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A Pricey Made-In-China Label

It will be some time before we know the final, staggering cost of COVID-19 here and around the world, but the country that may have the most to lose is the one where the new coronavirus originated.

This humanitarian and economic tragedy carries a made-in-China label. That fact, on its own, would not have much effect on China’s global standing. Previously benign viruses can mutate or jump the species barrier anywhere. Although China’s dense population and antiquated sanitary standards provide more opportunities there than in other places, it is not fair to hold a country of 1.3 billion people responsible for an accident of nature.

Yes, I am aware of the fevered speculation that a secret virology lab was involved. This seems unlikely and is certainly unproven. And yes, I am aware of even more fevered speculation that the release of the virus in China was not an accident at all. That theory belongs in the closet alongside the tin foil hat. China just suffered its first economic contraction since public data began in 1992, and probably since the 1970s. It did not do this to itself on purpose.

It may not be China’s fault that the coronavirus launched its attack on mankind in the unsuspecting city of Wuhan. But we can’t overlook the reality that the viral blitzkrieg was aided, if not outright enabled, by China’s coercive and corrosive authoritarian government.

Health officials in Wuhan knew they were dealing with a pneumonia-like illness induced by a new coronavirus no later than Dec. 27. They took four days to notify the World Health Organization about the “unknown” illness, for which patients had been hospitalized for weeks. By that time, their doctors had identified the responsible virus, after initially recognizing its clinical resemblance to SARS, which arose in China in 2002.

On Jan. 1, security officials detained and chastised eight doctors for “spreading rumors” about the new virus. They also ordered a local laboratory to destroy samples. Chinese researchers mapped the new virus genome on Jan. 2; this was not disclosed until Jan. 9. It was clear that the virus could be transmitted between humans by Jan. 11, when the later-lionized Dr. Li Wenliang was diagnosed with pneumonia in both lungs, yet officials did not acknowledge this until Jan. 20. In the meantime, the first traveler from Wuhan later confirmed to be infected with the virus came to the United States on Jan. 15.

During this crucial period, China also pressured the WHO to sideline Taiwanese health officials who had raised suspicions about the contagious nature of the virus as early as Dec. 31. The WHO announced on Jan. 14 – when China already knew of the viral contagion – that China had found “no clear evidence of human-to-human transmission.”

By Jan. 23, Chinese authorities had locked down Wuhan. They made it all but impossible for outsiders to learn the most deadly secret of the new coronavirus, which is how transmissible it is by people who are asymptomatic. This doomed most of the world’s early efforts to control the spread, which focused on avoiding contact with people who were already noticeably sick. While China downplayed the contagion, the rest of the world innocently went about its business. We took trains and planes, hugged and kissed our relatives, went on dates, and attended sports events, festivals, weddings and funerals. All the while, we did not know that the seemingly healthy person next to us could give us COVID-19. Had we known, the world today would be a very different place.

But the Chinese system is set up to control, distort and suppress information to meet its own perceived needs – the most important of which is to preserve the system itself. From the beginning of the crisis to this instant, China has told the world only what it wanted the world to hear. Journalists, scientists, doctors and citizens who went beyond where the Communist Party wanted them to go have been silenced or have disappeared completely. That’s the Chinese way.

This is not news, although many business and political leaders have chosen to blind themselves to reality in the past. Not even the chronic forced transfer or outright theft of valuable intellectual property has been enough to deter the wider world from treating China as the normal-functioning country that it isn’t.

Now, at last, the wisdom of relying on China is getting a second look, beyond the Trump administration’s long-standing skepticism. The breakdown of Chinese supply chains during the first phase of the COVID-19 pandemic, when China itself all but shut down for two months, started it. Now the accelerating disclosures of Beijing’s duplicity, and the worldwide losses of life and money it brought, are feeding resentment in places like the United Kingdom. Partly as a result, Britain is reconsidering its willingness to let China’s Huawei play a role in bringing 5G wireless service to that country. Canada’s relationship with Beijing has been rocky since before the pandemic, though developments related to it are unlikely to help.

Last weekend’s roundup in Hong Kong of pro-democracy activists, in the midst of the pandemic and while the streets are quiet, has confirmed that China will go to any lengths – even publicly breaking its commitment to Hong Kong’s prosecutorial independence – to have the last word on what everyone in its orbit can hear and say.

The global economy cannot replace China’s workforce of nearly 800 million people quickly. To some extent, that workforce cannot be replaced at all. China’s total population of 1.3 billion has also developed into a business and consumer market that non-Chinese businesses would hate to lose. Yet there are strategic imperatives that make it unwise for any other nation to let itself become too vulnerable to Beijing. This applies to the United States, the only country able to stand up to China economically and militarily, as much as it does to everyone else.

The Chinese labor force is four times the size of ours. We can automate to maintain our productivity advantage; the desire to negate that advantage is a major reason why China is so aggressive about acquiring intellectual property by any means necessary. We can also immigrate our way to a closer balance between our working and military age population and theirs. Maybe that can happen after the next election, if we get serious about reforming our immigration laws. President Donald Trump has taken a step in the opposite direction with his announcement of a new order to shut down permanent immigration for at least 60 days.

In the meantime, businesses may be waking up to the need to diversify their supply chains and their markets. China attained its current strength by being the low-cost producer in a huge array of fields. This pandemic may finally prove that the made-in-China label carries a price that is higher than advertised.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s most recent book, The High Achiever’s Guide To Wealth. His contributions include Chapter 1, “Anyone Can Achieve Wealth,” and Chapter 19, “Assisting Aging Parents.” Larry was also among the authors of the firm’s previous book, Looking Ahead: Life, Family, Wealth and Business After 55.

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