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Global Perspective: Prepare for depression and cold war against China in post-corona era

In this May 7, 2020 file photo, a display is seen at the Market Center of the Tokyo Stock Exchange in Tokyo's Chuo Ward, as markets remain wary of prolonged continuation the novel coronavirus pandemic. (Mainichi/Kentaro Ikushima)

By Akihiko Tanaka,

President, National Graduate Institute for Policy Studies

Although some countries have eased restrictions on economic activities, the unprecedented pandemic of the novel coronavirus continues. There have been many epidemics in history that have resulted in more deaths per population than this disease. However, with the growing awareness of human rights and the instantaneous sharing of information around the world, this is the first time in human history that infectious explosions of this scale have occurred one after another globally.

Moreover, the characteristics of the novel coronavirus that caused this crisis are not well understood. (This in fact has often been the case with epidemics over the course of history.) We are also not sure if the formation of antibodies immunizes people from this virus. If a mutation occurs, there's no telling what will happen. Not only that, but there's a lot we don't know about the interaction between the virus and society.

Therefore, it is not clear when the entire world can feel secure. What a "post-corona" world would look like is uncertain. However, there are some things that are bound to happen.

First of all, the world will be hit by a major economic downturn that is equal to or even worse than the Great Depression of 1929. The World Economic Outlook released by the International Monetary Fund (IMF) in April projects a baseline scenario under which the pandemic will be contained and economic activity will resume in the second half of the year -- which appears rather optimistic to me. Still, global economic growth this year will be minus 3 percent, and advanced economies will shrink by 6.1 percent, according to the report. In another scenario of the pandemic carrying over into 2021, which sounds more realistic to me, the entire world economy will still be in negative growth during 2021. In other words, we don't know how bad it will get, but it is certain to get considerably worse.

In January of last year, I wrote in this column that the global economy has increasingly tended toward stagnation since the beginning of the 2010s, and that we may be entering a period of prolonged recession, or the downturn of Kondratiev cycle. Both trade and direct investment were beginning to stagnate. Now that the new coronavirus has hit the world, the economy's long-term curb will be pushed further downward, trade and foreign direct investment will be sluggish, and growth will fizzle.

The second thing that is almost certain is that distrust of China in liberal democracies will intensify significantly. Distrust of China is not a new phenomenon. The "new Cold War" between the US and China has been discussed everywhere. However, the experience of this pandemic shows that distrust of China is not limited to the issue of hegemonic competition between the United States and China.

The criticism of China in the United States by the administration of President Donald Trump is certainly an act of shifting blame. No nation can blame just others for the current crisis. In a May 6 column for The Washington Post, Chinese Ambassador to the United States Cui Tiankai pointed out that there is a mindset of "always blame China," arguing that now is not the time to engage in a conspiracy to shift blame. Certainly, it's ugly to blame each other in the midst of a crisis.

Nevertheless, in the midst of this exchange of accusations, distrust of China is steadily deepening. And it is not only due to the "dirty politics" of some politicians, as Ambassador Cui put it. The Chinese ambassador to Australia suggested that Chinese citizens would stop buying beef and wine from Australia as the Australian prime minister said the cause of the new coronavirus needs to be determined. Chinese embassies and consulates around the world tried to draw praise from their host countries for China's suppression of the coronavirus and assistance from Beijing.

Ambassador Cui Tiankai's column also states that China has "provided" the U.S. with 4 billion masks. However, it doesn't say how many of them were donations. In Japan, masks made in China have recently been seen on the streets, but most of them are imported. It is understandable that China will go on an export offensive as economic activity in the country resumes. However, in some cases, the exports are disguised as good intentions, or worse, they sell defective products, so it's a wonder if distrust hasn't risen.

Fundamentally, the biggest cause of distrust against China in the international community is that the Chinese Communist Party stubbornly adheres to the domestic myth that it is always right and infallible. And this is a structural problem that will not change as long as the current Chinese Communist Party is the Chinese Communist Party. This is because once the party admits its errors to the international community, the myth for domestic influence cannot be sustained. Therefore, all criticism of China is perceived as a foreign conspiracy and thus inflames domestic nationalism.

The danger of significant economic dependence on a country with a political system built on this infallibility myth has become too great for the democracies of the world to bear. What would happen if the international body that is responsible for the health and survival of humanity came under the control of a state that espouses such an infallibility myth? It would certainly be impossible, at least for liberal democracies, to keep relations with China the way they have been.

What happens when the two certainties are superimposed on each other? It is the new Cold War in the midst of long-term economic stagnation. This is actually a phenomenon that was predicted even before the pandemic. The pandemic has accelerated the realization of this prediction. Can the new Cold War be successfully managed in the midst of prolonged economic stagnation? If the Chinese Communist Party doesn't change, the "post-corona" world will continue to be very difficult.

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