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How Will Coronavirus Impact China in the Long Term?

A ChinaFile Conversation

As numbers of new infections begin to diminish, the People’s Republic of China is beginning to claim victory in its battle with the coronavirus. But with over 700 million people—10 percent of the world’s population—now living under lockdown, the ripples of the viral crisis are huge, even if an end may be in sight. Hidden infections and dubious statistics have also left epidemiologists highly worried. What signs are there of the economic and political impact of the virus? And what should the world be keeping an eye on in the next few weeks? —The Editors

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The biggest long-run impact of the epidemic will be the hardening of the wall of distrust between China and the advanced democracies. This distrust will not be fatal to China’s ambitions to play a global leadership role in many fields. Nor will it seriously erode the Communist Party’s legitimacy at home. But it will be a significant constraint on China’s aspirations.

Long after this outbreak is contained, it will be remembered that China’s front-line public health systems are ill-funded and poorly managed; that top leaders knew of the disease’s potential severity weeks before they organized an effective response or shared information with international health authorities; that independent voices warning of an outbreak were smothered as a threat to public order; and that the epidemic was finally brought under control at the cost of shutting down the world’s second biggest economy for a month or more, with the aftershocks lasting months longer.

Domestically, the control of COVID-19 will be spun as a validation of the need for coercive state power, and as a justification for enhanced methods of surveillance and social control. Though many will grumble about increased repression, a sustained pushback either from the grassroots or within Party elites is unlikely.

But foreign governments and companies will take away other lessons. Multinational firms now have more reasons to diversify their supply chains away from China, both to hedge against the risk of disruption from future nationwide shutdowns, and because finding expatriate staff willing to serve in such a chancy environment will be harder. Political leaders in democracies will have more reason to be wary of a government seemingly incapable of a measured, transparent response to a crisis with international implications. And the gap in core values between democracies and a China whose main governance tools include quasi-military mobilization and draconian social and information controls will now be seen as a chasm.

The resulting loss of trust will be tough for Beijing to make up, and will constrain its efforts to build up international influence. The competence of its companies, the size of the national checkbook, and growing military might will continue to contribute to that influence strategy. But a key element of China’s “soft power”—its claim to have a governance model worthy of emulation—has been badly tarnished.

China and ASEAN kicked off an emergency foreign ministers’ meeting on the COVID-19 coronavirus on February 20 with a show of unity, as ministers linked arms while chanting “Stay strong, Wuhan! Stay strong, China! Stay strong, ASEAN!” The message of regional solidarity was an important one for Beijing. The coronavirus outbreak is not merely a test for Xi’s domestic leadership. It is also a significant test of China’s regional leadership ambitions.

Beijing’s first priority at the moment is to convince regional partners that its crisis management has been effective, and that normal trade and business should begin to resume. This will not be an easy task, especially as new outbreaks continue to spread. However, just as the United States looks to close allies in the midst of a crisis, China too is flexing its partnership muscles by relying on partners such as Cambodia and Pakistan to amplify its messaging. Both countries have chosen not to evacuate their citizens from Hubei province in a public show of trust and support for Beijing. Cambodian leader Hun Sen even personally visited Beijing earlier this month, where he applauded China’s management of the outbreak. Similarly, Pakistan’s government is insistent that hundreds of Pakistani students in China are “in safe hands,” even as angry students argue “our government wants to sacrifice us to show to China that Islamabad is their friend.”

Although Beijing is focused on staunching the immediate crisis, last week’s China-ASEAN meeting is a reminder that crises can also provide long-term opportunities. China’s response to the late-1990s Asian financial crisis not only generated tremendous goodwill, but also provided Beijing with a chance to build new regional coordination channels that endure to this day. At a moment when China’s neighbors express high levels of mistrust and skepticism of Beijing’s intentions, Chinese leaders will certainly look for opportunities to leverage this moment to shift the narrative. Chinese Communist Party critiques that Western nations are stoking the crisis provide China with an opportunity to reiterate the need for greater Asian solidarity and uniquely Asian security models. This message was clear in Chinese media statements coming out of the China-ASEAN meeting, which emphasized the need for countries to take “a long-term perspective” and “establish long-acting cooperation mechanism[s]” that would bind China and ASEAN more closely together.

China’s leaders have delivered a consistent message in recent years: Asian security should be managed by Asian nations, and China is ready to lead the way. As neighboring countries grapple with the continued spread of the virus and the economic fallout, Beijing is well aware that this moment provides both an opportunity and a test. Will China be seen as a responsible leader who does not bully smaller neighbors, but looks out for their welfare as well as its own? Can Beijing, whose “soft power” remains rather anemic with many countries in the region, rally a coordinated regional crisis response? How Beijing manages the regional fallout from the virus over the next few months will likely have a lasting impact on regional perceptions of these questions.

The coronavirus has uncovered the complex interdependence of China’s integration with the global economy that is both of China’s own making as well as the product of neoliberalism. In the last several decades, the Chinese government has adopted an import substitution-cum-foreign direct investment strategy across the economy, especially in strategic industries. The mandate from central and provincial bureaucracies to court, digest, absorb, and innovate upon foreign knowledge and technology has developed Chinese industrial capacity and incorporated China into global production networks.

The lockdown, in response to the coronavirus, of what is essentially half of the Chinese population, however, has shut down factories and offices around the country. Many Chinese companies across sectors have asked employees to take a three-month leave, most without pay. Many flights to China are suspended and tourism has come to a halt. Markets and consumers from Asia to Europe are beginning to feel the effects. Global trade in goods, already slowed, is poised to remain weak, and Chinese bond yields are at a four-year low. Morgan Stanley recently announced that its annual investor summit in Hong Kong will still take place, but will now meet virtually.

Global supply chain disruptions due to the coronavirus outbreak may lead temporarily to a de facto decoupling between China and the global economy in ways that more explicit, deliberate actions, such as the U.S.-China trade war and the tech competition, have not. During a teleconference on Sunday opened to county governments and top Party cadres alike, Xi Jinping, in addition to reiterating the government’s efforts to control the impacts of the coronavirus, has already implored local officials to refocus on the economy.

Once the lockdown is lifted, expect the Chinese government to reaffirm the Made in China 2025 industrial policy of focusing on indigenous technological development, including high-tech materials and technical textiles. This may lead to the resurgence of lower-tech, less value-added downstream sectors, such as the highly polluting processing of chemical fibers, inputs for man-made synthetic fabrics. For now, amid fears of shortages of face masks and other medical supplies, top Chinese leadership, facing an image problem after initial delay in announcing the outbreak, has doubled down on such “strategic resources,” including an export ban on surgical masks. Moreover, technology firms and petrochemical complexes alike are temporarily shuttered.

Two months into the COVID-19 outbreak, almost all my friends back home in China—several from Wuhan, where the outbreak first appeared—and my immediate family near Harbin are living under lock down. Each day, my routine is to check in with my mom, who has been stuck in a northern village since she traveled there to visit family members for Lunar New Year, to make sure she still has enough food.

Recently, I’ve also been worrying about the situation in the U.S. because as COVID-19 spreads so does the discrimination towards Chinese nationals and Asians.

A journalist friend in Washington, D.C., Yan Zhang, was recently walking near a metro station in Arlington, Virginia when a well-dressed man shouted, “China virus! Go back to China, bitch!” Yan told me he raised his hands as if he intended to hit her. She ran. Still, it didn’t seem to bother her much. “Perhaps it’s because I’ve been going to D.C. think tank events,” she theorized, saying she’d felt “serious anti-China sentiment” already.

When I traveled to Jamaica last month, the crew of my JetBlue flight singled me out as perhaps the only Asian-looking person with a Chinese passport.

They demanded to see my visa stamps from China to make sure I hadn’t been there in the past 14 days. Right after the flight landed, the announcer told passengers—many already lined up for exit—to sit back: “Kiki Zhao in 36C, please come forward.” The whole flight was eerily silent. “It’s her!” a passenger blurted out as I walked past him.

The previous night, I had happened to watch The Daily Show’s Trevor Noah describe his experience traveling as an African during the Ebola outbreak. My experience had been nearly identical. Fortunately, his humor prepared me to weather it.

China is filled with heartbreak, its doctors, journalists, scientists, and troves of volunteers relentlessly working to treat the sick and contain the virus’ spread. Yet editors from leading news organizations—The New York Times, the BBC, Reuters, and the AP—have referred to COVID-19 as the “China virus.” The German magazine Der Spiegel ran a photo of a Chinese person wearing a mask and holding an iPhone with the headline “Coronavirus: Made in China.” This language helps fuel racist paranoia, and Asians are already feeling its impact.

Of course, Sinophobia is nothing new. But Chinese communities in the U.S. have already been facing a resurgence of anti-Chinese bigotry as China-U.S. relations have taken a downturn over the past few years. The outbreak could make things worse, especially if news editors are careless with their choice of words.