The impact of the Covid-19 pandemic on the world economy and supply chains, and China’s trade partnership with ASEAN, were highlighted by economist Tan Sri Andrew Sheng during an online lecture today.
Tan Sri Sheng, Chairman of Georgetown Institute of Open and Advanced Studies (GIOAS), WOU, was speaking on ‘Post-Covid Economy: Thoughts on what China and ASEAN can learn from each other’ at the webinar series jointly organised by China-ASEAN Business Association (CABA) and Universiti Tunku Abdul Rahman (UTAR).
He predicted 2-3 years of slow growth in the world economy and suggested China and ASEAN commit to each other through open peaceful trade. He expects recession and the world economy to worsen this year, with the earliest recovery to happen in the 2nd quarter of 2021 or 3rd quarter of 2023.
He explained that the global economic decline will affect world trade growth and hurt the trade of emerging market economies (EMEs) like ASEAN. The most affected are the small businesses, bringing huge job losses. He added that in emerging markets like Asia, the lockdown could affect 2.7 billion workers or 81% of world work force.
He mentioned that the Covid-19 crisis could cause an unprecedented cumulative fiscal deficit in the G20 countries, prompting these rich countries to pull back their money from the EMEs. The EMEs will face massive capital outflow, leading to trade collapses, poverty levels rising, and food and water shortages. “China is still suffering from these. When China opened up after the lockdown, its domestic production started recovering but the international orders fell. The domestic retail trade has declined but it is now beginning to recover.”
He stated that since China is the key hub of the ASEAN global supply chain, ASEAN supply chains were all hit by the pandemic. He said that due to the US-China trade conflicts and China moving up the value-added chain, US has begun to shift its production and imports out of China to ASEAN markets.
Tan Sri Sheng said that to tackle the crisis, China is focusing on livelihood, besides health, by promoting domestic consumption, bolstering agricultural production, reducing corporate burden, and pushing the Internet Plus digital economy. He shared that ASEAN nations are following China’s approach.
He highlighted that the post-Covid economy will entail a rise in cost and changes to the services provided. “So we now need to be more nimble, more adaptable and more online.” He remarked that the majority of workers globally are not prepared for the digital shift, and so the government must be willing to fund interim losses, subsidise the cost of the transition, and help train people to move to the digital age, because businesses cannot do this on their own. “Those who reform fastest will win; those who are slow will lose,” he declared.
He predicts East Asia, China, India and ASEAN plus three to be the world growth zones in the post-Covid era since they have a modern infrastructure, a young and well-trained labour force, and are still open to trade, technology and innovation. He said as these nations move towards domestic consumption to sustain growth, they will attract trade with the other regions, concluding, “This is a time for a Private-Public-Partnership particularly a regional partnership to overcome the challenges before us.”
During Q&A, he said that ASEAN economies are trade-oriented so as to help grow their relatively small economies. He reiterated that with the global supply chain disruption from the US-China dispute, diversification to ASEAN is the right way to go. He called for ASEAN countries to find ways to improve their citizens’ preparedness to go online and to build their online business platforms to generate income and jobs.