World vs China – Silver lining for the GCC amidst COVID-19

Executive Summary

The current COVID-19 pandemic has disrupted supply chains across the world, causing a profound negative impact on global trade. China, being the global leader in trade of goods and service, stands to lose in the current scenario. Deteriorating relations with the U.S., India and other key economies exacerbate the issue further, potentially weakening China’s position in the global scheme of things. Our report focuses on identifying potential opportunities for GCC countries to expand non-oil trade to the U.S. across different product groups, by filling the voids created by the ongoing friction between the U.S. and China.

• COVID-19 to threaten China’s trading power: Near-term production and consumption of good will reduce greatly due to the pandemic; Lessons from the intermittent supply chain disruptions will influence countries to start localizing production and diversifying sources of import; Weakening relations with U.S., India and other key economies will be regressive for China.
• Trading vulnerabilities to the fore amid COVID-19: China’s external trade is well diversified in terms of partners and commodities, with the U.S. being the major trade partner. China is a key trade partner for major economies such as Japan, Korea, Australia and Russia. COVID-19 crisis brings forth the risk of gradually altering these relationships.
• COVID-19 hit economies may find it hard to decouple from China: China has managed to reduce its dependence on a single commodity and diversify across segments. It has dominant market share in the trade of textiles and electronic goods. Retreating from China could be a costly exercise for several countries due to their trade dependence, especially with economies being hit badly by the COVID-19 crisis.
• Global ambitions of Chinese technology experiences a setback: Technology remains a key focus area for China, with strategic investments pushed into areas with high potential for future growth; China also aims to lead 5G deployment, which would help it emerge as a leader in digital transformation after COVID-19 crisis.
• Window of Opportunity for GCC Countries: Friction between the U.S. and China provides an opportunity for GCC countries to expand non-oil trade to the U.S., by filling the voids created by China. Plastics, Chemicals, Metals and Minerals are some possible commodities for trade.

Table of Content

• Extent of world’s dependence on China unveiled by COVID-19 crisis
• COVID-19 exposes trade vulnerabilities of countries
• COVID-19 hit economies may find it hard to decouple from China
• Impact of COVID-19 on China’s hold on global trade
• Opportunities for GCC countries amidst COVID-19