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Geopolitics weigh on trade and investment

Published 30 January 2024

Geopolitical events are affecting trade flows, but to what extent are they driving lasting changes? What is China doing to uphold its status as a manufacturing superpower? How is Asia's data landscape evolving? Explore our reading list for the latest developments in global trade.

Global trade reconfigures

McKinsey Global Institute illustrates trade flow reconfigurations in its new report on geopolitics and the geometry of global trade while Hugo Dixon comments that a fractured world is changing investment geography, in Reuters. "Is geopolitical risk getting worse" asks Cullen Hendrix for the Peterson Institute for International Economics. Tensions and conflict in the Middle East may stall development of the IMEC corridor, per Bloomberg, and may drive development of a new trade route linking Iran and China through Central Asia, writes Felix Chang for the Foreign Policy Research Institute.

Mentioned publications

  1. Geopolitics and the geometry of global tradeMcKinsey Global Institute, January 17, 2024
    A report illustrating reconfigurations in trade flows over the past few years.

  2. Fractured world is changing investment geography – Hugo Dixon (Commentary), Reuters, January 23, 2024
    Geopolitics are redirecting and reorienting investment flows.

  3. Is geopolitical risk getting worse? – Cullen S. Hendrix, Peterson Institute for International Economics, December 20, 2023
    In the context of the past century, current risk is not significantly higher than during the Cold War.

  4. World’s Most Ambitious Trade Route Stalls in Mideast TurmoilBloomberg, January 24, 2024
    Regional tensions threaten to stall an ambitious economic corridor linking India, the Middle East, and Europe.

  5. Central Asia’s Middle Corridor Expansion: Opportunity for China and Iran – Felix K. Chang, Foreign Policy Research Institute, January 16, 2024
    A new trade route through Central Asia may enhance ties between China and Iran.

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China, the manufacturing behemoth

China is the world’s sole manufacturing superpower, claims Richard Baldwin in VoxEU/CEPR. China’s manufacturing prowess in the electric vehicles sector is leaving Western firms quaking, writes the Economist, but Beijing is planning to reign in EV capacity, per the Financial Times. Korea and China are forming joint-ventures to navigate tariffs and restrictions, writes Zongyuan Zoe Liu for the Korea Economic Institute, and Morocco is benefitting from foreign investment designed to get around IRA rules, according to Christian Géraud Neema Byamungu of the Center for Strategic and International Studies.

Mentioned publications

  1. China is the world’s sole manufacturing superpower: A line sketch of the rise – Richard Baldwin, VoxEU/CEPR, January 17, 2024
    China’s production exceeds that of the nine next largest manufacturers combined.

  2. Western firms are quaking as China’s electric-car industry speeds upThe Economist, January 11, 2024
    Chinese companies are well-positioned to dominate EV production and sales in the coming years.

  3. China vows to rein in capacity in electric vehicle industry – William Sandlund and Edward White, Financial Times, January 19, 2024
    China will address expansion of EV capacity to counter domestic competition amid foreign concerns.

  4. Navigating Korea’s Changing Trade Shifts with the United States and China – Zongyuan Zoe Liu, Korea Economic Institute, January 22, 2023
    Are Korea-Chinese joint ventures a long-term solution to geopolitical pressures on supply chains?

  5. Morocco, an Unexpected Winner of China’s Strategy to Circumvent the U.S. Inflation Reduction Act – Christian Géraud Neema Byamungu, Center for Strategic and International Studies, January 23, 2024
    Morocco is well positioned to take advantage of "friend-shoring" initiatives and shifting supply chains.

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Asia’s evolving digital trade and data landscape

Asia’s data center landscape is hot and complex, writes Cissy Zhou in Nikkei Asia, while the Financial Times reports that China’s slow approvals of data exports hamper companies. Digital trade helps foster development, per a new report from the IMF, UN, OECD, World Bank Group, and WTO. UNESCA offers an annual trade and investment report focusing on digital trade and investment in the Asia-Pacific.

Mentioned publications

  1. Asia's data center landscape is red hot -- and increasingly complex – Cissy Zhou, Nikkei Asia, January 4, 2024
    Data centers are more in demand than ever -- the challenge is where to locate them.

  2. China’s sluggish approval of data exports leaves companies struggling – Sun Yu, Financial Times, January 3, 2024
    China’s data export rules hamper businesses that need to send data abroad.

  3. Digital Trade for DevelopmentIMF, United Nations, OECD, World Bank Group, and World Trade Organization, December 7, 2023
    A report focused on the benefits and opportunities digital trade affords for developing economies.

  4. Asia-Pacific Trade and Investment Report 2023/24: Unleashing Digital Trade and Investment for Sustainable DevelopmentUnited Nations Economic and Social Commission for the Asia and Pacific, December 6, 2023
    A comprehensive report and recommendations on digital trade and investment in the Asia-Pacific.

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Fostering sustainable trade

Lucian Cernat creates a new Gini Trade Index, capturing trade values across economies, and Ed Gresser, writing for the Progressive Policy Institute, illustrates how least developed countries are using trade to graduate to a higher development status.

Mentioned publications

  1. The Gini Trade Index: What Can We Learn from A New Trade Indicator? – Lucian Cernat, ECIPE, January 2024
    A new indicator capturing trade values across firm characteristics and economies.

  2. PPI's Trade Fact of the Week: Senegal is the U.S.' fourth-largest source of wigs – Ed Gresser, Progressive Policy Institute, January 24, 2024
    Trade is helping least-developed countries graduate to more developed status.

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