Coronavirus Exposes Europe and America's Overdependence on China for Medical Supplies
If the coronavirus pandemic has shown us anything, it is how much the world is heavily dependent on China.
First in China and then globally, including in the United States, the outbreak of COVID-19 has drawn attention to how the world depends on manufacturing and supply chains based in China.
China produces about half of the world's sanitary face masks, with daily output increasing from 20 million units, before the pandemic, to over 110 million units.
As the demand for face masks, personal protective equipment, respirators, and pharmaceuticals surges, the world faces a harsh reality: it relies on China to make them.
China is often known as the world's factory for electronics, machinery, and toys. However, the country also produces much of the antibiotics, face masks, painkillers, penicillin used across the globe.
It has also managed to dominate all aspects of the supply chain due to unfair trade practices such as generous government subsidies, cheap sweatshop labor, and lax soft environmental regulations.
America's Dependence on China for its Medical Supplies
Since the 1990s, the United States has imported more pharmaceutical products from China and India, where components are cheaper, and production is subject to fewer guidelines.
Approximately 90% of US generic drugs come from China and India.
These medications include painkillers, antidepressants, diabetic treatments, antibiotics, HIV/AIDS medications, and chemotherapy drugs.
Chinese pharmaceutical firms have also captured 90% of the US market for Vitamin C and more than 97% of the antibiotics market.
According to the US Commerce Department, China accounts for 95% of US imports of ibuprofen, 91% of US imports of hydrocortisone, 70% of US imports of acetaminophen, 40% to 45% of US imports of penicillin, and 40% of US imports of heparin.
Keep in mind; President Trump came into office intending to cut some of America's deep trade entanglements with China. Unfortunately, the pandemic has shown how intertwined their economies remain and how difficult it will be to separate them.
The same White House has airlifted tons of medical supplies from China. Thus, it's not so easy to turn away from China.
China's Active Pharmaceutical Ingredient (API) Market
About 80% of the essential components used in US drugs, known as active pharmaceutical ingredients (APIs), come from China and India.
According to the US Food & Drugs Administration, as of August 2019, only 28% of manufacturing facilities making APIs for the US market were based in America. The rest were in the European Union (26%), India (18%), China (13%), and elsewhere (15%).
The active pharmaceutical ingredient is part of any medication that produces the expected effects.
The production of APIs was usually done by the pharmaceutical companies themselves in their home countries, mainly in Europe and the United States.
But in recent years, many firms have decided to outsource manufacturing overseas to China and India to cut costs.
More and more pharmaceutical firms are outsourcing to slash costs on employees, infrastructure, and equipment.
Notably, AstraZeneca Pharmaceuticals used to operate many production centers in the United States. Unfortunately, that has changed. In 2019, about 15% of their APIs came from the United States.
China is the global leader in the manufacturing and export of APIs, accounting for about 20% of its API production.
According to a KPMG report, China has more than 7,000 API manufacturers. India has around 1,500 API manufacturers as well. India gets about 68% of its APIs from China.
China’s pharma industry boasts an annual production capacity exceeding 2 million tonnes.
Europe's Dependence on China for its Medical Supplies
European countries like France and the UK found that the pandemic has exposed their reliance on imported medical supplies from China.
Like the United States, France is deeply dependent on Chinese supply chains, not only for medical equipment to deal with COVID-19 but also for its pharmaceutical and auto industries.
In March 2020, President Macron announced plans for France would gain "full independence" by ramping up its local production of face masks, drugs, and ventilators.
France is deeply reliant on China and India for its medical supplies.
Still, reducing French dependency on China could result in Beijing doing the same. Consequently, it could harm some of France's most lucrative sectors, like the wine sector, which needs the Chinese market to remain profitable.
Britain is profoundly dependent on China for medication, surgical face masks, testing kits, and ventilators.
According to the Henry Jackson Society, China accounts for 96% of the UK's imports of chloramphenicol (antibiotic) and 61% of the UK's imports of acetylsalicylic acid (aspirin).
Following Brexit, the UK is exploring new trade relations outside its traditional partnerships in Europe. China, the world's second-largest economy, is a significant target for London.
Across Europe, China has shipped test kits, face masks, and ventilators to Spain, Greece, and Italy. Already, Beijing has been making inroads in Italy and Greece through its Belt and Road Initiative.
Chinese firms are getting ready for discount deals in Europe as the coronavirus pandemic has sent several European companies to seek funding to stay in business.
During the early period of the COVID-19 pandemic, in March 2020, China slashed the production of some drugs and pharmaceuticals, prompting drug shortages and driving up prices.
With decreasing imports from China, India suspended exports of 26 essential drugs and drug ingredients to ensure its population has an adequate supply of drugs.
Thus, if China decides to ban or limit the exports of core ingredients used in producing drugs, several US pharmacy shelves would become empty within months. As a result, the US healthcare system would cease to function.
Already, the US is pushing hard to reduce its reliance on China for medical supplies.
Supporters of reducing dependence on China are concerned that Americans may experience massive shortages of medicines in the event of a pandemic, war, or trade conflict.
Some in China have also noted these vulnerabilities. In March 2020, an article posted by Xinhua warned America that it had the power to plunge it "into the hell of a new coronavirus pneumonia epidemic" by banning or restricting exports of pharmaceuticals.
Some in China have also noted these vulnerabilities. In March 2020, a Xinhua's article warned America that it had the power to plunge it "into the hell of a new coronavirus pneumonia epidemic" by banning or restricting exports of pharmaceuticals.
When any country becomes dependent on another to supply its needs, it is at the mercy of that country's ambitions and strategic goals.
Due to China's role as a global supplier of PPE, face masks, medical devices, antibiotics, and active pharmaceutical ingredients, reduced exports from China will lead to shortages of critical medical supplies in the United States.