China has earned much of the blame it has received for alerting the world too slowly to the novel coronavirus outbreak that originated in Wuhan. Newly released government statistics for March indicate further that Chinese exports of surgical masks and respirators remain 5 percent lower than a year earlier, even though China had stirred worldwide hopes by claiming to have ramped up production of such vital equipment. China is clearly redirecting Chinese-made medical supplies for its own use, which may be understandable. But its priorities are contributing to skyrocketing prices for masks and respirators on the world market. And its limited exports are mostly going to the rich countries that can afford them.
As emotionally satisfying as it might be to deplore China for helping itself first, the world cannot afford that luxury at this moment of crisis. China remains an incredibly important source of the personal protective equipment (PPE) now in short supply globally. Precisely because of its remarkable success as an export powerhouse of manufactured medical supplies, China is obliged to ensure that they get where they are now needed most. As time passes, that will not be in countries like Germany and the United States, which have the capacity to scale up domestic production. Supplies must flow to poor countries where millions may die unnecessarily without the proper protections.
China must also improve its transparency. How much medical gear China is producing and consuming is unknown. What is known, though only after a considerable lag, is that China’s trade in personal protective equipment has been poor. Official statistics reveal that the level of China’s exports remained very low in March, contributing to a near tripling of the export price for respirators and surgical masks.
The Group of 20 of the world's leading economies have called for keeping open the supply chains for critical medical supplies. But that was a lame response to a crisis. More concrete steps are needed to convince China that it must accept responsibility to increase the supplies it makes available to the world, for the sake of human survival from the worst health crisis in a century. How China’s production and exports of medical supplies are allocated may turn out to be the difference between life and death.
China is a major global supplier of many different forms of personal protective equipment
China is an important global supplier for a number of pieces of PPE.  In 2018, the most recent year for which global trade data are available, China was the estimated source of more than 50 percent of world imports of respirator masks and surgical masks, medical goggles, and protective garments (figure 1). For other products such as medical shoe covers and hospital gloves, it was a smaller, albeit still important, source of global imports.
Before the pandemic, China’s top exports of PPE included respirators and surgical masks, which it exported an estimated $5.4 billion in 2019. It also had sizeable exports of hospital gloves ($1.9 billion), protective garments ($1.9 billion), medical goggles ($1.4 billion), and medical shoe covers ($900 million). The United States and the European Union were the top two foreign destinations for each product. Other major importers mostly included high-income economies like Japan, the United Kingdom, South Korea, Canada, and Hong Kong (figure 2).
China’s imports of each product in 2019 were mostly negligible. With the exception of medical shoe covers, China was a major net exporter—defined as exports minus imports—of each product to the global economy before the novel coronavirus outbreak.
As COVID-19 hit, China’s PPE exports fell and imports increased
As the coronavirus took hold in China in January and February 2020, there was a considerable increase in Chinese demand for PPE.  The result was both more Chinese imports and fewer Chinese exports (figure 3). This reduced China’s net exports of PPE, diminishing supplies available to the rest of the world.
Take respirators and surgical masks. China imported 8.7 million more kilograms of masks over the first two months of 2020 than it did over the same period in 2019. It also exported 22.8 million fewer kilograms of masks. Combined, there were thus 31.6 million fewer kilograms of masks on the world market for import by other countries in January and February 2020. Put differently, China’s net exports of masks to the world dropped by 24 percent during this period relative to a year earlier.
The data show evidence that net exports of each of China’s PPE products declined considerably in January and February 2020 compared to the same period last year.
China’s net exports of PPE recovered slightly in March. According to recently released official Chinese customs data, net exports of masks fell by only 3.2 million kilograms compared to a year earlier (see again figure 3). This was the combination of imports increasing by only 1.9 million kilograms and exports falling by only 1.3 million kilograms. Net exports of masks were thus only 5 percent less in March 2020 relative to 2019.
In percentage terms, the reduction in net exports for March was not as bad as the first two months of 2020, for all products except hospital gloves.
Nevertheless, the level of Chinese exports in March was hardly what the world had hoped. Official Chinese government statements of March 6 indicated that China had already considerably increased domestic supplies:
“At present, through resumption of production and expansion of production capacity, China's medical material production capacity has rapidly increased. Taking protective clothing as an example, our daily output has reached less than 20,000 pieces from the initial stage of the epidemic, reaching the current 500,000 pieces. N95 masks have gone from 200,000 to 1.6 million, and ordinary masks have reached 100 million.”
But China’s increase in domestic production did not translate into an increase in China's net export volumes. The only bright spot indicated by the March PPE trade data is that the worst for China might be over. But its PPE supplies clearly did not address the massive increase in global demand arising through the spread of COVID-19 to other parts of the world.
Prices of some Chinese PPE exports have ballooned
A sharp increase in global demand for PPE—even with the stabilization of China’s export volumes—resulted in a price spike for some of these products in March 2020. China's export prices for one category, respirators and surgical masks, nearly tripled—increasing by 182 percent—in March, when compared to prices in January and February (figure 4). Prices for medical goggles were up 15 percent in March, and prices for a type of protective garment were up 11 percent from January and February.
Such large month-on-month price increases are consistent with reports of price gouging for PPE around the world—including in Italy and the United States—as well as “wild-west” behavior as governments outbid one another for Chinese-produced PPE. The Trump administration orchestrated Project Airbridge to airlift some supplies from China to the United States to shorten standard shipping times. By early April, some American hospitals were getting wealthy benefactors like New England Patriots owner Robert Kraft to send them directly by charter jet.
But this scramble strained medical delivery systems in poorer hospitals in rich countries and public health systems in poor countries. For many economies, the COVID-19 crisis has meant quarantines, reduced economic output and lower local tax receipts, as well as tighter credit markets. Higher PPE costs for hospitals also have meant fewer resources are available for other pandemic needs, such as ventilator purchases or increased personnel costs for medical staff working overtime.
Through March, China’s exports of masks have disproportionately gone to rich countries
With China such an important global supplier of PPE, the allocation of its production will turn out to be a critical global policy issue. The evidence from January and February was that its supplies were increasingly allocated domestically. While more of its production went for export in March, it still made fewer exports available relative to historical levels. And through March, the exports that China did make available disproportionately went to high-income countries.
Take surgical masks and respirators. For January through March 2020, the United States remained the largest foreign destination of Chinese production, receiving 37 percent of Chinese exports, despite having had only 24 percent of the world’s (non-China) reported cases of COVID-19 (figure 5). The United States remained a large recipient of Chinese PPE for a number of reasons. More than most of the world’s population, American consumers could afford to outbid other countries and pay the escalating prices. But some US imports were also the legacy of pre-existing networks of buyer-seller relationships forged over the long term. Recall that the United States was the recipient of 39 percent of China’s exports of respirators and masks before the outbreak of the novel coronavirus (see again figure 2).  Similar to the United States, Japan also received a large number of Chinese masks relative to its share of cases through March 31.
But other countries, ravaged by the coronavirus disease earlier than the United States, were not as lucky. Consider a similar snapshot of the world illustrated by figure 5 but taken only two weeks earlier. As of March 15, the United States had only 4 percent of the world’s (non-China) reported cases of COVID-19; at the time, it was eclipsed by Germany (5 percent), France (6 percent), Spain (8 percent), South Korea (11 percent), Iran (17 percent), and Italy (29 percent). But each of those countries has received a much smaller share of masks from China than the United States.
COVID-19 may eventually force the world to contemplate the distributional implications of relying solely on uncoordinated activity in markets to allocate scarce medical supplies during a pandemic. Thinking ahead, what will happen to all of the countries—many of them quite poor, and without their own PPE manufacturing facilities—currently clustered around zero in figure 5? By the end of March, these countries had all received few imports of masks from China. The only positive news was that they had, as of that time, few reported cases of the novel coronavirus. Unfortunately, the continuing spread of the disease means that bright spot likely has not lasted.
The world will continue to rely on imports from China for the near term
Policy events in March and April have made much of the world potentially even more reliant on China as a source of PPE. Other major economies imposed export restrictions on their production of PPE. France (March 3), Germany (March 4), and the European Union (March 15) each imposed export limits on PPE, including masks and respirators.
In early April, the Trump administration followed suit by imposing its own export limits on respirators and masks. And in one important respect, Trump’s actions could worsen global access to PPE. By invoking the Defense Production Act and threatening the manufacturer 3M with a complete export ban from its US-based production facilities, the Trump administration laid claim to what it felt should be its share of 3M’s future production in China, including that which might have gone to other countries.
Other countries have also been slow to scale up PPE production. Eventually, though, industrialized economies with manufacturing capacity and fiscal resources are likely to overcome their national PPE supply shortages. Even if they eventually relax their export restrictions, experience from China suggests it will take time before supply and demand conditions stabilize and these other countries re-emerge as reliable sources for importers. Yet, if such countries become less reliant on PPE imports from China, pressure on export prices for Chinese-made PPE should fall. So long as China does not suffer a relapse of COVID-19 and recurrence of its supply and demand conditions of January through March, more of its production, as time passes, would be available for export to poor countries.
And that is potentially quite important. Historically, a number of developing countries—sprinkled all around the world—have been very reliant on China as a source of their imports for PPE (figure 6). Failing to supply these countries in their time of greatest need would be devastating.
China and the G20’s responsibility to the poorest countries
Where China’s PPE exports go, and under what financial terms, may be important determinants of how well poor countries are able to cope with the pandemic.
The statement coming out of the G20 trade ministerial on March 30 recognized the importance of some of these issues:
“We are actively working to ensure the continued flow of vital medical supplies and equipment.... We will support the availability and accessibility of essential medical supplies and pharmaceuticals at affordable prices, on an equitable basis, where they are most needed, and as quickly as possible, including by encouraging additional production through incentives and targeted investment, according to national circumstances. We will guard against profiteering and unjustified price increases. We are concerned about the impact of COVID-19 on vulnerable developing and least developed countries.”
Yet the G20 made few specific commitments.
The G20 should start with monitoring global PPE supplies, much like it took on the task of watching over food supplies in the aftermath of global food price hikes in 2007–08 and 2010. Then, the G20 established the Agricultural Market Information System (AMIS) to provide not only information but also a way to coordinate national policies when market uncertainty spiked. Today, more information is desperately needed on the PPE that countries are producing and consuming, and the available stocks.
Many developing countries will be reliant on imports, and therefore imports from China, over the immediate term. Thus, there needs to be increased scrutiny into how much PPE China is exporting, to whom, and under what commercial conditions. If and when Europe, the United States, and others scale up production and can also resume exporting, the same model of global scrutiny should apply to them.
More ambitiously, the G20 should also develop policy mechanisms to efficiently steer global PPE supplies to where they are needed the most. The European Commission has faced similar concerns facilitating EU-wide procurement of PPE. This issue is equally pressing at the global level, especially because many of the poorest countries will continue to lack the capability of manufacturing their own medical gear. Self-sufficiency is not the answer. But putting trust in trade requires additional collaboration.
Distributing respirators and surgical masks was the first test of global cooperation during the pandemic. Thus far, the major economies have failed the test miserably. But this is only phase one of what may be a very long crisis. After the PPE problems play themselves out, next will come the global allocation of therapeutic drugs and, eventually, vaccines. Not only is it vital to change course on PPE, but it is also important to apply these lessons learned to the challenges to global cooperation still to come.
|Appendix table: Products used in the COVID-19 response study|
|Product||China's 8-digit product code||Unit of measurement|
|Medical shoe covers||40169990||Kilograms|
|Protective garments (A)||39262090||Kilograms|
|Protective garments (B)||62101030||Number of items|
|Respirator masks and surgical masks||63079000||Kilograms|
|Source: Compiled by the author with data available from China’s tariff schedule and China Customs’ announcement No. 53 of 2020.|
1. The estimates of Chinese exports (and imports) in figures 2, 3, 4, and 5 are more precise than those given in earlier blog posts, as they are based on trade data at the more disaggregated 8-digit product level, with product definitions made available by the Chinese government's April 10 announcement of additional regulatory scrutiny over certain products. See Liza Lin “China Tightens Customs Checks for Medical Equipment Exports,” Wall Street Journal, April 10, 2020. These product codes are found in the appendix table at the end of this blog post. For an earlier post examining 6-digit level data for January and February 2020, see Chad P. Bown, COVID-19: China's exports of medical supplies provide a ray of hope, PIIE Trade and Investment Policy Watch, March 26, 2020. Not included here are other PPE such as face shields and surgical headwear. China’s exports of the 8-digit product level category in 2019 for face shields was $13.3 billion and for surgical headwear was $2.6 billion. They are not included because even at the 8-digit level, these categories appear to contain a number of other products unrelated to PPE.
2. Figures 3 and 4 consider data for "January and February" because the Chinese trade statistics are combined for those two months given the Lunar new year.
3. For the purposes of figures 3 and 4, protective garments are split into two categories because their volume data are recorded in different units. Protective garments (A) include disposable protective clothing made of plastics and are counted in kilograms, whereas protective garments (B) include disposable protective clothing made of chemical fibers and are counted in “number of items.” In value terms, (A) made up 53.3 percent and (B) made up 46.7 percent of total exports of protective garments in 2019. The volume of net exports of protective garments (B) fell by 18 percent in January-February and by 70 percent in March.
4. More precisely, these prices are measured as unit values, constructed as the value of Chinese exports relative to the volume of Chinese exports. Not reported in figure 4 is protective garments (B), which was measured in number of items (as opposed to kilograms)—the data suggest its unit value increased by 433 percent in March relative to January and February.
5. China’s mask exports to the United States were down compared to 2019, in part because of the Trump administration’s trade war tariffs imposed in September 2019 on those products, which did not receive exclusions until March 17, 2020. See Chad P. Bown, "Trump's trade policy is hampering the US fight against COVID-19," PIIE Trade and Investment Policy Watch, March 13, 2020; and Chad P. Bown, "COVID-19: Trump's curbs on exports of medical gear put Americans and others at risk," PIIE Trade and Investment Policy Watch, April 9, 2020.
6. 3M agreed to import into the United States 167 million N95 masks over April through June, “primarily from its manufacturing facility in China,” and, in exchange, the Federal Emergency Management Agency (FEMA) revised its rule defining the export restrictions to allow 3M to continue to export PPE it produced in the United States to Canada and Mexico. However, the FEMA rule still limited US exports of PPE to other countries. For a discussion, see Chad P. Bown (2020) “COVID-19: Demand spikes, export restrictions, and quality concerns imperil poor country access to medical supplies,” in Richard Baldwin and Simon Evenett (ed.), COVID-19 and Trade Policy: Why Turning Inward Won’t Work, London, Centre for Economic and Policy Research.
The data underlying this analysis are available here.