Webcast: 'This Time China Is More Dependent on the Rest of the World to Recover'
In Conversation With Daniel Rosen and the Honorable Kevin Rudd
What effect did the coronavirus outbreak and the response to it have on China’s economy, and how does the situation look right now? How are economies across Asia and around the world responding to the economic fallout of the pandemic? And how will the world economy be changed as a result of the coronavirus spread? Kevin Rudd, President of the Asia Society Policy Institute (ASPI), and Daniel Rosen, a founding partner of Rhodium Group, discussed these economic challenges facing China, Asia, and the world with Eunice Zehnder-Lai, Asia Society Switzerland Board Member.
Our Key Takeaways
The Chinese authorities used large-scale stimuli in the magnitude of 10%+ of GDP during the Financial Crisis in 2008, which helped the world economy get back on its feet. In the current crisis, the financial stimulus applied by officials in Beijing is much smaller. This might be due to the overhang in debt, bank balance sheets and the political sphere from the rescue package 10 years ago. It is also a matter of affordability. This time around China is more dependent on the rest of the world in order to recover.
The calls for more self-reliance on the supply and demand sides can easily backfire. One of the lessons from the Financial Crisis is protectionist actions can be harmful. Actions by individual countries to stabilize their economies have proven to be ineffective unless they are replicated by other countries around the world.
The commitments by Beijing in the “phase one” bilateral trade deal with the U.S. were sizable even under normal circumstances. China may not be in a position to deliver upon the agreement; similarly, it was questioned whether U.S. exporters can produce enough to keep their side of the bargain. Daniel Rosen reminded us that prior to coronavirus, China would have needed to divert purchases away from other countries to begin with in order to hit U.S. numerical targets. With regard to a phase two deal, given the structural changes the U.S. wanted from China, it is unlikely that negotiations will start any time soon.
Both China and the U.S. have taken a hit to their international images due to their own significant domestic challenges, promotion of propaganda, and the inability to play a stronger global aid role to fill the gaps in equipment needs. Daniel Rosen reiterates another lesson from history: The higher the data transparency, the better off you will be in the aftermath. Currently, both countries have shortcomings in that regard.
Daniel H. Rosen is a founding partner of Rhodium Group and leads the firm’s work on China, India and Asia. He has twenty-six years of professional experience analyzing China’s economy, commercial sector and external interactions and is widely recognized for his contributions on the US-China economic relationship. He is affiliated with a number of American think tanks focused on international economics, and is an Adjunct Associate Professor at Columbia University. From 2000-2001, Daniel was Senior Adviser for International Economic Policy at the White House National Economic Council and National Security Council. He is a member of the Council on Foreign Relations, and board member of the National Committee on US-China Relations.
The Hon. Kevin Rudd is inaugural President of the Asia Society Policy Institute. He served as 26th Prime Minister of Australia (2007 to 2010, 2013) and as Foreign Minister (2010 to 2012). He is Chair of the Board of the International Peace Institute in New York, and Chair of Sanitation and Water for All, a global partnership of government and non-government organizations dedicated to the implementation of Sustainable Development Goal 6. He is a Distinguished Fellow at Chatham House and the Paulson Institute, and a Distinguished Statesman with the Center for Strategic and International Studies. He is also a member of the Comprehensive Nuclear Test Ban Treaty Organization’s Group of Eminent Persons.