A study points out that the economic impact of COVID-19 is going to be more severe than the 2008 global financial crisis and even the Great Depression from 1929 to 1933. Although it is yet unclear where the global economy is heading after the pandemic, there are some things we can predict.

Currently, uncertainty about the global economy is mainly caused by three factors. First, it is hard to determine the eventual scale and impact of the pandemic. Second, it remains unknown when a specific vaccine or medicine for COVID-19 will be ready. Third, the economic effects remain unclear. This includes uncertainty as to whether systemic failures could occur in major economies including that of the US, as well as how long the global economy can stay at a standstill. Presently, liquidity shortages have been alleviated, so it is unlikely that systemic failures could occur in the short term. These uncertainties warn us to plan for every scenario.

Restructuring of global supply chains and profound adjustments to globalization have become more likely. As the pandemic sweeps the world, there is a growing concern among developed economies over their excessive reliance on protective equipment and medicines supplied by such countries as China.

For instance, the raw materials of some drugs in the US need to be imported from China, including azithromycin, penicillin and cephalosporin. Although India is also one of the major exporters of medicines in the world, it relies on China for 70% of its bulk drugs, especially antibiotics and febrifuges that have to be imported from China entirely. Obviously, the restructuring of global supply chains is unavoidable as countries become more aware of the importance of public health.

Economic globalization has benefited the world enormously. However, inappropriate policies have led to an uneven distribution of income. The US economy is heavily indebted, and its wide income gap is tearing the society apart. This has given rise to populism and protectionism in the US.

2020 is a US presidential election year, when partisan struggles and political polarization heavily affect economic policies. At the same time, globalization and the country’s dependence on “made in China” products are to be further criticized in the context of the pandemic.

We can also foresee three other trends related to economic globalization. First, the relationships between a country and the market and between a country and its society will go through big adjustments. Values will be dramatically changed. Countries will attach more importance to safety and order and begin to increase intervention in the economy. During this process, China’s governance model will become increasingly influential.

Second, the global competition in scientific and technological innovation will become fiercer, in which the advent of new technologies, new models and new commercial activities will determine the position of a country in the competition. The pandemic has highlighted the advantages of big data and AI, spurring global competition in technology and business models. Third, in the new global landscape, competition among major countries is becoming fiercer in its strategies, ideologies, development patterns and geopolitics. Great-power strategic competition will restructure the geoeconomic and geopolitical landscape.

The prospect for China-US relations will determine the trends of the post-COVID-19 world economy. During the pandemic, the nature of China-US relations has been deviating from a cooperation-centered relationship towards one that revolves around major-country strategic competition and ideological competition.

In the future, it is possible that there will be two parallel international supply chains, with one centering around the US and the other China. The US-China trade war may go on to lead to higher tariffs and more barriers to technology exchange. The connection between the two major markets is likely to gradually weaken.

The policy choices of China and the US will impact the road ahead for economic globalization and world order. In my opinion, the only way out for China-US relations are the following three measures:

First, both sides should reaffirm their shared interests. Second, China and the US should conduct a dialogue of civilizations. Third, the two countries should expand cooperation in non-traditional security fields including global public health and climate change, both of which are the common challenges that humanity is facing today, and which need to be addressed with international solidarity and cooperation. China and the US should play a leading role in this regard and enhance strategic mutual trust and political mutual trust to maintain economic stability.

The author is a professor at the School of International Studies and the director of the Center for International Political Economy at Peking University.

(Edited and translated by Weng Rong)