Is China the true winner of the corona pandemic?
It has been one of the most attention-grabbing topics recently: How is the coronavirus (COVID‑19) going to change our world? Many people claim that our lives are never going to be the same again and use all their prophetic gifts to determine winners and losers of this epidemic.
We are not changing direction but pace
Here is my point of view in a nutshell up-front: COVID‑19 is going to change way less on our planet than most people think. However, it is accelerating a lot of trends – in both directions up and down. And despite the undeniable and unavoidable challenges that the country is facing, China is most likely one of the places on earth that are taking the way upside – faster than ever.
What do I exactly mean by that? Until recently, China’s real strength for many reasons has not been so obvious to many of us. However, as all eyes were turned to China this spring, the Chinese way of dealing with COVID‑19 was the first passive but convincing demonstration of power with full global attention. History is jumping, not crawling. In essence, the COVID‑19 crisis has accelerated a development which is evolving for decades already. The growth of the Chinese economy and its prosperity, which remain unarguably high in an international comparison, is an inevitable trend. Even though China is still far from what is defined as fully developed, the pandemic has shown that rich democracies are not necessarily best equipped to solve difficult problems.
How come? Is it only because China’s political system is more authoritarian and illiberal? This assumption is a very common and convenient but also incomplete explanation. The major strengths of China today are alignment, pace, and flexibility. Large companies like Huawei did not become so dominant because they are very hierarchical, quality-oriented, or have the lowest prices. Their success is based on a steely determination to bring solutions on the road. Or in other words, intrinsic action and market orientation are what matters. This distinction applies to the ordinary business world just as well as to crisis management and gives China a one-of-a-kind advantage.
The plan to tackle the threats
On the other hand, a big disadvantage and vulnerability of an export-driven country like China is certainly the high dependency on overseas markets. Its economy is deeply integrated into the global system. This reliance was one of the major reasons why China was struggling already prior to COVID‑19, and why they are increasingly focusing on both creating a stronger domestic market and on deepening relations with Asian counterparts to make Asian nations less dependent as a whole.
Already today, Asia is a much more integrated and independent economic zone than it used to be some years ago. Around 60% of Asian countries’ trade is within Asia with an increasing tendency while business with the West is partly stagnating or shrinking. China and Asia are still far from anything like independence, but chances are they are getting close to it sooner or later. In the future, the question is not whether Western countries need a country like China, but whether China needs them. This prediction should not suggest that China has a smooth and pain-free way. Just think about the rough and curvy path the U.S. was marching on before becoming today’s global superpower. I hope China is not facing civil wars in between, but there will be adversity for sure.
Interestingly, China is one of the very few countries with a long-term vision, with clearly defined goals, and with a self-defined role on this globe. China talks quite openly about its ambitions and strategies and recently has shifted into a new model of growth: The country started emphasizing the importance of the sustainability and quality of its future development rather than its pace. Some of their targets might still be over-ambitious or too costly, such as the Made in China 2025 initiative. Still, there is a clear strategic approach and motivation behind it nonetheless.
There is only one China
While some people keep searching for alternatives, most businesses and states know that there is no second China, and it will take a while until India and other countries can catch up. Many surveys suggest that also after the COVID‑19 crisis, China remains among the top investment destinations for most international businesses.
Eventually, COVID‑19 is just an indicator and, in parts, very likely a catalyst for a macroeconomic and technological trend that is going to set the course for the years ahead. And in case I failed to convince you yet, I suggest taking a look at where big money goes. Which markets are appreciating lately and which are heading South? Which currencies are gaining more relevance, and which banknotes are increasingly avoided?
If countries grow above average and prosper, and if states are more and more opening up and perceived as political and economically stable, it inescapably leads to inflowing money. Looking at global indices and currencies, it is obvious for everyone that large amounts of capital started to leave Europe. So far, a lot of this capital has been flowing straight to North America. In the next years, we will see more capital being invested in Asia – first and foremost in China and from citizens worldwide.
Waiting for the perfect moment
Many people are waiting for China to change to a state that they prefer. They hope China will become more democratic, more liberal, and a place with more legal compliance. Sure, you can wait for this if you feel uncomfortable with the current situation, but this is surely not how you make money. If you wait for a supposedly ideal moment, it might never come, or it might be too late once the bell rings. The best opportunities for emerging markets exist when uncertainty is high, but the risk is low, and this is what attentive people can observe right now.
I am seizing the opportunities in China today and in the future, following the principle, put your money where your mouth is. Many countries in Europe and America are facing times which can be just as prosperous as in China. However, it will not be as easy as in the past, and one has to be more willing to adapt and be open-minded. With too much narcissism and pride, one will not be able to seize the new amazing opportunities in Asia (particularly China) and benefit from what no virus can stop.