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Employees assemble ventilators at a plant of Beijing Aeonmed Co, an anaesthesia and respiratory medical equipment enterprise, in Yanjiao, a town of north China's Hebei Province, March 25, 2020. Photo: Xinhua
Opinion
John Evans
John Evans

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.

It looks like I may have been correct only about the second part of that prediction. The Chinese economy may well take a further hit this year, but Beijing's approach to tackling the virus has been in stark contrast to Washington, with the United States failing to learn from other countries more advanced in their battle against the virus, led by China.

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.

I have also seen how the US ignored the clear signs from Asian countries of the devastation this pandemic would have and now it is paying a severe economic price.

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.

Now, our firm’s economic development practise team has been pressed into assisting US states source medical equipment and ventilators, with no office more active in this work than Shanghai. Before the coronavirus, these same states were using our services to promote exports to Asia or attract inbound Asian capital.

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.

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
John Evans

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.

For clients in other industries, many are studying the Chinese economy to see whether they should stay there to service domestic demand. Others are still eager to leave China, despite the bleak economic situations elsewhere in the world.

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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