16 BEIJING REVIEW MARCH 26, 2020 http://www.bjreview.com
The author is an
op-ed contributor to
Beijing Review and
founder and CEO
of 5 New DigitalT
he spread and effects of the novel
coronavirus disease 2019 (COVID-19)
have been so rapid and widespread
that attempting to make sense of what is
happening, let alone write about it, has of-
ten been an exercise in frustration at best
and futility at worst.
Case numbers, industry shutdowns, re-
tail closures, markets dropping, economic
disruption, supply chain disruption, geo-
political implications—news on all of this
and more is rolling in and changing on an
hourly basis.
With all of this in mind, I believe three
key facts will go a long way to determining
what the long-term impact of the pandem-
ic will be on the global economy, national
economies and the living standards of the
world’s 7 billion people.
All three of them are centered around
the relationship between China and the U.S.
The first is that China, the U.S. and
most of the world are, for all intents and
purposes, in a de facto recession that will
deepen in Q2 and Q3 and threatens to be-
come a depression.
The second is that the world’s two larg-
est economies, China and the U.S., are now
escalating a negative relationship when the
world needs the two to work together, not
to decouple.
The third is that this is a uniTue event
and time in modern history and there is a
chance for a reset and rethink on the way
we all make, move, sell, buy, live and treat
the shared Earth we live on.
I have put these facts in this order be-
cause this is the order in which we need to
think about the crisis. Clear thinking and
actions on one leads to clear thinking and
action for number two which creates the
environment to tackle number three.
Looming recession
The official numbers from China, the U.S.
and elsewhere have not yet caught up with
the reality that with the Chinese economy
on hold for the better part of three months,
and U.S. and European economic activ-
ity on hold, combined with the universal
plunge in global eTuity markets, we are
in the early stages of domestic and global
recession.
With the virus spreading to the U.S.,
Europe and the rest of Asia, and the far-
reaching impact we now understand the
crisis had on China’s economy, global
economists, banks, Ķ nancial organizations
and governments are recognizing that the
“base assumption” for the rest of 2020 is
a global recession with growth slowed to
anywhere between 0.5 and 1.2 percent.
There is optimism in this reality though.
As hard hit as China has been, the country
is getting back to work, the economy is
stabilizing and life is, in many ways, getting
back to normal. This provides the world
with a timeline on how the process of virus
emergence, spread, economic slowdown
and resumption of normal activity can play
out.
However, the shadow that is looming
over the U.S. and global economic outlooks
is that of a deep prolonged recession or
more hauntingly, the potential for a rapid
descent into a global depression in the or-
der of 1929. The Tuestion that remains to
be answered is: Will the economic effects
of COVID-19 be more like 1929, 1987,
2001 or 2009? Or will we be facing a situa-
tion with no precedent?
How the global economy suffers, recov-
ers and changes will largely depend on how
China and the U.S. respond, cooperate (or
not) and shape the global outlook.Two giants, one future
When the COVID-19 situation was, in the
beginning, only known to be taking place
in China and as China put in place strong
measures to slow and stop the spread of
the virus, the world’s focus was on what
it meant for China and to a lesser degree,what it might mean to global supply
chains.
Despite China now being a major con-
sumer, service and technology economy,
it is still the largest manufacturing hub in
the world and hundreds of thousands of
companies depend on China’s factories to
produce their goods.
Enterprises as diverse as Apple, Walmart
and Nintendo, as well as many of the
world’s apparel brands, are reporting that
their ability to bring products to market
may be affected by an extended disruption
in Chinese manufacturing.
The logical extension of this reality is
how interconnected the global economy,
economic activity and the means to make,
move, sell and buy everything is. This ex-
pansion of the crisis has revealed to many
people, companies and governments just
how fragile our digitally connected, supply
chain connected and economically con-
nected world is. How unforeseen black
swan events can, in the right circumstanc-
es, disrupt a fragile balance.
So where does that leave us? It leaves
us dealing with the reality that the two
largest economies in the world and the
two most inß uential countries in the world,
China and the U.S., have been, are and will
be profoundly affected by this black swan
event, and that the rest of the world is be-
ing impacted as well if not more so.
At this time, when unity, cooperation
and collaboration are needed, the U.S. and
China are not only not working together to
lead the world back from the precipice of
disaster, but Tuite the opposite.
They have been in a protracted trade
war for more than two years and now are
waging a rhetorical war on who is to blame
for the emergence and spread of the virus.
The virus emerged from nature. It is not
a “Chinese virus” or “American virus.” It is a
virus that attacks, sickens and kills people
of every kind. No one is to blame for it.
I know there are many on both sides
who will view me as naïve and idealistic for
what I am about to say next, but I believe it
and I think there are many others who do
as well.A CHANCE FOR A RESET
The economic and human imSlications of the CO 9 ID crisis
By Michael Zakkour
COVER STORY