Most agree that the global order would undergo a total overhaul after the coronavirus pandemic. If the policy responses of countries in the last few weeks is any indication, China might be heading for complete isolation. Many nations have found Beijing’s economic and strategic expansionist agenda even during the crisis appalling, while the Chinese Communist Party’s role in the genesis and spread of the virus has come under global scrutiny.
The muscle flexing between the US and China accusing each other of being responsible for Covid-19 notwithstanding, the latter’s insensitivity under an incorrigible communist regime has become largely unacceptable to humanity. But this does not mean that China as an economic and strategic powerhouse would in any way get diminished in the near term. But most countries have come to realise how China has been allowed to spread its tentacles without resistance. Reports suggested over 1,000 companies from Europe that have operated in China are busy finalising plans to exit in search of more friendly and open destinations. This is indicative of the suffocation they have faced within China led by President Xi Jinping that neither values human life nor their basic rights.
For many big and small companies, China had been a cost-effective manufacturing destination during the last decade. But these benefits may seem too little or negligible given the heavy price the world had to pay after the virus emerged from Wuhan in China. Suspicion, fear and distrust seem to have overwhelmed boardroom discussions in the global corporate world given reports about Chinese biological warfare-related research going out of hand.
Governments and corporates seem to have decided to move away from China. Japan under PM Shinzo Abe seems to have taken a tough call as the country’s industrial enterprises would starve for want
of components if the umbilical cords with China, its biggest trading partner, were to be snapped. It fired the first salvo by setting up a $2.2 billion dedicated fund to help its companies that opted to shift their production out of China.
Key EU member countries seem to have taken the cue and decided to keep China out of their industrial, agriculture, trade and services ecosystem. This again is difficult to achieve and sustain. Nevertheless, they have moved on. Disturbing reports from global merchant bankers that China was zeroing in on a hostile takeover of international businesses after the virus pushed several enterprises into the red seem to have hastened the exit process. Simultaneously, firewalls have been set up worldwide against an aggressive Chinese bid to take control of small and medium businesses, especially those that provide access to proprietary technology.
Italy, where most human lives were reportedly lost due to its extensive economic linkages with China’s Wuhan, moved first to set up barriers against takeovers. As per the columnist Giacomino Nicolazzo, backed by Partito Democratico (synonymous with the Italian Communist party), China owns a major chunk of real estate in North Italy, bought up over 300 companies in diverse sectors, had majority stake in five top Italian banks apart from the nation’s entire communication network. Though Italy’s new investment guidelines were in sync with the European Commission’s directive to protect critical assets ‘against foreign takeovers’, the urgency was to guard against predatory Chinese moves to expand its footprint. Several governments, including those in Spain, France, Australia and elsewhere, too seem to have set up what’s popularly known as a ‘Chinese firewall’.
Germany, on the other hand, was seen as a different cup of tea till the other day. Initial reports suggested that summit-level talks between Chancellor Angela Merkel and Chinese President Xi Jinping would flesh out a new alignment of forces. Thankfully, these efforts seem to have fallen through and Germany has toed the line of other European powers to keep China out. On April 8, the German Cabinet approved tightening of rules against the takeover of critical infrastructure and enterprises by foreign companies, especially from the US and China. In a mock invoice, German newspaper Bild went ahead and billed China 130 billion pounds towards meeting the country’s costs of fighting the virus.
The Narendra Modi government, on the other hand, has been treading very cautiously. Even while drafting its new FDI norms, it refused to call out China. Instead, it put up restrictions on countries having borders with India attempting takeovers. The government may have to give up its shyness and instead pursue a bold line against China, its opaque communist rule and the havoc it heaped on humanity. Outstanding strategic and border issues notwithstanding, India will have very little option but to join a broad global coalition that’s in the making to single out China, communist oligarchs and President Xi.
Parallelly, India will have to rework its supply chains, localise production as seen in the case of generic drugs, personal protection equipment or even go overboard in the near term to dovetail these efforts with the policy framework. Cashing in on the opportunities that arise out of exodus from China should also begin immediately. Going local and swadeshi with focus on self-reliance is the way forward while China gets time to reflect on its anti-humanity behaviour.
K A Badarinath
New Delhi-based senior journalist and economic analyst
Email: badarinath61@gmail.com