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First, the Covid pandemic, then the war in Ukraine – global supply chains are under a lot of pressure these days. So it comes as no surprise that more and more governments have begun to consider decoupling the global economy. The German government currently also notes that it is too dependent on China. For this reason, there are increasing calls for the re-nationalization of certain supply chains.
Economic expert Achim Wambach sees nothing to be gained from such a policy. Interviewed by Felix Lee, the Head of the ZEW Economic Research Institute explains why the exact opposite would be the solution. Wambach’s recommendation: more free trade. There are many regions in the world that still have a phase of high economic growth ahead of them and where German companies could position themselves very well. Another advantage over China is that not all of these countries are autocracies.
After all, the strict Covid policy of the leadership in Beijing is only the latest example of how autocratic China can be: Be it streets, apartments, parcels, parks or restaurants – everything that has a surface is being disinfected lately. Even people. So our team in Beijing set out to see how effective the pungent mixtures of ethanol, 1-propanol or 2-propanol truly are in the fight against Covid: Are China’s masked disinfection troops a miracle cure for Covid or mere hygiene theatrics?
Your Michael Radunski
‘Detach from dependencies, but not from China itself’
Russia’s invasion of Ukraine also calls Germany’s economic ties to China into question. Xi Jinping rules in a similar authoritarian manner to Putin. But decoupling from China would hurt the German economy more than Russia’s. And so Achim Wambach argues for more free trade. The Head of the ZEW economic research institute explains why in today’s interview conducted by Felix Lee.
Mr. Wambach, Shanghai’s lockdown to fight the pandemic was supposed to last four days. Now it’s been more than two months – while life in the rest of the world is returning to normal. How big is the damage to the German economy?
China’s lockdowns will have a massive impact on global supply chains. While we won’t see a sudden shock in the next few weeks, we will be faced with increasingly long delays in shipping times. In addition, prices are likely to rise further as a result. Financial market experts, whom we regularly survey, do expect the situation in China to improve slightly over the next six months. But at a low rate. After all, the problems will not be over with the end of the Covid measures. It will take months before trade is back to normal.
Russia’s campaign against Ukraine shows us once again how risky it is to get too involved with an authoritarian country. Shouldn’t Russia be a lesson to us when it comes to China as well?
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