Pandemic Upends World's 2 Largest Economies The coronavirus has crushed both the U.S. and China economies. Whichever emerges in better shape at the end of the pandemic might shape how global power shifts, perhaps for many decades to come.
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Pandemic Upends World's 2 Largest Economies

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Pandemic Upends World's 2 Largest Economies

Pandemic Upends World's 2 Largest Economies

Pandemic Upends World's 2 Largest Economies

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  • <iframe src="https://www.npr.org/player/embed/857458647/857458648" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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The coronavirus has crushed both the U.S. and China economies. Whichever emerges in better shape at the end of the pandemic might shape how global power shifts, perhaps for many decades to come.

MICHEL MARTIN, HOST:

We're going to continue our focus on the U.S.-China relationship. The world's two largest economies have both been hit hard by the coronavirus pandemic, with whole industries shut down and high unemployment. How quickly each nation recovers could have long-term implications for the relationship moving forward. NPR's Jackie Northam has this report.

JACKIE NORTHAM, BYLINE: The coronavirus has left the economies of the U.S. and China in tatters, and the recovery promises to be slow. The pandemic started in China, so it stands to reason the Asian nation would have a bit of a head start in terms of economic recovery.

NICHOLAS LARDY: I think China will be substantially ahead. They have the virus under control, whereas we're still discovering, you know, many, many new cases every day in the United States.

NORTHAM: Nicholas Lardy is a China specialist at the Peterson Institute of International Economics (ph). He says Beijing badly handled the pandemic at the outset, but then it became very aggressive in terms of detection, tracking and quarantining, helping to bring China on the other side of the crisis.

LARDY: It's likely that China could be the only major economy that has significant positive economic growth in 2020. The U.S. is clearly going to be negative. Europe is negative. Japan is going to be negative.

NORTHAM: But China is hardly out of the woods.

JAMES KOSTOHRYZ: They're certainly facing headwinds - I mean, enormous headwinds.

NORTHAM: James Koshtorhyz is a global portfolio strategist and founder of Investor Acumen. He says exports, a key driver of China's GDP, are flat. And Beijing has extremely high levels of debt, including from its Belt and Road initiative. During the last global economic crisis a decade ago, China invested heavily in infrastructure projects. Beijing has since nurtured a consumer society. But Kostohryz says that isn't working during the pandemic.

KOSTOHRYZ: A lot of businesses that are involved in retail commerce, tourism - you know, all the types of industries that are directly impacted and indirectly by coronavirus - are still tremendously affected in China. And this is going to be creating big problems for them.

NORTHAM: And Kostohryz says the deepening U.S.-China blame game could push companies from the U.S. and elsewhere to reconsider basing their operations there.

KOSTOHRYZ: China is a little bit of an easy scapegoat right here, and I think there's going to be some movement to diversify the supply chain away from China and towards countries that are perceived to be more friendly to the United States such as India and Mexico, for example.

NORTHAM: There is finger pointing and heated rhetoric from both sides. But Xiaobo Lu, a political science professor at Barnard College, says Beijing and Washington have had a long relationship built on economic competition and cooperation, and that's unlikely to shift. Lu says that was evident last week when the two sides unexpectedly agreed to new talks on phase one of the trade pact.

XIAOBO LU: I think both side - the Chinese side needs American markets still, and also, U.S. needs China. The sort of agriculture product, China probably going to want to import from the United States as well. So there is this eagerness on both sides to look beyond the pandemic to find some areas of operation.

NORTHAM: And looking beyond the pandemic, the world's two biggest economies are so intertwined that the coronavirus will likely not allow either the U.S. or China to come out decisively ahead of the other or change the overall balance of power.

Jackie Northam, NPR News.

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