Since before the unprecedented events of 2020 tensions with the west and China have been slowly growing. Over the last two decades China has slowly become the hub of international manufacturing and a key link in the globalised supply chain. Accounting for 28% of global manufacturing in 2018.
They monopolised the market by offering much more cost effective manufacturing than their western counterparts.
This caused most businesses to stop manufacturing locally and source Chinese firms.
Over Trump’s term from 2016 to 2020 he declared a ‘trade war’ against China. Setting tariffs on more than £268bn of Chinese products.
Then Covid-19 happened..
Unless you’ve been living under a rock and have been social distancing since before it was mandatory and also haven’t logged into your social media all year. Then you would have heard about the origins of the dreaded Covid-19.
But if you haven’t then I’ll give you a brief summary.
Covid-19 is a deadly and infectious strain of SARS disease that emerged from a food market in Wuhan, China in December 2019. Initially the Chinese government denied the existence of the highly infectious disease, until the cat was so far out of the bag that it was scratching up the living room.
After infection rates really exploded in Wuhan the virus soon found its way to Italy, France, Spain, England, America and just about every corner of the world. Leaving devastated and overwhelmed healthcare services, putting a foot on the breaks of global supply chains and causing unprecedented hysteria.
How did the rest of the world get affected when covid-19 broke out in China?
Once they exited a state of denial, China reacted with a hard hand to try and contain the virus and help to buy the rest of the world a little bit of time to prepare for the outbreak. They did this by ‘closing shop’ for a few weeks. This involved a two month long nationwide lockdown which closed a number of factories and businesses and brought manufacturing production to a screaming halt.
The sudden stop to the heart of the global supply chain caused a rippling effect down the chain to international businesses. Causing many companies to struggle to meet demand.
How did the covid-19 outbreak in the west affect the east?
As the virus began to breakout in Europe and the UK it started to really affect those areas in similar ways to how it affected China. Except this time a mirror image.
As factories began to re-open in China demand was none existent in the west.
The industries hardest hit by the sudden lack of demand caused by consumer shutdowns were automotive, travel & tourism, healthcare, high-tech manufacturing, entertainment and retail industries.
One of the biggest issues plaguing Asia following the outbreak itself was cancelled orders.
‘Fast fashion’ giants like Primark and Matalan have already cancelled £2.4bn worth of orders from Bangladesh. Causing over 1 million garment workers to lose their jobs. This equates to over a quarter of garment workers in the country that is the second biggest clothing manufacturer in the world.
In Myanmar, 20,000 workers have already lost their jobs and one industry expert estimated that as many as 70,000 garment workers could lose jobs within a week. In Cambodia, one estimate projected that 200,000 garment workers could lose their jobs.
Car parts exporter Rita Xiao was thrilled to join the bandwagon of factories resuming work across China in March but were met with a whopping 70% fall in demand. With many buyers attempting to again cancel or delay shipments of orders already manufactured.
It is expected that covid-19 will cause the world economy to shrink by 3% with an accumulated GDP loss of an estimated 7.2 trillion pounds.
Tensions are definitely on the rise (as If they weren’t already high enough), between the West and the East. Well more specifically between America and China.
It is expected that covid-19 will cause the world economy to shrink by 3% with an accumulated GDP drop of an estimated 7.2 trillion pounds.
On Tuesday the 14th of April trump decided to pull funding for the WHO for 60 to 90 days while a review was made of the WHO’s warnings about the coronavirus and China. He has continued to claim the WHO had promoted China’s “disinformation” about the virus that likely led to a wider coronavirus outbreak than otherwise would have occurred. Boris has reportedly been urged by Trump to follow suit in holding funding for the World Health Organisation.
There seems to be mixed reactions by popular figures about what the outcome will be. Some say China should be held liable and made to pay for damages. Some say China responded quickly and pragmatically. UK foreign Secretary Dominic Raab said in one of the government updates in mid April ‘we ought to look at all sides of this and do it in a balanced way, but there is no doubt we can’t have business as usual after this crisis, and we will have to ask the hard questions about how it came about and how it couldn’t have been stopped earlier.”
Regardless of which way you see it, Covid-19 definitely shows the cracks in our supply chain and the risk of being too reliant on any individual nation.
I think that even if there aren’t international sanctions issued to China we are going to see a shift in power and more businesses getting their products manufactured elsewhere. A movement already being led by Japan, who issued a £1.8bl emergency economic package to assist Japanese firms in pulling manufacturing from China.