The question of responsibility in the corona crisis

Donald Trump loves the topic: To distract from his own mistakes in corona crisis management, the US President is only too happy to point out China’s responsibility. The virus could have been stopped there. “It didn’t happen, and the whole world suffers because of it,” Trump accuses the Beijing leadership. One could dismiss this as a political distraction by a president in the election and crisis campaign, but it is more.

Pandemics have caused political reorganization in the past. The corona virus could do the same. The Covid 19 crisis shows more clearly than ever how little the US currently wants to and cannot fulfill the role of world leader.

The G7 and G20 groups of states also find no convincing answers. But China will not be able to position itself as a global helper in the corona crisis. If the states are out of crisis mode, the question of responsibility for and in the Covid 19 crisis should play a crucial role and become a burden for China’s global position.

The 2007 financial crisis emanated from the United States, and China’s role as an economic stabilizer brought much recognition to the country. But a lot is different now. China cannot save the world economy, nor will the country’s role as the top pandemic fighter be relieved.
For one thing, the corona crisis has its origins in China. And undeniably, the provincial government in Hubei and the central government in Beijing reacted too late and issued international warnings.

The “Chernobyl moment” in China, which experts predicted in many places in January, when the extent of the crisis became clear, did not happen domestically. The central government has largely averted domestic resentment at the initial cover-ups and the late response to the virus outbreak and passed it on to the provincial government in Hubei. However, faster and more transparent communication would have saved other countries valuable time.

Demand for independent investigation into the outbreak

Trump is therefore not the only critic. The heads of government of India and Brazil have denounced Beijing’s role. The Australian government has called for an independent investigation into the outbreak and is “concerned” about China’s transparency. Some points may never be resolved. This could include whether the virus has spread to humans from an animal or from a laboratory.

But the discussion about it alone will burden China’s international reputation. In the United States, Republican governors are preparing a law that would allow claims for damages against China. The official statement from China that the country has brought the pandemic with fewer than 84,000 infected and less than 5,000 deaths behind is not believed internationally. The numbers are too good to be true. French President Macron openly attributes this to the fact that information in the country is not free.

For Xi Jinping, much like Donald Trump, the focus is primarily on the domestic effects of the corona crisis. However, international positioning is important for this. If Beijing stands as a world troubled man, this strengthens the domestic political argument that it has mastered the crisis well. Therefore, at a time when international cooperation is the order of the day to curb the spread of the virus and keep economic damage as low as possible, the struggle for interpretation has long begun.

Beijing is trying to position itself as a supplier of protective equipment. In view of serious deficits, for example in the European vote, there are grateful customers like in Serbia. The deliveries are important and welcome.

However, to speak of a “silk road of health” shows how much they are used for propaganda purposes. EU foreign policy chief Josep Borrell criticizes the Chinese efforts as a struggle for influence over opinion making and donor manners.

Confidence building necessary

In addition to the fact that some of the protective masks supplied in Spain, for example, turned out to be defective, the Chinese power position in this area is becoming an issue in Europe: protective masks and respirators will now join 5G technology if Europe is too dependent on China discussed.

There are many indications that the world must first adjust to a weak USA and an internationally weakened China. Successful states such as South Korea or Germany could strengthen multilateralism during this time.

Beijing has to build trust. Transparency is key. The situation is also new and challenging for the Chinese leadership. Among other things, it can demonstrate its global responsibility by forgiving debts as a big believer in African countries, even if its own economy is historically bad.

More: Western pathogens have made the West great. The corona virus could also accelerate certain geopolitical trends.

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Russia offers EU participation in defense union

Europe

The EU flag flies in front of the headquarters of the EU Commission in Brussels: the EU launched Pesco in December 2017 to become more flexible and independent of the United States.


(Photo: Reuters)

Brussels Despite the tense relationship between them, Russia has offered the EU to participate in the European defense union Pesco. “We are open to working with Pesco,” said Russian EU Ambassador Vladimir Chishov to the daily newspaper “Die Welt” (Friday). In principle, Moscow does not see the increased cooperation of Europeans in defense policy as a problem.

In order to become more flexible and independent from the USA, the EU launched Pesco in December 2017. There are said to be a total of 47 projects, some of which are already running. This involves building a medical team and developing prototypes for infantry vehicles.

Russia could consider participating in the Pesco projects, Chishov said. “For example, it would be conceivable to work with the EU on cyber defense or in the logistics area, or our troops and experts could support EU operations in third countries.” Russia had already provided helicopters for an EU mission in Chad in 2008, and they were involved fighting pirates in the Horn of Africa.

Russia’s relations with the EU, but also with NATO, have been under heavy strain since 2014. Moscow is accused of annexing the Ukrainian Black Sea peninsula of Crimea in violation of international law and supporting the pro-Russian separatists in eastern Ukraine.

As a result, the EU imposed economic sanctions. NATO expanded its presence in the east of the alliance. The relationship between Russia and the EU has “stabilized at an abnormally low level,” said Chishov.

More: Vladimir Potanin is Russia’s new richest man.

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“Many companies will diversify more”

Guntram Wolff

The economist assumes that there will be fewer business trips after the crisis than before.

(Photo: Corbis News / Getty Images)

The pandemic will not herald the end of globalization, believes the head of the Brussels research institute Bruegel, Guntram Wolff. Much now depends on whether the foreclosure tendencies gain the upper hand in politics.

Mr. Wolff, do you expect the pandemic to question global value chains?
We will certainly see a rethink in medical goods. Politicians will urge manufacturers to produce critical products in Europe and to build up larger stocks so that they can react quickly in an emergency. In other sectors, however, governments are likely to leave the decision to businesses. I don’t think we will see deglobalization on a broad scale.

Why not?
We have seen epidemics over and over again, such as the plague pandemic in the 14th century or the Spanish flu, and globalization has continued to advance since then. But the corona virus is likely to leave a dent.

Will many companies become more independent of individual countries like China?
Many companies will try to diversify more. Anyone who has had delivery problems due to the production stop in individual regions such as the Hubei province should also look for alternative suppliers in other parts of the world. Even if it means more effort and costs to manage contracts with two suppliers than with one. I also assume that there will be fewer short business trips after the crisis than before – many managers are now experiencing the benefits of video conferencing.

Free trade was on the defensive even before the pandemic, and the US-China tariff conflict has also hit many European companies.
Much will now depend on whether the free trade institutions like the WTO hold out or whether the tendency towards foreclosure continues to increase. Then many companies would also relocate their production.

The EU is also placing increasing emphasis on technological sovereignty.
There is a discussion about becoming more independent of the United States or China in critical infrastructures such as cloud computing in order to have more political leeway. This discussion has now been expanded to include the health sector.

More: The corona crisis is changing global value chains. Instead of proximity and efficiency, distance and security are now the order of the day.

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How the corona virus de-globalizes the global economy

Brussels, Paris, Dusseldorf When Joe Kaeser returned from China together with Chancellor Angela Merkel in September 2019, he had a warning in his luggage: “The United States and China are decoupling from one another,” he suspected Siemens boss back then with a view to the trade war of the two largest economies. The pandemic makes Kaeser’s cash register call a reality faster than feared: companies cut supply chains and relocate factories. Governments isolate their economies from each other and hoard vital products. This affects not only the United States and China, the entire world economy is distancing itself from one another.

This can already be seen in world trade. According to the latest forecast by the World Trade Organization (WTO), global trade in goods could collapse by up to a third in the current year due to the pandemic. What the WTO economists see in their early warning systems are the immediate consequences of a worldwide economic shutdown that started in China and then spread with the virus from Europe to America in no time.

Such business interruptions are the horror scenario for many companies. In the “Allianz Risk Barometer”, such abrupt forced breaks in production have topped the list of the greatest managerial fears since 2013. However, the WTO experts can only guess what medium and long-term consequences the corona crisis will have for the global economy, which is closely linked by global value chains.

Keeping distance is not only the order of the day for people, but also for companies. The balance between efficiency and security is being readjusted in the economy. Almost overnight, companies that have been trimmed to “just in time” have to rethink “just in case”.

In concrete terms, this means: managing more suppliers, redirecting supply chains, increasing inventories and, if necessary, even relocating entire locations. Just as the banks had to create capital buffers after the 2008 financial crisis, industrial companies in particular are now creating security cushions for their production.

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Companies are helped by new digital technologies such as big data and 3D printers, which enable them to use the data to also redirect the flow of goods so that they are no longer dependent on just one production location. “The current crisis will have an impact on globalization,” EU Industry Commissioner Thierry Breton told Handelsblatt. Even before the outbreak, many companies had started to check their supply chains and production sites in order to take CO2 emissions, dependence on digital technologies and proximity to customers more into account.

The dependence on individual countries outside Europe is now being questioned, predicts the former head of the IT group Atos. “This crisis is accelerating developments that we have observed before,” said Breton. EU Commission President Ursula von der Leyen speaks of “mindful globalization”: You can no longer see trade flows and supply chains exclusively economically, she told Die Zeit.

A change in mood is also noticeable in China

China, which has become a factory for the world since it joined the WTO in 2001, is particularly affected by the new precautionary principle. The McKinsey Global Institute (MGI) has calculated that the global economy – measured in terms of trade, technology and capital flows – was three times more dependent on China in 2017 than in 2000. Over a third of all industrial products produced worldwide now come from Chinese factories.

More than 50,000 companies worldwide have, according to a business consultancy study Dun & Bradstreet a system supplier (Tier 1) in the region around Wuhan. “Many countries and companies are now increasingly thinking about whether they rely too heavily on deliveries from China,” says Max Zenglein, chief economist at the Mercator Institute for China Studies (Merics) in Berlin.

The change in mood is already noticeable in China itself: “When the country went down under the pandemic in January and February, the rest of the world felt how dependent everyone is on supply chains from China. The changes that are now emerging are not just temporary, but permanent, ”reports Jörg Wuttke, head of the EU Chamber of Commerce in China.

Even before the crisis, companies would have oriented themselves differently for cost reasons. Trump’s trade war then showed everyone how vulnerable global value chains are today. “The supply chains will look different after the crisis than before,” predicts Wuttke.

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This applies not only to medical products such as respiratory masks or respirators, which have become national security goods in almost all countries due to the delivery bottlenecks during the corona crisis. Chancellor Merkel speaks of “existential value chains” that many politicians prefer to see in European hands. “Industry is concerned that the Federal Government has gained extensive powers to intervene in the production, price and trade of corona protective goods in the past few weeks,” warns the Federation of German Industries.

However, the national need for protection goes further: the crisis has weakened many companies so much that they could now be easy prey for foreign takeovers. And indeed, the financial information service Bloomberg reports increased interest from Chinese state investors in particular in European companies. Italy, Spain, France and Germany have therefore also increased their investment protection.

In France, the government has indicated that it is working with the Chancellery on a Franco-German initiative to secure strategically important economic areas. This also involves the return of certain production capacities for pharmaceuticals from abroad, especially China, to Europe and finally the prevention of the sale of technology companies in the wake of the economic crisis.

“We have to put ourselves in a position to guarantee national or European productions that are essential for our populations,” says an adviser to French President Emmanuel Macron. The EU had already agreed in 2019 to take a closer look at foreign direct investment.

Japan wants to bring productions home

According to the United Nations Conference on Trade and Development (Unctad), foreign direct investment will decline 40 percent worldwide this year. This threatens to sustainably damage global production networks and supply chains, said Unctad director James Zhan.

Globalization is also being resorted to elsewhere: Japan even wants to help companies with the equivalent of around 1.7 billion euros to bring production plants back from China to Japan or to relocate them to other Southeast Asian countries. Microsoft and Google are planning to relocate production facilities from China to Vietnam and Thailand, according to a report by the Nikkei Asian Review. “Anyone who has had delivery problems due to the production stop in individual regions such as the province of Hubei should also look for alternative suppliers in other parts of the world,” says Guntram Wolff, head of the Brussels research institute Bruegel.

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Jacques Aschenbroich, boss of the French automotive supplier Valeo, pointed out the fragility of the supply chains at the beginning of the crisis: “Each of our customers tries not to be dependent on us alone. If this is the case, he demands from us the guarantee that we can procure each component from at least two if not three different regions of the world. ”

German carmakers think similarly. Cover every day BMW, Daimler and the VW-Group several million components from their suppliers. This chain, however, has stalled due to the corona pandemic. Particularly important and therefore critical for production are the southern countries Italy and Spain, who have partially stopped their production on instructions from the authorities.

In response to previous bottlenecks, car companies in particular have created extensive databases in order to find alternative suppliers for each individual part. Daimler now sees itself prepared for the start-up of its plants. For almost every component, there are substitute suppliers in the databases if the original partner should fail.

More: Grimm economy – “We will trust international supply chains less”

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China’s foreign trade figures are deceiving: the worst is yet to come

Foreign trade

With China’s most important foreign trade partners, the economy is at a standstill.


(Photo: dpa)

At first glance, the latest foreign trade figures from China don’t seem that bad in the light of the global crisis. Exports fell by 6.6 percent and imports by 2.4 percent. Of course, this is still catastrophic for the second largest economy in the world, but at the same time much better than many experts had predicted.

Anyone who now believes that China has got off lightly with the corona virus-related standstill in Europe and the USA is mistaken. A closer look shows how violent the slumps with China’s most important trading partners, the European Union and the United States, have already been. Trade fell by ten percent and 20 percent, respectively.

However, the numbers do not even reflect the complete reality that is currently taking place in the world. Orders from abroad before the crisis are still included in the data. Logistics in China have only been working again for a short time, so that container jams occurred in the ports. These are now being gradually dismantled.

Anyone who talks to Chinese companies will find out that their new orders from abroad fell sharply in March.

So the worst is China’s foreign trade. In April and May the numbers will likely look much worse. The government in Beijing also calls for caution in the face of the uncertain economic situation abroad. The World Trade Organization (WTO) forecasts a slump in foreign trade of between 13 and 32 percent year-on-year compared to 2019.

From the rain in the eaves

The Chinese government is trying to counteract and stimulate foreign trade. For example, companies are waiving fees and a major foreign trade fair is now to take place online. Liquidity is added to the money market, and companies have to pay less tax.

But the Chinese companies are getting into the eaves from the rain. While domestic demand is still far from normal, demand from abroad is also slumping. China’s factories have largely resumed normal operations. But that is of little use to them. Many have nothing to do other than replenish their bearings.

The lack of demand from abroad will mean that many companies can no longer employ their employees, or can only do so with fewer hours. This in turn will mean that domestic demand will only pick up again to a very limited extent. It is a doom-loop.

More: The International Monetary Fund anticipates a dramatic slump in the global economy. Germany’s economy is also forecast to shrink dramatically.

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Half of Germans consider health to be more important than business

Empty restaurants

Many Germans are worried about the economic future.


(Photo: dpa)

Dusseldorf Should the German economy stand still? Or are you slowly starting up again? The Germans have a fairly clear stance on this: Around every second person believes that the federal government should first concentrate on limiting the spread of the corona virus, even if this would result in negative economic consequences such as a recession and the loss of thousands of jobs.

Only 26 percent of Germans believe that supporting the economy is more important. This was the result of a representative survey by the communications consultancy Kekst CNC, which is exclusively available to the Handelsblatt.

Nevertheless, many Germans are worried about the economic future. More than one in three fears that his employer could get into financial difficulties in the current situation. 18 percent of those surveyed shortly before Easter even assume that they will lose their jobs.

However, despite individual fears, more than two thirds of Germans expect that the effects of the virus crisis on the economy and companies will be significantly greater than the effects on them personally.

In the eyes of the Germans, the state therefore plays a decisive role in overcoming the crisis. According to the survey, 67 percent believe that the government should save the most important companies if they stumble in the corona crisis.

It is also noteworthy, as the Kekst-CNC survey also showed, that the call for state intervention in Germany is much louder than in countries like the USA or Great Britain. The fear of losing a job is greatest in the United States.

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The work of the federal government, as other surveys have already shown, is meanwhile largely assessed positively: 64 percent of Germans support the active role of the grand coalition in combating the corona crisis.

44 percent said the behavior of the government had increased their confidence in them. Only 21 percent of Germans have lost confidence in the federal government.

The picture is quite different in the USA, where the government of US President Donald Trump has long hesitated to take measures against the virus. 35 percent of Americans said their confidence in the government had declined.

It is clear, however, that at least many Germans think that the world will change after the corona crisis. Almost every third German wants to fly less, a similar number want to reduce the number of trips abroad – and 26 percent stated that they would like to spend more time outdoors in the future.

More: Corona crisis: Zero hour – How a responsible restart of the economy succeeds. Read more here.

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Applications for KfW loans are skyrocketing

The state development bank KfW

KfW loans amounting to EUR 20.8 billion had been applied for by Tuesday evening.


(Photo: dpa)

Frankfurt Corporations’ applications for corona relief loans to the KfW state development bank are skyrocketing. KfW loans totaling EUR 20.8 billion had been applied for by Tuesday evening – an increase of almost EUR 8.8 billion compared to the previous day, as KfW announced on Wednesday.

The main reason for the strong increase are twelve large applications for over 100 million euros, the total volume of which now amounts to 17.2 (previous day: 12.1) billion euros.

The tourism group TUI announced on Wednesday that it had signed a contract with KfW for a bridging loan of EUR 1.8 billion.

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Trump is considering tariffs on oil imports – Opec + meeting postponed to Thursday

Baku, Washington The U.S. government plans to use all available means to support the American oil and gas industry in the face of the recent fall in prices. If necessary, new tariffs on oil imports could also be considered, President Donald Trump said on Saturday night (local time) at the White House. Many jobs are now at stake in major U.S. industries, Trump said. “I’ll do whatever it takes,” he promised.

The oil price has dropped dramatically recently. The main reasons were a conflict between oil producers Russia and Saudi Arabia and the global drop in demand due to the coronavirus pandemic.

The United States is now also a major oil and gas producer. However, according to analysts, most American producers cannot produce profitably at current market prices. Unlike in Russia and Saudi Arabia, most oil producers in the US are independent of the state, which is why they should soon cut production if losses continue.

Leading representatives of the Opec cartel as well as other large producing countries like Russia want to meet in a few days and coordinate their further strategy. Several producers want to reduce production in order to stabilize the price.

However, according to the oil-rich Azerbaijan, the Opec + countries only want to discuss the restriction of oil production on Thursday (April 9). The video conference initially scheduled for Monday will be postponed for three days, the Ministry of Energy in Baku confirmed on Saturday, according to the Russian agency Interfax.

The aim of the video conference will be a new declaration of cooperation, it said from Azerbaijan. The Ministry did not announce why the meeting was postponed.

In the past few weeks, the corona crisis and a price war between Saudi Arabia and Russia had sent oil prices down. While demand plunges worldwide as a result of the virus pandemic, both countries have recently been unable to agree on a cut in funding. Saudi Arabia had even dramatically increased its oil production.

Kremlin chief Vladimir Putin had previously emphasized the willingness to negotiate. He could imagine a reduction in the production volume of about ten million barrels (159 liters each) per day, he said on Friday. However, the International Energy Agency (IEA) stressed that a cut in funding by this amount could be insufficient.

More: Read here why the fall in oil prices is particularly hard on the US economy.

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America’s All-Mine Doctrine is a sign of uncertainty

Donald Trump

The US President is fighting for his political survival through the corona crisis.

(Photo: AFP)

Anyone who would have predicted six months ago that respiratory masks would one day become the most sought-after product on the world market would have been laughed at. At best. But the corona crisis has changed the world. The pandemic is turning everything upside down, even Donald Trump’s America First policy.

So far, the US president has sought to close the United States’ huge trade deficit, limit imports, and promote exports. But now the strategy of export has become a strategy of maximizing imports.

Because Trump has denied the dangers of the new corona virus until it was too late, the US government is desperately trying to bring protective masks into the country. Every means seems to be right for that.

The USA is said to have intercepted 200,000 respirator masks from the US manufacturer 3M at Bangkok Airport in Thailand, which, according to the German description, were intended for the Berlin police. Berlin Mayor Michael Müller accuses Trump of “inhumane” and “unacceptable” behavior.

The White House rejects the allegations, but similar allegations come from France and Canada. In fact, the United States has activated a Korean War law that authorizes the government to interfere with US companies’ supply relationships. “As long as we don’t have too much,” the United States will not stop hoarding protective equipment, US media cite an American top official.

Trump is fighting for his position

With its panic purchases, the United States is not only beleaguering its closest allies. They also document the tragic loss of their moral authority. The All-Mine Doctrine is not an expression of power, but a sign of uncertainty.

Trump, the raven sock at the top of the state, is not concerned with such relationships. He is fighting for his political survival. America has become the epicenter of the pandemic because it failed to prepare the country for the wave of infections, instead mocking the warnings of experts as “fancies”. The virus and the thousands of deaths it claims in the United States will be linked to its name forever.

However, the outraged reactions of German politicians to the behavior of the US government are difficult to bear. Trump uses funds that Germany has also used. One of the first measures taken by the federal government in the corona crisis was to impose an export ban on medical protective equipment. Urgent requests from Italians to deliver relief supplies have been ignored by the federal government for far too long. The damage is great.

Mask nationalism offers no way out of the crisis, on the contrary, it makes it worse. A virus that knows no borders is either contained by global cooperation. Or not.

More: The aid program for American medium-sized companies only starts off bumpy.

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China’s central bank frees billions for lending

People’s Bank of China

The new measure is intended to mitigate the economic consequences of the corona crisis.


(Photo: Reuters)

Beijing The Chinese central bank continues to boost lending in the fight against the corona crisis. Small and medium-sized banks will have to hold less cash in the future, she announced in Beijing on Friday.

This trick is expected to release around 400 billion yuan in liquidity to help the economy, which has been severely shaken by the epidemic. There are around 4,000 small and medium-sized banks in China.

The reserve requirement (RRR) will drop to six percent as a result of the central bank’s measure. The parking of surplus funds by the financial institutions at the central bank is also made less attractive by the latter cutting the deposit rate from 0.72 to 0.35 percent from 7 April. This is also intended to free up funds for loans.

“The Chinese economy will continue to be extremely resilient,” said deputy central bank chief Liu Guoqiang. “We also have a wealth of instruments and ample political scope to stabilize economic growth. I think the epidemic’s impact on China’s economy is temporary. ”

If the corona crisis initially affects service providers in particular, exporters in particular will face headwind in the future. Financial institution analysts Nomura estimate that China could lose 18 million export jobs in the next one to two quarters. Exports could plunge 30 percent as key export customers such as Europe and the US are likely to fall into recession due to the crisis.

More: The Bafin makes it clear that companies can support suppliers with guarantees.

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