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What to do about China?
For some years now, presidents and other leaders in Europe and Asia have grappled with the dilemmas of adapting to China’s role as a major economic power while also containing or thwarting its maneuvers for domination.
The COVID-19 pandemic has sharpened this tension. Finding a way to deal with China is now an urgent puzzle, a matter of literally life and death.
On the one hand, China bears some responsibility for the current crisis. The outbreak began in China; it might have remained localized had President Xi Jinping’s government not covered it up for several days; in the three months since, he has further falsified data and turned the crisis into a propaganda tool, pinning a U.S. soldier as the source of the virus. These are all cause for condemnation.
On the other hand, China is the world’s leading source of medical supplies needed to control the virus, including surgical masks. If a vaccine is ever developed, China will be a vital player in its production, distribution, and perhaps its invention. So it would be imprudent to condemn China’s mendacity too loudly.
In the past two decades, much of the world, very much including the United States, has become deeply dependent on China for a vast swath of products and technologies. One positive side effect of the pandemic is that a growing number of business executives and political leaders are focused on the consequences of this dependence. In a recent industrial survey, more than half of U.S. manufacturers have said they are at least planning to make changes to their supply chains as a result of the coronavirus. But our dependence is too deep and complex to be quickly or cheaply unknotted.
David Livingston, an analyst at the Eurasia Group, notes in an email that while China is not a rich source of raw materials or finished products, it is “a behemoth in the middle of supply chains.” It is in fact the world’s largest exporter of intermediary goods, providing one-third of the “intermediate goods” that help turn raw materials into finished products.
According to a recent report by the McKinsey Global Institute, China supplies the critical components in 70 to 85 percent of the world’s solar panels, 75 to 90 percent of high-speed rail systems, 60 to 80 percent of agricultural machinery, and 40 to 50 percent of cargo ships.
COVID-19 has drawn attention to this grip on the middle of supply chains for health and medical products—a grip that’s tighter than commonly realized. As Bradley Thayer and Lianchao Han note in the National Interest, China produces “key ingredients to medicines in almost every area,” including drugs for Alzheimer’s, epilepsy, antidepressants, HIV/AIDS, and cancer treatments, as well as statins, birth-control pills, antacids, and vitamins. If China stopped exporting these ingredients, they write, “America’s—and the world’s—hospitals would be in free fall.”
The fear of a total cutoff is a bit alarmist: China needs foreign markets almost as much as the foreign markets need China. But Xi could brandish his dominance as leverage or intimidation in some future power clash. Or the supply chain could falter due to no one’s design. This may already be happening. The pandemic has forced the shutdown of some of the Chinese factories that make the pharmaceutical ingredients. As a result, the Food and Drug Administration fears, the U.S. may soon face shortages of 150 prescription drugs, some of which have no generic substitutes.
In the past few years, even before COVID-19, higher Chinese labor costs, and then President Donald Trump’s tariffs, have compelled some companies to seek alternative sources of supplies in Vietnam, India, Singapore, Malaysia, Mexico, and elsewhere. But the shift has been modest; in some markets, including health and medical supplies, it’s been all but nonexistent. The pandemic will shift things further—but not by much, certainly not for as long as the virus is still spreading. In other words, we are stuck in this relationship with China for some time to come.
So, to return to the question at the top of this piece, what to do about China? It’s easier to list some things not to do. Topping that list would be needling China in a way that has no purpose whatsoever. Unfortunately, the Trump administration has done precisely that. At a summit of the G-7 nations in late March, the delegates failed to agree on a common statement about the pandemic because Secretary of State Mike Pompeo, at Trump’s behest, insisted on calling it the “Wuhan virus,” named after the Chinese city where it originated. This was stupid along so many dimensions. (Even Trump has since dropped the schoolyard taunts and reverted to calling the virus by its proper name—though perhaps not for long.)
Trump’s approach to China is wrong because he completely misreads the nature of Xi’s regime. In a paper published this week, Elizabeth Economy, director for Asia studies at the Council on Foreign Relations, describes the relationship between Trump and Xi as “The Hydra vs. the Headless Horseman.” She writes:
China’s Communist Party is like the mythological hydra of ancient Greece—a multi-headed, serpentine beast that can approach its prey from multiple directions, feinting and distracting before eventually attacking. President Trump, whose nightly briefings are destined to become late night horror-comedy classics, is like the headless horseman—a malevolent ghost riding without his head, carrying a jack-o’-lantern in its stead. Only when the American people get their horseman a new head, and the Chinese people find their inner Hercules and kill off all the hydra’s heads, will either country have an opportunity to lead.
So, yes, we need to diversify our supply chains, we need a more clever, alliance-driven style of diplomacy, and we need a new president. Meanwhile, we’re all trapped together in the throes of a pandemic.
It’s worth noting that, in 1966, during a particularly frosty phase of the Cold War, the United States and the Soviet Union still managed to work together to eradicate smallpox. Similarly, for all the tensions today between the United States and China, we have common interests as well, and the snuffing out of COVID-19 is chief among them.
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