ASEAN and China's flags. Some countries are now leaning in a different direction when it comes to the United States and China. Photo: Twitter

There is no doubt that the Covid-19 pandemic is one of the biggest disasters that the world has seen in many decades. The intensity of this catastrophe cannot be measured only by the present number of infections or deaths, but also needs to take into account the consequences of the acute financial crisis that will ensue after the global public health situation is somewhat brought under control.

At the very outset, it is important to share a small observation regarding this phase. Although through history we have had experiences of pandemics and disasters where millions of lives have been lost – the first Asiatic cholera pandemic in 1817, the plague of 1896, the Spanish flu in 1918, etc – the current situation is a little different in the sense that in spite of the progress in societies and health-care technology, the fact that a virus can bring the world economy to a complete halt is almost impossible to fathom. A better way to deal with the situation is first to come out of the denial that this has transpired, so that it enables us to proceed from a panic zone to a zone of learning and awareness and finally move on to a phase of being thankful for surviving this crisis.

Discussions on the pandemic have gained momentum across the world. The situation is being seen through varied lenses that open up different avenues of research in a quest to find answers to questions and the uncertainties that lie ahead.

These range from disease causation, suggesting that pandemics are a result of human-nature interactions gone wrong and how destruction of natural habitats contributes to outbreaks of zoonotic diseases by way of novel pathogens; to the changing paradigms of disaster management and the required expansion in its scope; the reshaping of global perceptions about China and whether it will be held accountable for this in the future; leveraging health technology in dealing with the pandemic; the aspect of domestic and global political leadership in the light of this humongous health crisis; and the migration of labor within and across nations leading to a high number of casualties, among others.

China and the world

The last few decades have been characterized by unprecedented paradigms of globalization where China has played a crucial part in the global value chains. Although India has regularly attempted to keep China out of its regional groupings for economic reasons, China is anchored with almost all the economies of the world, especially in Asia. For example, the following table shows China’s economic interlinkages with the BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) nations.

BIMSTEC Countries/Group TotalsChina’s Total Trade (2017) in Million USDNumber of Persons Abroad (2017) in Chinese Contracted Projects & Labor ServicesChinese FDI Utilized (2017) in Thousand USD
Sri Lanka43984308220
Bhutan6No DataNo Data
China’s economic interconnectedness with BIMSTEC nations, Source: Author’s own using data from Chinese Statistical Yearbook 2018, National Bureau of Statistics of China

There is no doubt that the world order, migration patterns and globalization trends will be revised after this pandemic, at least for a few years. Research shows that the downward pressure on foreign direct investment (FDI) will be in the range of -5% to -15% compared with previous forecasts and the predicted global recession that we will run into may have a chance of sparing India and China a bit, relative to the other developing nations.

Altering the world economic order

In this contemporary era, economies are striving to become more complex, that is, creating products with a high knowledge quotient, and at the same time are less ubiquitous – to move up the value chains. Producing complex goods requires transfer of technology know-how, movement of skill sets and dynamic business processes that cannot be carried out unilaterally – and these are indeed the core aspects of globalization.

This pandemic is a strong stimulus to look inwards and to look toward regional groupings such as BIMSTEC, SAARC (South Asian Association for Regional Cooperation), ASEAN (Association of Southeast Asian Nations), in Asia and other issue-based objectives to make economies self-sufficient. This is mainly for three reasons.

First, where a disaster in one nation will not have an extreme positive correlation with another nation so that there exists a certain level of insulation in the times of crises which will prevent the global economy from sinking. Second, economies should be able to sustain short run emergencies and supply chain disruptions (that are most likely to arise from China in the current scenario) without falling apart. And third and most important, countries should strive toward diminishing their external dependency and increase the efficacy of the domestic production and consumption processes.

In conclusion, it is important to remind ourselves that human memory is too short and given the kind of ambition that the world has embarked upon, all the physical interaction between countries may be lowered in the short run after Covid-19 incurring huge economic losses, but this situation will not last in the long run because development of any form can’t be worked out in silos.

(The author acknowledges the diverse inputs on this piece from Pratnashree Basu, Ambar Kumar Ghosh, Sohini Bose and Sayanangshu Modak at Observer Research Foundation Kolkata.)

Soumya Bhowmick

Soumya Bhowmick is an associate fellow at the Centre for New Economic Diplomacy, Observer Research Foundation, India. His research focuses on globalization economics, Indian economy and governance, and sustainable development.