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Expect COVID-19, China and climate change to dominate 2021

How Taiwan's Audrey Tang can help Asia's democracies strike back

| Japan
A woman prays for the new year at Meiji Shrine in Tokyo on Jan.1: we will experience the cycle of optimism and pessimism again and again.   © Getty Images

Shigesaburo Okumura is editor-in-chief of Nikkei Asia.

As the editor-in-chief of Nikkei Inc.'s flagship English language publication Nikkei Asia, I always have some hypotheses or scenarios in my mind as to what could happen next.

Usually, I have an orthodox main scenario, which in most cases is a more probable but less exciting story. Then there are the alternative scenarios, where I am preparing for the risks associated with both positive and negative events. Our editorial direction is also based on similar sets of scenarios.

When it comes to 2021, to simplify one especially complex set of scenarios, I will be watching what I call the three Cs with extreme care: COVID-19, China and climate. Nikkei Asia will provide comprehensive and thorough coverage of these three subjects because these are the three topics I expect to deliver the biggest changes affecting Asia over the next 12 months.

When it comes to COVID-19, I cannot find much cause for optimism. Let's take the United Kingdom, for example. The first country to approve the Pfizer-BioNTech vaccine, the U.K. began mass vaccinations on Dec. 8. It took only two weeks before skepticism dampened that early surge of hope after U.K. health authorities identified a new, more contagious variant of the virus.

A healthcare worker receives a dose of COVID-19 vaccine in Singapore on Dec. 30.   © Reuters

Even though scientists say that the COVID vaccines currently being rolled out are effective against the new variant, the mutation itself has made us recognize the difficulty of conquering this disease. It is highly probable that we will experience this cycle of optimism and pessimism again and again.

Still, our main scenario will be an economic one: the Great Recovery. Across most of Asia, growth rates will shift back into positive territory, with governments expected to maintain expansive fiscal and monetary policies to support their economies.

According to the International Monetary Fund's World Economic Outlook released in October, after a 1.7% decline in 2020, the real gross domestic product for emerging and developing Asia -- including China, India, Malaysia, Thailand, Singapore, Indonesia and the Philippines -- will reach 8% in 2021. Regionwide mass vaccinations will help prevent the further spread of the virus, further boosting the confidence of manufacturers and consumers.

Not surprisingly, the pace of economic recovery will depend on whether individual nations can suppress the pandemic. Looking at "Daily new confirmed COVID-19 cases per million people" compiled by Our World in Data, as of Jan. 1, that number is currently no more than 0.1 person in Taiwan (0.1), Vietnam (<0.1), Cambodia (<0.1), China (<0.1), Laos (0.0) and Brunei (0.0). These numbers are astonishingly low, especially when compared to the U.K., which has 787.5 new cases per million people, or the United States with 485.2.

Right now, Japan and South Korea are experiencing a tough moment. Japan has 25.8 new cases per million people and South Korea has 16.1, exceeding India's 14.5. Other Association of Southeast Asian Nations still struggling to get on top of infection rates include Malaysia, with 63.9 new cases per million people and Indonesia with 29.5, followed by the Philippines (16.0), Myanmar (7.6), Singapore (5.1), and Thailand (3.1).

What can we learn from the data? Overall, it suggests that totalitarian and authoritarian states have performed better when it comes to containing the virus swiftly, while democratic countries have failed, with the exception of Taiwan.

Will 2021 be the year that democracy strikes back? Democratic countries in Asia should make a serious study of how Taiwan successfully suppressed the virus, because it is clear that democracies such as Japan or South Korea are not equipped with the necessary powers to restrict civil liberties and control freedom of movement in the way that authorities in China and Vietnam were able to do.

For example, Taiwan's Digital Minister Audrey Tang developed a mask map app in the earlier stage of the pandemic. A reflection of her vision to use technology to create a digital democracy, which depends on governments implementing an open data policy, by incorporating big data and national health ID cards, Tang's multiple digital tools and apps helped speed up the distribution of masks and economic stimulus coupons.

Taiwan's Digital Minister Audrey Tang, pictured on Dec. 10: her multiple digital tools and apps helped speed up the distribution of masks and economic stimulus coupons.   © AP

The second C to watch in 2021 is China. First to be hit with COVID-19, China was also the first nation to contain it. After recording modest growth of 1.9% in 2020, China's economy is expected to grow by 8.2% this year and will undoubtedly lead the world economy in 2021. Similarly for Vietnam, which is expected to bounce back from 1.6% growth last year to 6.7% in 2021, while Taiwan is forecasting 3.2% growth this year after idling in 2020.

Whether the arrival of Joe Biden in the White House will affect the decoupling of the Chinese and U.S. economies, my main scenario is "not getting worse, but not improving much either."

One of the most important quotes to help divine Biden's trade policy with China came with his announcement of Taiwanese American Katherine Tai as the next United States Trade Representative. "During the Obama-Biden administration, she was the chief trade enforcer against unfair trade practices by China, which will be a key priority in the Biden-Harris administration," said the president-elect.

Looking at Tai's background, it is highly probable that Biden and Tai will focus on unfair practices related to intellectual property. It should also be noted that protectionism and respect for human rights are important principles for the Democratic Party.

Jake Sullivan, Biden's chosen National Security Adviser, urged "early consultation with our European partners on our common concerns about China's economic practices," in a tweet on Dec. 21, reportedly implying claims of forced labor in China's Xinjiang region.

As President of the divided states of America, it will be difficult for Biden to compromise with China considering the broad support for Trump's tougher trade policies against Beijing.

Beijing has its own political reasons to avoid a compromise with the U.S. When the Chinese Communist Party celebrates its centenary on July 23, 2021, Xi Jinping's top priorities will be domestic stability and security.

If the tech Cold War and decoupling continue, who will benefit the most? The current consensus is Vietnam. After successfully containing the spread of COVID-19, and with the good reputation of its workforce, the Mizuho Research Institute says Vietnam is the most popular destination for companies looking to exit China. Among Japanese companies that have relocated or considering shifting production out of China, 36% chose Vietnam.

The third C is climate change. The slowdown in economic activity due to COVID-19 has not only given the world bluer skies and seas, but has eroded skepticism about climate change by making it abundantly clear to all that human activity is the primary cause of global warming.

In 2020, China has promised to achieve peak carbon dioxide emissions before 2030 and achieve net-zero emissions by 2060, and Japan's Prime Minister Yoshihide Suga committed to a net-zero emissions target by 2050. That will make 2021 a turning point for all of Japan's three main sectors -- government, corporate and household -- to work together to achieve that goal.

Here again, China will play a critical role. According to LMC Automotive, China produced 30.3% of all automobiles in the world in the first half of 2020, followed by Japan with 11.4% and 11.1% from the U.S. Considering electric vehicles only, China produced 38.4%, the U.S. 23.1%, while Japan made only 2.3%.

Not only are Chinese EV makers such as BYD, BAIC and Geely major players in the global market, but Chinese tech giants including Baidu, Alibaba Group Holding, Tencent Holdings and Huawei Technologies are also investing heavily in EV-related technologies.

An electric vehicle of Alibaba backed Xpeng Motors is demonstrated at a Xpeng store in November 2019: Chinese tech giants are investing heavily in EV-related technologies.   © Imaginechina/AP

Because real progress on climate change needs cooperation between China and the U.S., this is one area that could provide a breakthrough toward improving, or even normalizing bilateral relations between the two countries. On the other hand, it could become another front line in the tech Cold War.

We are living, as ever, in a world of uncertainty and a true news event is always something beyond our imagination. A year ago, for example, who could have imagined Carlos Ghosn's escape, Qasem Soleimani's assassination, the spread of the novel coronavirus and Joe Biden's victory?

Despite that, I believe keeping multiple scenarios in mind is a vital way of being prepared for change. And here I believe that COVID-19, China and climate are the most important subjects to watch for this year. Nikkei Asia will be on top of all three, and will cover related issues extensively, so stay tuned.

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