It is a bluff, they are hoping Australia will cave quickly, China doesn’t have any other cards to play, they are THE single most trade dependent country on earth, if an investigation reveals they are at fault the world will put up barriers, by striking first they are hoping to get other countries to back down.
“Appear weak when you are strong, and strong when you are weak.” Sun Tzu
Err... China's trade as a percentage of GDP is 38.25%, higher than the US by a good bit but definitely not the world's most trade dependent nation.
If I had to guess...that's probably Luxembourg with trade as a percentage of GDP at around 400%.
For a lot of the western European economies the big hits will start coming once fall and winter hit. By that point all the direct emergency aid governments have pushed will have floundered off. Tons of small businesses will have collapsed, especially in high tax countries like Germany, Belgium, France where small business owners have barely a chance to create reserves in the first place. Shops will lay abandoned, leading to those relying on their rent payments loosing tons of purchasing power as well. The millions out of work now in the US will slowly be mirrored by hordes of new jobless working age adults across Europe. And an already highly eroded middle class - itself under siege by the depression - will be expected to pay for all of it. Allthewhile immigrants from even worse hit places and from the usual suspects will push into the region. Ethnic and political clashes are preprogrammed in such an atmosphere, and radicalization will continue to rise. For all the establishment cronies thinking the past five years in Germany were turbulent: boys and girls and gender-diverse suckers, you ain't seen nothin' yet!
Man, I wish the 2020ies wouldn't try so damn hard to emulate the 1920ies.
Europe's deal is the shift the burden off the individual onto large organizations such as the government, banks, companies etc.. forcing them to redirect resources to protect their constituents, clients and employees.
What happens then when these entities fail? Disaster. Greece a decade ago almost went bankrupt and was rescued with hundreds of billions of outside assistance.
The European economy was not before the crisis healthy. Debt to GDP didn't budge and politicians didn't use the time they had to reform unsustainable models. Banks were particularly unhealthy and strained by a number of different forces including negative interest rates, low levels of technical sophistication and the inability to expand beyond their home borders in a true sense, pushed to record low profitability and general malaise. Companies too are constrained by a myriad of onerous regulations that increase operational difficulty.
Germany is trade dependent but they have had years of long growth and their coffers are full.
Italy on the other hand is a catastrophe waiting to happen.
Italy has to gamble right now in that there won't be a second wave (there will be) and is trying to reopen their economy, but it's difficult to imagine them growing out of this. Italy hasn't had real GDP growth in 20 years before the crisis.
Even in the absolute best case scenario with everyone onboard to rescue Italy, it still wouldn't be enough to fix the problem, their economy is too big, ten times the size of Greece. Now though, everyone is in full selfish mode and is interested in fixing their own problems and not anyone else.
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