What happens when a country is the origin of 48% of the world’s face masks? More specifically, what happens when that country decides to restrict the outflow of those exports during a major pandemic?
Is China trying to cripple the US economy to win back some trading power? Here’s some insight:
China has a long term goal to become known as the quality goods exporter and instead of the current image equating “Made in China” with cheap goods. According to a Chinese news site, “the CPC will basically realize socialist modernization in the first stage from 2020 to 2035, before developing China into a ‘great modern socialist country’ that is ‘prosperous, strong, democratic, culturally advanced, harmonious and beautiful’ after another 15 years.”
China is more concerned about improving their country, which includes building a strong brand image in the world’s eye – a vital component when your economy is largely based on manufactured exports.
In China’s effort to become known for modernized quality manufacturing by 2035, they need to export quality goods. That’s one reason why the Chinese government took over the largest factories that manufacture masks that are FDA cleared, NIOSH approved, and CE certified (among other certifications). When a Chinese factory becomes a tool in international government relationships, China’s government steps in.
But why did China restrict the exportation of face masks? Short answer: to stop fraud and ensure quality.
They are not restricting exports for certified masks. Instead, they halted all exports of masks that do not carry government approved certifications. This was done to to reduce the outflow of fraudulent masks, which occurred after the FBI thwarted a fraudulent deal for 39 million masks, saving Kaiser Permanente millions of dollars. Imagine how many masks were bought that have not been thwarted.
What are the impacts of China’s restrictions? Short answer: Decreased fraud, increased scarcity, increased prices.
It’s economics. Scarcity + fear = Extremely high demand. Traditionally, companies increase prices to reduce demand, but there are state codes limiting price increases during a state of emergency. Then mix those economics with fear-based, emotion driven purchasing behaviors from consumers, it’s easier for scammers to take advantage. Couple all this with an unprecedented crisis, there’s a lot scam artist can get away with. However, following increased fraud comes a wave a regulation an investigation. Following the regulation comes stress to production until demand returns to normal, at which time regulation returns to normal.
Interestingly, during a crisis with state of emergency declarations, we have seen an expansion of authorized masks as a bridge to mitigate fraud while allowing increased availability to hospitals, first responder, military, and eventually the general public.