Coronavirus Pandemic Will Change Orientation of Supply Chains – Economist

© AP Photo / Ng Han GuanResidents walk past a retail and office district in Beijing on Sunday, March 8, 2020.
Residents walk past a retail and office district in Beijing on Sunday, March 8, 2020.  - Sputnik International
China's economy shrank for the first time in decades in the first quarter of 2020 due to the impact of the coronavirus pandemic.

Economist Pauline Loong explains how much damage the spread of the coronavirus will do to businesses throughout the world in the long term.

Sputnik: How much of a knock on effect will the damage to China's economy have on global trade and supply chains?

Pauline Loong: Essentially, this began before the Coronavirus Pandemic with the US-China trade war, businesses have been rethinking their supply chains, whether it is a good idea to have your supply chain focused entirely on one country, or on one market.

Before now it has been too difficult, it is a lot of work, you have got to source new supplies and so forth but now with the Coronavirus Pandemic, it has brought home the fact that it is not a good idea to have all of your suppliers in one area, and in one country.

A man wearing a mask walks past the headquarters of the People's Bank of China, the central bank, in Beijing, China, as the country is hit by an outbreak of the new coronavirus, February 3, 2020 - Sputnik International
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What if there is another pandemic? What if there is an earthquake? I think that even when the whole virus thing is over, businesses are going to change how they orientate their supply chains.

Sputnik: Could we see Western countries aiming to encourage domestic manufacturing after the Coronavirus Pandemic, in a bid to lessen dependence on China?

Pauline Loong: Governments can try, but I think that ship has already sailed, because the costs of producing in places such as the UK and Europe, or the United States, are so much higher than in Asia, so I think that the big winners here are Southeast Asian countries.

The security for merchants and for businesses is not just to be away from China, the whole idea is just to have different areas, and to diversify. It’s not just China as such; it’s just not a good idea to have everything in one basket.

Sputnik: Is China’s economy in a better position than the west’s to bounce back from the impact of the Coronavirus Pandemic?

Pauline Loong: Each country has their own particular problems. China has its own particular problems, which began before the virus, so even if it bounces back from the virus; the pre-pandemic economic situation wasn’t good, because of the high levels of debt.

China has got to deal with that even when it bounces back, so each country has a different problem to bounce back from.

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