◼ ECONOMICS Bloomberg Businessweek March 8, 202134
FROM LEFT: TPG/ZUMA PRESS; JAMES BUGG. DATA: AUSTRALIAN BUREAU OF STATISTICS, BLOOMBERG CONSENSUS ESTIMATESTHE BOTTOM LINE The overwhelming power of Taiwan and
South Korea in chips is adding urgency to calls in the U.S. for the
country to beef up its manufacturing capacity.● Closed off to foreigners and feuding with
China, Australia is becoming more self-reliantA Taste of
Independence
of the coronavirus, so there’s been less need for
lengthy lockdowns. The country has recorded 114
Covid-19 cases per 100,000 people since the start
of the pandemic, according to the World Health
Organization, compared with 8,548 per 100,000 in
the U.S. Australia was also quick to do a big fiscal
stimulus, pledging the equivalent of 10.6% of GDP
for wage subsidies and cash handouts to house-
holds and businesses.
But another big reason the economy has
rebounded so quickly is that Australia turned
inward—more by necessity than choice.
Winemakers and other export-oriented busi-
nesses pivoted quickly to build domestic sales,
and thousands of Australians packed cars and
caravans and headed out to spend their money
in the Outback or along the country’s vast coast-
line. “The ban on Australians traveling has diverted
around A$45 billion ($35 billion) into domestic
discretionary spending or increased household sav-
ing,” says Saul Eslake, an independent economist.China, which buys more processors than any
other country—some $300 billion worth annually—
has invested massively to wean itself off its reliance
on geopolitical rivals like the U.S. Its share of global
manufacturing capacity now stands at 15%, three
percentage points above the U.S., according to the
BCG report, but none of its national champions are
considered world-class. The soon-to-be-unveiled
14th Five-Year Plan may provide fresh guidance on
Beijing’s intentions.
So for now, Washington and Beijing are in aA year of border closures is making Australia rethink
its embrace of globalization. Before Covid, the coun-
try’s economic strategy was predicated on attracting
large numbers of immigrants, foreign students, and
tourists to supplement earnings from mineral and
farm exports. The formula yielded a record-setting
28-year streak of uninterrupted growth and a soci-
ety where more than half the population was either
born abroad or has at least one immigrant parent.
Then the pandemic hit, ushering in strict con-
trols on international travel, followed by a diplo-
matic brawl with China, the destination for about
one-third of Australia’s exports. The country suf-
fered its first recession in decades last year, yet the
central bank is now forecasting that gross domes-
tic product will return to its level at the end of
2019 by the middle of this year, which is 6 to 12
months sooner than it had previously anticipated.
How did this happen? First and foremost,
coordination between the federal and state gov-
ernments has been effective in curbing the spreadsimilar bind: heavily reliant on the flow of chips
from Taiwan and South Korea, which are allied with
the U.S. strategically but also entwined with China
economically. Says Lee Kyung-mook, a professor of
business management at Seoul National University:
“They may now have more power than OPEC did
going forward, because at least oil producers were
spread all over the world.” �Sam Kim◀ TSMC’s factory
complex in Tainan,
Taiwan