Medical staff with protective clothing, Rajiv Ghandhi Government General hospital, Chennai, India, January 29, 2020(REUTERS)
Medical staff with protective clothing, Rajiv Ghandhi Government General hospital, Chennai, India, January 29, 2020(REUTERS)

Time for a G20 summit on coronavirus

The world is facing a public health and economic crisis, with major implications for global stability
By Shyam Saran
PUBLISHED ON MAR 04, 2020 08:18 PM IST

It is being reported that the coronavirus infection has now spread to more than 70 countries, and there is now a greater likelihood of it being declared a global pandemic. China, where the infection first appeared and which has been the most seriously affected, claims that fresh cases have progressively declined, and the worst may be over. It is gradually and incrementally allowing normal life and economic activity to resume.

But the picture outside China is different. There is a continuing spike in reported cases and fatalities, despite drastic measures being taken across countries to limit the cross-border movement of people, shut down factories, schools and offices, and implement strict quarantine measures, both on confirmed and suspected cases. These are creating major disruptions in a densely interconnected global economy, which operates through cross-national global supply chains. The longer it takes for the virus to be brought under control and diminish in intensity, the greater the scale of disruptions.

Even if China is in a position to substantially revive production in its factories, it will not help much if other components of supply chains, located in other countries, continue to be in lockdown. The world is not only facing a major public health crisis, but an economic crisis also. This is leading to stock markets across the world, including in India, registering unprecedented losses. Even without the impact of the coronavirus, the global economy was expected to grow by only 2% during the current year. The latest estimate is only 1%, and some analysts believe that a contraction is likely.

World trade has been mainly flat over the last couple of years. It is likely to see significant contraction this year. For the Indian economy, which is already in the midst of a slowdown, this is bad news.The impulses for recovery of growth will have to mainly rely on what stimulus may be provided locally. This is assuming that India will not be one of the countries affected by the virus. If it is — and the two recent cases in Delhi and Hyderabad, which has resulted in panic, show how suddenly and seriously this could happen — then India will be in deeper trouble. Any drastic measure to contain the spread of the virus will inevitably cause serious disruptions to the domestic economy, exacerbating the growth slowdown. The situation is being closely monitored at the highest level of government, and prophylactic measures, such as preventing entry from high-risk countries, are being put in place. This is reassuring, but, despite this, the virus may well spread, and we need to have contingency plans in place.

The outbreak of the coronavirus exposed how much the global economy is dependent on China for sustaining growth. It has also exposed the high level of dependency on China for the supply of key components, such as generics for the pharmaceutical industry worldwide. This vulnerability to China was already rising in salience, and the case of the Chinese telecom giant Huawei emerging as the most advanced and economical supplier of 5G technology and equipment is only the most prominent among several other sectors where dependence on China is significant.

There is an ongoing “decoupling” between China and the West taking place in higher-end technological segments. The coronavirus epidemic is likely to intensify such decoupling. Over the past couple of years, as wages in China have continued to rise, there has been a steady shift of production platforms from China to other countries. This has happened, for example, with textiles and garments, which are being relocated to countries such as Vietnam, Indonesia and Bangladesh. Such relocation may well be accelerated under the impact of the coronavirus. There may be “onshoring” on a greater scale, that is, bringing back production platforms from China to home locations. The popular dissatisfaction with globalisation and the upsurge in nationalist and even autarkic sentiments across countries may well receive an extra boost from the fear of the spread of the virus.

The coronavirus is a global public health challenge and necessitates a collaborative response. Countries that have limited capacities and resources require support from those better equipped. Merely closing down borders and banning the entry of people from affected countries are not enough. Countries have to coordinate their efforts and share information in a transparent manner. Why do we not see a G20 summit to address this crisis?

China’s global standing has been adversely affected by its status as the epicentre of this public health crisis. But China is also evoking admiration by its ability to orchestrate preventive and remedial measures on a scale that is unprecedented. The construction of a new hospital in Wuhan within days was most widely watched on social media not only in China, but across the world. In the initial stages of the epidemic, it seemed as if the political standing of President Xi Jinping had been undermined. There was deep anger over the delay in warning the public on the danger the virus posed. However, if the drastic measures taken since do succeed in overcoming the crisis, then it is likely to further consolidate Xi’s authority. It is too early to say that the crisis has passed its peak in China. The economic consequences may still be dire even if the crisis has passed. An uncertain world has just become even more uncertain.

Shyam Saran is a former foreign secretary and is senior fellow, Centre for Policy Research

The views expressed are personal

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