Economic Jenga – How COVID-19 May Cause Chinese Government to Collapse

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"made in china" by twicepix (CC BY-SA 2.0)

The coronavirus is acting as a catalyst to possibly take the entire Chinese government down. Has it been a long time coming?

For products ranging from everything to clothing, furniture, and electronics, they all generally have one thing in common- a label, sticker, or marking on them that simply says, “Made In China”. For years, manufacturers have been moving operations to China due to its relaxed labor laws, and over time they started to completely move supply chains over to the region. Due to COVID-19 however, this whole system is falling apart, and it may be the final block taken from the wobbly Jenga tower of the Chinese government.

Starting with the Clinton administration, China was granted the status of Most Favored Nation, opening up possibilities for millions of manufacturing contracts. While over the past roughly 25 years things have been going relatively smoothly, we are now seeing the effects of just how bad of a move it was to centralize manufacturing on the opposite side of the world in a country with a communist government.  Even in the late 80s with the Tiananmen Square Massacre, China was still looked at as being a very lucrative manufacturing center. Over the course of the 1990s and 2000s, things only got better economically for China. However, as manufacturing expanded, so did critics and human rights activists targeting the situation there.

That brings things to the present day – companies all over the world are scrambling to move their factories outside of China. It’s not even due to them raising minimum wages either – it’s due to the Chinese government affecting the products that are made, everything from globes to servers

[The Chinese government’s] actions have cost thousands of lives, and plunged the global economy into chaos.”

To make matters worse as of right now, the world is furious at the Chinese government for trying to cover this virus up in the beginning stages, as reported by several outlets, including the New York Post. Their actions have cost thousands of lives, and plunged the global economy into chaos.

If the companies who outsourced their manufacturing to China had actually taken a look at just how reckless their government was behaving, then the world would be in a much better spot during this time. Now, these very same companies are facing a perfect storm – factories shut down, an economic crash, and potentially a full-on refusal for bailout if needed by the federal government. Companies like Ford moved production of cars such as the Focus to China to save money, costing American jobs and their reputation. Now, Ford might end up paying the price. 

Centralizing all manufacturing in a country that constantly teeters on the brink of collapse was never a good idea, but now companies have wised up to it. Factories are moving all over Asia, to nations friendly to the U.S and with better human rights records, such as India, Taiwan, and Vietnam. 

Manufacturing is a massive lifeline that the Chinese government needs to stay in power, and it’s fading fast. When that goes, they won’t have anywhere to turn, and their government will have a significant chance of imploding. 

This virus is acting right now as a catalyst to possibly take the entire Chinese government down, and considering their track record with how they treat their own people, it’s been a long time coming.