Sino FileThere’s a hidden cost to coronavirus, and China is about to pay dearly

The virus itself can’t derail China’s economic miracle, but toxic geopolitics can

Even if Trump’s campaign for compensation fails, ties with Beijing’s most important business partners have been infected, possibly fatally

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A figure passes the New York Stock Exchange. Photo: AFP

Published: 11:15am, 17 May 2020Updated: 11:15am, 17 May 2020

Like many catastrophes in the history of mankind, the novel coronavirus will do much to reshape global geopolitics. But while some form of overhaul is inevitable, the key question is whether China will emerge stronger or weaker in its great power struggle with the United States.

Thus far China is, predictably, doing better than any other major economy. This should not be surprising as Beijing has outperformed its rivals in controlling the virus. While its record 6.8 per cent contraction in the first quarter was worse than the European Union’s 3.5 per cent and America’s 4.8 per cent, China is expecting a quick turnaround in the second quarter. Neither the EU nor the US can expect the same as this was the period the two regions overtook China as the epicentres of the pandemic.

The global economy is projected by the International Monetary Fundto contract 3 per cent this year, in what would be the worst recession since the Great Depression of the 1930s. Of the world’s three largest economies, the EU is forecast to shrink by 7.5 per cent and the US by 5.9 per cent, while China is forecast to grow by 1.2 per cent. Most other major advanced economies are facing steep declines: 9.1 per cent for Italy, 6.5 per cent for Britain, and 5.2 per cent for Japan.

China’s GDP last year was US$14 trillion, two-thirds the size of America’s US$21 trillion. But the coronavirus outbreak will narrow the gap. Last year, China’s annual growth figure was 3.8 percentage points above the US’, while this year the difference is expected to be 7.1 points. Last year, real GDP growth in the US was 2.3 per cent, while China’s was 6.1 per cent. If these trends continue, the two economies will reach parity within the next decade, much earlier than previously forecast.