He Shuquan, Professor, School of Economics, Shanghai University, in Guangming Daily (April 28, 2020)
Summary by Alan Yang Gregory (Photo credit: Magda Ehlers/Pexels)
The Covid-19 outbreak has had a huge economic impact on all countries around the world. After the pandemic, while globalization and global value chains will exhibit new trends of development, the fundamentals will not change.
First, Covid-19 has emerged at a time when global value and supply chains are deeply interconnected. As a result, the social and economic impact on countries affected by the virus will be more extensive.
Second, today's global production network and value chains have made the international trading system more and more complicated. Local demand-side and supply-side shocks can quickly spread to other countries, industries and sectors across the global value chain. Meanwhile, the negative impact on companies will also affect the global financial market.
Third, unlike previous economic and financial crises, the cause of the turmoil originated from outside the economic system. This means that the strength and resilience of various sectors and firms will determine their comparative advantages going forward.
Fourth, while the digital economy has shown an impressive rise and become a new hotspot for industrial development, the fundamentals of economic globalization and global value chains will not change. The physical manufacturing capacity of each country alongside the core competitiveness of firms will remain the key factors that support economic growth and development.
Finally, national public-health security will become a more important part of the business environment and a factor in international competitiveness. Multinational companies will pay greater attention to a host country's medical and public-health system as well as the government's ability to respond to epidemics. In addition, firms will put more focus on the resilience of supply chains.
In sum, opportunities are always reserved for those who are prepared. The epidemic will pass, but we must take a long-term perspective and prepare for the post-epidemic era.