing quick decisions about supply chain restructuring and manufacturing location.
We are working with US state authorities who are devising plans to lure American companies in the life sciences industries back from China to US soil. But for the time being, the companies themselves are so busy trying to cater to demand, they have no capacity to think in such strategic terms.
But the US and its companies should be careful not to sever links with China completely – a true global recovery will need collaboration.
In January, US Commerce Secretary Wilbur Ross said Covid-19 could be an opportunity for the US to force its trade agenda with China.
This may be true, but only a constructive dialogue to reduce tariffs, monitor China’s commitments to structural reform, and increase trade between our two nations post Covid-19 would benefit recovery in both countries and the rest of the world.
John Evans is a co-founding partner and the managing director of Tractus Asia, an Asia-based advisory firm providing both public and private sector trade and investment assistance.
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