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New balance being struck economically, politically

Cui Hongjian / Share:
Chinese State Councilor and Foreign Minister Wang Yi addresses the China-U.S. Think Tanks Media Online Forum on July 9, 2020. (Xinhua/Zhang Ling)

Although the international community is locked in a battle against the Novel Coronavirus, the post-pandemic global pattern has gradually shown a clear trend, as China starts to return to normal and things are looking up among most Western countries. At the critical moment when the benefits from globalisation still matter, the present global pattern will not move toward a new Cold War characterised by a full decoupling between the world’s two largest economies. Instead, a new balance will be struck between market principles and political security concerns.

The pandemic has brought a halt to social life, wreaked havoc on economies, broken the balance of existing international relations and exacerbated the risk of imbalances worldwide. Pessimists even believe that the postwar situation “has never been worse than it is now” and that the public health crisis coupled with the economic shocks could lead to geopolitical confrontation that could result in the collapse of the global pattern and established orders.

There are lessons to be learned from the past century, when the world reaped the fruits of globalisation and reached a consensus on safeguarding common interests and preventing historical tragedies from happening again. It is because of this that the international community is striving to find a new balance.

The pandemic has exerted successive impacts on regional economies such as that of East Asia, Europe and North America. The large-scale lockdowns and shutdowns and unsynchronised resumption of production have aggravated the economic dilemma faced by countries of whether to restart their economies or not. The partial breakdown of the industrial and supply chains has also exposed the fragility of the globalised industrial layout and its vulnerabilities. These vulnerabilities have been highlighted by the general shortage of medical supplies in many countries.

The pandemic will further shake the economic foundation of globalisation that was previously determined by market principles, driving countries to make industrial adjustments that they might otherwise not have made. The pandemic will also promote the reorganisation of the industrial supply chain worldwide under the guidance of related policies. Therefore, it is inevitable that economic globalisation will undergo a profound transformation and all major economies will participate in the process either actively or passively. The post-pandemic globalisation will not simply be restarted: It will be reset.

This resetting of globalisation will lay the necessary economic foundation for the rebalancing of the global pattern, leading to new types of economic regionalisation. For instance, Washington has focused on the United States-Mexico-Canada Agreement, the European Union is focusing more on the pan-European network while the Regional Comprehensive Economic Partnership is being highlighted among Asia-Pacific countries.

On the basis of the world economic hubs, an upgraded North American free-trade area, Eurafrican economic union and Eurasian economic union are expected to take shape in the future.

The resetting of globalisation will mean that the previous dominating market-and-capital principle and weakening national consciousness will give way to multiple factors, including maintaining industrial security, enhancing international competitiveness and serving geopolitical competition.

This change will be directly reflected in more political intervention in economic activities.

For example, the industrial division and layout planning will be more linked to the concept of national (regional) economic sovereignty. Concerns such as shock-resistant supply chains, the development of industries, and even political security, will be included in the cost calculations for industrial investment and layout.

Also governments will provide more explicit guidance to industries through policies and take advantage of financial means to offer substantial support.

The author is the director of the Department for European Studies at the China Institute of International Studies

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