As China's Economy Implodes, Trump Ratchets Up the Pressure

As the Wuhan coronavirus continues to spread, stay at home orders have shut down commerce in many parts of the world. Some have predicted a 40% contraction in the U.S. economy in the 2nd quarter of 2020. This means that China’s economy, heavily dependent upon exports, will see no economic rebound for quite some time. In the mean time, the Trump administration has “turbocharged” its effort to relocate global supply chains from China to markets less hostile to the West.

The Epoch Times reports that China’s manufacturing industries have completely imploded:

Chinese factories are ramping up production as the country struggles to get back on its feet from the pandemic-induced recession. Around 80 percent of the small and medium-sized businesses, and nearly all large firms have returned to work, according to China’s commerce authorities. But analyses of recent data from the country suggests a quick rebound is nowhere in sight.

Export orders, including to China’s top export markets of the United States and Europe, have shriveled up as the virus shatters the world economy and workforces continue to shrink, and companies are uncertain about the outlook ahead.

The China Beige Book, a project to collect data on commercial activity in China, says that reopening the nation’s factories has come in fits and starts:

The good news is that almost all — 91% — of the more than 500 Chinese companies surveyed had reopened by late April, and about three-quarters were working on-site again, but just 42% were able to operate at more than half their capacity.

Worse, demand for goods and services from Chinese companies has plummeted. Foreign orders have fallen more than twice as fast as domestic ones, with orders from the U.S. contracting the most among China’s major trading partners.

Crucially, 81% of executives at surveyed companies said they’re worried about a resurgence of the coronavirus in the next three months. And 69% say April’s tepid pace of economic activity may be “as good as it gets” for the next several months.

This follows news from February and March that China had its worst quarter ever in the first quarter of 2020.

This gives the Trump administration more ammunition in its attempts to move global supply chains away from the Chinese Communist Party (CCP). Reuters reported on Sunday:

Now, economic destruction and the massive U.S. coronavirus death toll are driving a government-wide push to move U.S. production and supply chain dependency away from China, even if it goes to other more friendly nations instead, current and former senior U.S. administration officials said.

“We’ve been working on [reducing the reliance of our supply chains in China] over the last few years but we are now turbo-charging that initiative,” Keith Krach, undersecretary for Economic Growth, Energy and the Environment at the U.S. State Department told Reuters.

The report describes a “whole-of-government” effort in which free trade advocates seem to be losing their struggle with China hawks inside the administration. Citing national security concerns, many departments have joined in the process to figure out how to incentivize U.S. firms to move their operations out of the Chinese mainland. Options reportedly include ‘reshoring’ subsidies, tax incentives, developing closer ties to Taiwan, and ever higher tariffs on goods produced in China.

The United States is pushing to create an alliance of “trusted partners” dubbed the “Economic Prosperity Network,” one official said. It would include companies and civil society groups operating under the same set of standards on everything from digital business, energy and infrastructure to research, trade, education and commerce, he said.

The U.S. government is working with Australia, India, Japan, New Zealand, South Korea and Vietnam to “move the global economy forward,” Secretary of State Mike Pompeo said April 29.

These discussions include “how we restructure … supply chains to prevent something like this from ever happening again,” Pompeo said.

Industry groups have pushed back, noting that constructing new manufacturing facilities could take years. The winds appear to be shifting away from the CCP, however, as the world reacts to their documented record of deception regarding the COVID-19 that they caused and subsequently covered up. Momentum could easily lead to a consolidation of efforts to punish the CCP in economic and political ways.

Jeff Reynolds is the author of the book, “Behind the Curtain: Inside the Network of Progressive Billionaires and Their Campaign to Undermine Democracy,” available now at www.WhoOwnsTheDems.com. Jeff hosts a podcast at anchor.fm/BehindTheCurtain. You can follow him on Twitter @ChargerJeff.

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