COVID-19: China and the West reset their relationship

The “Chinese Century” began as a tsunami of cheap manufactured exports overwhelming Western industry and displacing blue-collar workers. The steep social price of economic disruption in the industrial heartlands of the United States and Europe continue to unfold tragically in the form of persistent unemployment and an opioid crisis tearing apart families and communities. Westerners who focus solely on the “cheap labor” aspects of China’s rise are, however, missing a momentous emerging story. In the third decade of the 21st century, China poses a more complex and deep-rooted challenge to the West. China has for some time been playing a “great game” deeply underappreciated by many in the West, quietly amassing broader economic prowess and “soft power” through its “belt and road” initiative consisting of carefully targeted and executed trade and infrastructure investments in over 126 countries and 29 international organizations spanning Asia, the Middle East, Latin America, Africa, and Europe. As a result, it has achieved geopolitical influence that arguably has surpassed that of the United States. Certainly, this is so in the United Nations simply by virtue of the growing number of countries falling increasingly under China’s economic sway.

In 2020, the global COVID-19 pandemic revealed (to the surprise of some) the extent of China’s influence over international institutions and how deeply interconnected China is to the rest of the world’s economies. In April, then-President Trump halted funding to the World Health Organization (WHO). Two months later he announced that the United States would withdraw’ from the WHO altogether. He did so after being surprised by the fact that the United States sent ten times ($893 million) more money to the WHO than did China ($86 million) but that nevertheless the organization is “very, very China-centric.” He should not have been surprised. Ethiopia, home of WHO Director-General Tedros Adhanom, offers an illustrative example of the influence China has purchased through its belt and road initiative.

Ethiopia owes half (estimated to be over $12 billion) of its external debt to China, including funding for a $475 million light railway system in the capital, Addis Ababa, and a $4 billion railway from the capital to Djibouti. While there has been no suggestion that Mr. Adhanom—a malaria researcher with a Ph.D. in community health from the University of Nottingham—has profited from these investments, it would be naive to think that China’s support did not impact his election to Director-General in 2017. It would also be naive, however, to think that China is not exerting ongoing influence within the WHO as it does throughout the UN, greased by its “soft power” investments throughout the world. In a hard-fought election among member states with political jockeying behind the scenes, Mr. Adhanom won by garnering 133 out of 185 votes, becoming the first non-medical doctor and the first African to ascend to the post. Whether China effectively bought a COVID-19 hall pass from the WHO is something we will likely never know. The fact that Mr. Adhanom—after meeting with Chinese leaders in January 2020— praised China’s containment efforts, declared shortly thereafter that it was unnecessary to restrict international trade and travel, and was late to label COVID-19 a global pandemic, might as easily be attributed to mistaken judgment as undue influence.

Another “revelation” of the COVID-19 pandemic was the extent to which global supply chains were dependent on Chinese manufacturing. When the initial xenophobia over the origins of the virus in the city of Wuhan temporarily subsided, many in the West fully understood for the first time how the supply chain for everything from iPhones and televisions to Tylenol and hospital ventilators are dependent on Chinese exports. The resultant conversation about the quality, reliability, and safety of this supply chain raised many troubling questions. Owing to the health concerns that sparked the conversation, Western dependence on China’s manufacture of “active pharmaceutical ingredients” (APIs) in the drug supply was particularly singled out by political leaders. Two California members of the US Congress went so far as to call reliance on China for API and the “rare earth minerals” that go into high-tech commercial and military products a “national security” issue (Eshoo & Schiff, 2019).

While it is an understandable instinct to correct strategic overreliance on a China-dominant supply chain in key sectors, the sudden desire to sever supply relationships built up over decades has met with considerable resistance from multinational corporations. PhRMA, a trade organization representing some of the largest pharmaceutical companies and the US Chamber of Commerce, among others, have lobbied intensively against government efforts to reduce reliance on China. They argue that over the course of decades China’s export economy has become inextricably bound to the rest of the world and that it would be unwise and inefficient to attempt to unravel longstanding supply arrangements. In the wake of the COVID-19 pandemic, however, there is likely to be increasing scrutiny from regulators about assuring the integrity of the supply chain on a host of issues ranging from safety and quality to human rights. In August 2020, then-President Trump went so far as to issue an executive order instructing the federal government to buy and give preference to drugs and supplies made in the United States. The calls to bring at least some manufacturing in key strategic sectors back to Europe or the United States are likely to continue in the Biden administration. The post-COVID-19 pressure to reduce over-reliance on China in supply chains will precipitate a host of conversations about difficult subjects that have been on the backburner for many global companies. It is unclear how these conversations will unfold in the United States and Europe now that Donald Trump is no longer in power. One fact will, however, remain true in the Biden era. Significant progress on safety, quality, and human rights will require more effective communication and relationshipbuilding, which can be enhanced by—and we believe depends on—mastery of the essentials of traditional Chinese culture we present in this book.