0 items USD 0.00Aggressive China 鈥� Suppressive America 鈥� Depressed Economy: An Essay on Current Business Environment
鈥淎ny man who must say I am the King is no true King鈥� - this powerful statement of Game of Throne, delivered by short-lived king Joffrey Baratheon, fits perfectly for present-day鈥檚 global situation. China and America are delivering blow after blow to each other, trying to prove who is the real King, and both want the world to play the role of an active audience of this economic duel.
Trade and Pandemic
The fiscal year 2019 was the year when the trade war between the US and China made all the newspaper headlines, but the emergence of the coronavirus at the end of the year overtook everything. The world has seen and experienced something that has never happened in years. Just like an apocalyptic science fiction, humanity crawled back into their homes to protect themselves from this dreaded virus. The advanced economies suffered most, and despite having immense progress in the field of healthcare and science, until today, we have no reliable cure for this virus - which is also known as COVID 19.听
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The world economy was itself in a deteriorating state due to the trade war which has now gone to the dogs due to the corona pandemic.
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US and China in a war of words over coronavirus. The US has accused China of spreading the virus, as well as questioning the role of the WHO, saying that it has suppressed serious facts related to this global pandemic.听
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Over 100 countries across the globe including Russia have demanded an independent inquiry into the origins of Coronavirus.听
The curious case of Australia
Australia, who has spearheaded the probe against China and was being pivotal for generating support from other nations, faced a backlash from China.听 China has suspended imports of beef from four Australian abattoirs.
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According to Industry experts, the four abattoirs processed more than a fifth of Australia鈥檚 AU$2 billion a year beef exports. (source: Financial Times)
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China also planning to impose punitive 80% tariffs on Australian barley exports. Australia鈥檚 barley exports to China were worth AU$1.4 billion (USD 915 million) in 2017, according to the government sources. The barley from Australia was used to make beer in China. Australia, however, is in the mood to drag China to WTO over these tariffs.听
China's Trade with the U.S. and the rest of the world
The world鈥檚 largest exporter China (shipped USD 2.499 trillion worth of goods in 2019) and largest importer US (imported USD 2.568 trillion worth of goods in 2019), both are still reliant on each other for various products and services. In 2019, the European Union remained to be China鈥檚 largest trading partner while the U.S. slipped to third place behind ASEAN. The exports to the U.S. from China plunged 12.5% in 2019 compared to 2018.
Japan has allocated a USD 2.2 billion stimulus package to its manufacturers to help them move production from China. The world's third-largest economy is already recession-hit, and coronavirus has worsened the situation - Japanese companies have not been able to fulfill their orders because parts and components have not arrived in time from China. Factories in China were closed which are now opening but it will take time to resume operations in full swing. Due to disrupted supply chains, not only Japan, other trading partners like Korea are also suffering from component shortages.
The US government will support companies considering India, Vietnam, the Philippines, and other Asian countries as an alternative to China. Although India is one of the attractive trading destinations for companies, underdeveloped infrastructure and law and order are major hurdles for the country.
Chances of delisting Chinese companies from US Stock Exchange
On 21 May 2020, the US Senate passed a bill to delist Chinese companies from the US stock exchanges, if it becomes legislation then Chinese companies such as Alibaba Group Holding Ltd and Baidu Inc could be barred from listing on U.S. stock exchanges. According to the bill, if a company fails to prove that it is not under the control of a foreign government or the Public Company Accounting Oversight Board isn鈥檛 able to audit the company for three consecutive years and unable to ascertain whether any company is under the control of a foreign government, such companies will be banned in the US stock markets. Misappropriation in accounts of China-based Luckin Coffee has triggered this bill, the company was delisted from U.S stock change after auditors found bogus $310 million in sales between April and December 2019.
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China's audacity has already upset many countries with its interference in neighboring borders and international waters. The current regime has already disrupted the Asian financial powerhouse Hong Kong with its one-nation policy. Relations with Taiwan have also been caught in the whirlpool for some time. For the global betterment, either the Chinese government will reconsider their policies or Chinese companies will permanently relocate their bases from China to protect their businesses. Otherwise the plight of local Chinese workers will not be going to abate anytime sooner.
Global Outlook and Closing Statement
Global economic output to shrink 4%; U.S. GDP to slump 6.4%; European Counties (cumulatively) GDP is set to contract 8.1%. Japan will shrink 4%, China has shied away from quoting any numbers for future GDP. India's GDP growth in 2020-21 likely to be negative; Australia鈥檚 GDP to shrink 10% in the first half of 2020.听 (source: Bloomberg)
All these numbers are telling the same story that the coming days are going to be full of difficulties. It would be wrong if any country thinks only of itself at this level. In these demanding times, a nation has to become self-conscious and must be fully aware of the welfare of its citizen and at the same time create sufficient opportunities for its business partners so that they can further enrich mutual trade relations in the coming years.
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About The Author
Sudeep Chakravarty
