The big tilt away from China

THERE is a plethora of theories on how the Covid-19 outbreak could end up changing the geopolitical landscape - everything from great power relations, food security, and the economic balance of power are just a few examples of what some of the world's best minds are forecasting for when the outbreak is finally contained and the dust is settled.

Armchair speculation about possible change makes for good intellectual entertainment, but much like the coronavirus itself, there are too many unknowns to be certain about what the world will actually look like in the future. Many pundits are predicting the world will never be the same, but for those who think the pandemic will lead to tectonic shifts, one need only be reminded that the 1918 Spanish flu pandemic, which claimed over 50 million lives, had little discernable impact on global politics.

There are, however, some things we can be sure about, which has less to do with radical change but more with how the pandemic's effects will accelerate certain trends. One of the more important will be an intense decoupling of the world's economies with China. Starting a decade ago, there were already the beginnings of a tilt away from China. As China progressively became richer after opening up its economy in the late 1970s under the leadership of Deng Xiaoping, its labour costs steadily rose, going from an average yearly wage of US$150 in 1990 to US$8,900 in 2015 and most recently US$13,500. In contrast to the 1990s, where China emerged to become the factory of the world and eventually accounted for one-third of the world's manufactured goods, in past years there has been a steady exodus of labour-intensive manufacturing out of China into lower-wage economies such as Sri Lanka, Bengladesh and Vietnam.