With global leadership at stake, China and U.S. both fumble

Driving the news: The global economy is facing an economic shock "far worse" than the 2008 global financial crisis, the International Monetary Fund, announced Tuesday.

The big picture: By mid-March, with its coronavirus epidemic largely under control, plenty of cash on hand, and the U.S. having woefully mishandled its response, China seemed poised to gallop ahead on the world stage.

• "We’re talking about relative opportunity that is tilted in favor of China because the safe haven that the U.S. represents is no longer a real safe haven" thanks to the COVID-19 outbreak, Keyu Jin, an economics professor at the London School of Economics, tells Axios.

A win for China's self-confidence

Despite doubts about the veracity of the coronavirus data China has publicly released, it is undeniable that China's tough measures to stem the spread of infections worked, and that much of the country is well on its way to recovery.

• "When China emerges from this, the narrative [from the CCP] will be that this is a political system that has shown great resilience and fortitude in dealing with a once-in a century crisis," says Jude Blanchette, the Freeman Chair in China Studies at the Center for Strategic and International Studies.
• Yes, but: Many Chinese people remain angry about the government's early cover-up and its ongoing suppression of information related to the epidemic.
• In the U.S., the level of catastrophe will likely damage confidence in the government and perhaps even in the political system itself.

The yuan's lost opportunity

While the Trump administration has dropped the ball, "the Federal Reserve has made a breathtaking expansion as basically central banker to the world," Kori Schake, director of foreign and defense policy studies at the conservative American Enterprise Institute, said during a recent media call.

• A global shortage of dollars and panic-induced selling in financial markets at the onset of the pandemic could have bolstered China's case for the world to move away from the greenback.
• Instead, the Fed's fast action to inject trillions of dollars into the financial system and open dollar swap lines with central banks around the world has had the opposite effect.

"This crisis has shored up and spotlighted the strength of the dollar," Joshua Meltzer, a senior fellow at Brookings Institution, tells Axios.

• "It underscores that when there is a crisis the only asset anyone wants to hold is dollars."

Winning, and losing, hearts and minds

China's highly-publicized campaign to provide needed medical aid and supplies to countries in Europe, Africa and the Americas, including the U.S., has been mired in controversy.

• The medical assistance has been widely welcomed, but numerous shipments, including to Spain, Turkey, and the Czech Republic, have included thousands of faulty and unusable devices.
• The accompanying propaganda has done little to erase the memory of the Chinese Communist Party's early actions that helped enable the global pandemic in the first place.
• The U.S., meanwhile, has been slow to announce medical aid and largely abdicated global leadership on the issue, with the Trump administration preferring to deflect blame for the domestic outbreak by focusing on China's missteps.

What to watch: China could still draw more of the world into its orbit as COVID-19 is likely to decimate economies in much of Africa, Latin America, the Middle East and the Indian subcontinent, which already receive economic assistance from Beijing and will be looking for more.

• But the U.S. remains the world's largest economy and home of the global reserve currency, uniquely positioning it to help offset the looming crisis by leading debt-reduction and aid packages.

The bottom line: China and the U.S. have stumbled but both still have powerful incentive to help dig the world out of its economic hole.

Editor's note: This story has been updated to clarify that Blanchette was referring to the CCP's narrative.