A Renewed Look at Asia’s Production Networks

Two decades after the outbreak of SARS, Asia is confronted with another serious epidemic, COVID-19. As with the SARS episode, soon after the COVID-19 outbreak in China, ASEAN was one of the first regions intensely affected due to its close geographical proximity to China, and the extensive business, travel, tourism, and supply chain links between the nations. Aside from the human costs, economies have also severely suffered. Intuitively, one may be inclined to think that Asia would be better prepared to soften the economic impacts of a second pandemic, but ACI research and forecasts predict otherwise.  

This is firstly because the scale of the COVID-19 pandemic itself is much larger than that of SARS. The total number of SARS cases in 2003 was 8,437 (WHO), whereas the total number of COVID-19 cases has already surpassed 37 million as of October 2020.  

Secondly, social distancing measures have been much more severe during COVID-19 than during SARS. For example, the peak of China’s COVID journey had an overwhelming number of almost 760 million citizens under lockdown. Naturally, this bears a heavy impact on the operations of tourism, goods imports, and regional supply chains on a global level.  

Taking on a new perspective, ACI research focuses on the long term and more deep-rooted causes of the economic downfall. Namely, the increasingly integrated production networks between China and ASEAN, which have contributed to a more synchronised economic decline. The findings determine that due to ASEAN and China’s increased economic interconnectivity via evolving production linkages and trade patterns, the spill over effects between China and ASEAN are larger during COVID-19 than during SARS. This is because China has a deeper role in ASEAN Global Value Chains (GVCs). The research further shows that China’s containment efforts reduce the spill over effects to ASEAN. 

The key questions for policymakers are: What is the role of international production networks in the propagation of an epidemic’s economic impact, and how can policy intervene to mitigate the downfalls that COVID-19 has uncovered? While globalisation has come with its numerous benefits, the unfolding of COVID-19 has simultaneously uncovered various downsides in such interconnected relationships. The economic impact of the disease and unsuspecting halt to global operations leads to the debate on whether China’s increasing importance in GVCs has contributed to the current global economic downturn. The pandemic has shed light on the synchronised characteristics of Asian nations with regards to resiliency when confronted with public health crises and financial shocks. Asia requires a renewed look at what industrial and technological policies they can incorporate to maintain more robust GVCs.  

by Sunena GUPTA

Researchers: Ammu GEORGE, Changtai LI, Jing Zhi LIM, Taojun XIE

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