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How will countries and companies navigate a bipolar world?

Published 06 September 2022

As geopolitical tensions grow, will countries begin to choose between US and China-led geopolitical blocs? How will the links forged by the Belt and Road Initiative (BRI) influence a country’s choice? How will these choices affect manufacturing decisions?

Navigating a bipolar world

Facing geopolitical and economic shifts, is the BRI at a tipping point?, considers Nikkei Asia. China nevertheless is pressing on with the new Global Development Initiative (GDI).  In the Financial Times, Yu Jie opines that, in rolling out the GDI, China should try to avoid the mistakes it made with the BRI. The US and the EU are competing with China for influence in ASEAN, which is making relations more complicated, notes Nikkei Asia. 

China has become an indispensable economic partner for eight important economies, even as the US remains the most important security partner, a new study by MERICS reveals. It’s long been assumed that close economic ties help to stave off armed conflict, but in some circumstances, can trade ties fuel a drive to war?  Dale C. Copeland argues the case in Foreign Affairs. 

Geopolitical tensions and domestic concerns are reorienting supply chains, driving countries to encourage reshoring or “friend-shoring”.  What is the rationale of friend-shoring, what policies advance friend-shoring, and will the push to friend-shore deliver?  Halit Harput examines these questions for the St. Gallen Endowment.  Companies appear to be “fleeing” China for friendlier shores, according to Elisabeth Braw in Foreign Policy, while the New York Times chronicles that tech companies are slowly shifting production from China.  Companies may be on pace to bring to the US a record number of overseas jobs, per the Wall Street Journal. 

Mentioned publications

  1. China’s Belt and Road Initiative at tipping point: Pakistan, Sri Lanka debt crises threaten Beijing's regional influence – Adnan Aamir, Marwaan Macan-Markar, Shaun Turton and Cissy Zhou, Nikkei Asia, 10 August 2022
    Part of a three-part series on China’s Belt and Road Initiative and the geopolitical and economic pressures it faces. 
  2. China faces a new test of its economic statecraft – Yu Jie, Op-ed: Financial Times, 24 August 2022
    Will Beijing’s Global Development Initiative, repeat the successes or failures of the BRI?
  3. China's ASEAN Silk Road gets slippery as other powers move in – Lien Hoang, Nikkei Asia, 23 August 2022
    More countries are investing in Southeast Asia, giving China a run for its BRI money.  Is it too little, too late?  
  4. Beyond Blocs: Global views on China and US-China relations – Mercator Institute for China Studies, August 2022
    Views of China among eight trading partners have remained positive as their economic engagement with China booms.
  5. When Trade Leads to War – Dale C. Copeland, Foreign Affairs, 23 August 2022
    Conventionally, economic interdependence precludes war.  But are current events showing us that the opposite may be true? 
  6. What do the Friends of Friend-shoring Think Its Rationale Is?, What Policy Initiatives Advance Friend-Shoring?, and Will Friend-Shoring Deliver? – Halit Harput, St. Gallen Endowment, 24 August 2022
    Friend-shoring is the latest catchphrase in trade, but do policy makers understand what it is and how to incentivize it? 
  7. Companies Are Fleeing China for Friendlier Shores – Elisabeth Braw, Foreign Policy, 2 August 2022
    Surveys show increasing interest in relocating manufacturing out of China, but not necessarily back to home countries.
  8. Tech Companies Slowly Shift Production Away From China – Daisuke Wakabayashi and Tripp Mickle, The New York Times, 1 September 2022
    Tech companies appear to be gradually and carefully moving manufacturing away from China. 
  9. U.S. Companies on Pace to Bring Home Record Number of Overseas Jobs – Dion Rabouin, The Wall Street Journal, 23 August 2022
    Will 2022 see an unprecedented increase in firms reshoring manufacturing jobs to the United States? 

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A rare bright spot in US-China economic relations? 

Does the US-China agreement over public company audits represent a rare diplomatic breakthrough?  The Wall Street Journal reports on the agreement, while the Wire China analyzes how the bargain was finally struck after 10 years of negotiations. At the same time, US business confidence in China is falling to a record low, as described by the Wall Street Journal, reporting on the results of latest US-China Business Council surveyChinese companies are facing challenges in the US, per Nikkei Asia. 

Mentioned Publications

  1. U.S. and China Reach Agreement on Chinese Company AuditsKeith Zhai, Paul Kiernan and Michelle Chan, The Wall Street Journal, 26 August 2022
    US-China agreement over public company audits represents a rare diplomatic breakthrough. 
  2. Trading Truce – Isabella Borshoff, The Wire China, 28 August 2022
    The US and China agree to allow US regulators to audit publicly listed Chinese companies. 
  3. U.S. Business Confidence in China Falls to Record Low, Survey Says – Liza Lin, The Wall Street Journal, 29 August 2022
  4. Member Survey – US-China Business Council, August 2022
    US companies are increasingly losing confidence in their ability to do business in China 
  5. Chinese brands in U.S. face tougher challenges amid tensions – Marrian Zhou, Nikkei Asia, 25 August 2022
    While US companies report less confidence in China, Chinese counterparts feel new challenges in doing business in the US. 

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Chinese policies shape trade and investment flows 

Chinese demand for durian, the “king of fruits”, is growing, driving Thai and Malaysian farmers to ramp up production to take advantage of new export advantages conferred by RCEP.  Is this growth sustainable? Nikkei Asia considers this question, as it also dives deep into Chinese foreign investments designed to enhance its food security far into the future. The US imposed restrictions on the export of cutting-edge chips to China and Russia, Bloomberg reports. Will geopolitical shifts affecting trade and technologies prompt India to enter the semiconductor race? The Financial Times explains.  

Mentioned Publications 

  1. China's durian boom sparks ASEAN alarm over mega trade deal – Yuri Momoi, Nikkei Asia, 28 August 2022 
    Chinese demand for durian prompts Thai and Malaysian farmers to ramp up production unsustainably. 
  2. Farming out: China's overseas food security quest – Betsy Joles and Cissy Zhou, Nikkei Asia, 31 August 2022 
    As China seeks food security, it looks towards foreign investments and mergers and acquisitions (M&A) to ensure future food supplies. 
  3. US Deals Heavy Blow to China Tech Ambitions With Nvidia Chip Ban – Debby Wu, Ian King, and Vlad Savov, Bloomberg, 2 September 2022 
    The US aims to restrict exports of advanced chips necessary for China’s development of AI applications. 
  4. India’s high-stakes bid to join the global semiconductor race – John Reed, Financial Times, 1 September 2022 
    The Modi government offers US$10 billion in incentives to develop chip manufacturing in India. 

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Will China join the Digital Economy Partnership Agreement? 

Maybe, if China clarifies its data laws first, writes the South China Morning Post. 

Mentioned Publications 

  1. China’s bid to join digital economy pact hinges on clarification of data laws, experts say – Kandy Wong, South China Morning Post, 27 August 2022
    China will likely join DEPA, but may have to clarify its data security laws first.

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