Globalization continues to move forward amid adjustments

In recent years, there have been numerous calls for deglobalization, but the trend of globalization cannot be stopped. The pursuit of optimal allocation of resources around the wor…

In recent years, there have been numerous calls for deglobalization, but the trend of globalization cannot be stopped. The pursuit of optimal allocation of resources around the world is driven by economic laws, and the deteriorating global geopolitics cannot stop the surge of globalization.

In 2022, BASF of Germany plans to invest 10 billion euros to open a new factory in Zhanjiang, China. This is the largest investment ever made by a German company in China. Apple announced that it will produce 25% of its products in India, Tesla’s Chinese supplier Noah Itai invested US$100 million to set up a new factory in Monterrey, Mexico, and Brazilian multinational personal care cosmetics group Natura has expanded its business beyond Antarctica. 73 countries on all continents. In January 2023, the first overseas factory of Chinese battery giant CATL entered mass production in Anstadt, Germany. There are many such cases and I won’t go into details.

Globalization will not disappear, but globalization is adjusting. U.S. imports from China will drop from 22% in 2017 to less than 17% in 2022. Vietnam’s exports to the United States increased to US$120 billion, an increase of more than 10 times compared with 2007. China’s footprint in the Americas is increasing dramatically, and China has become the region’s second-largest trading partner after the United States. Data from the U.S. Department of Commerce last November showed that U.S. imports from the EU exceeded those from China. Although the Biden administration is trying its best to cut off Sino-US economic and trade relations, Sino-US economic and trade relations are in a state of “selective decoupling” that cannot be completely severed. Sino-US trade volume is expected to reach a new height in 2022, but the Section 301 tariffs imposed by the United States on China have had an adverse impact on American consumers and businesses.

The adjustment of globalization is due to some problems that have emerged since the wave of globalization in the 1990s. The first person to question globalization was Danny Rodrik, an economist at the Harvard Kennedy School. His questioning of globalization does not mean denying globalization, but he hopes that policymakers must rethink neoliberal economic concepts in order to establish a A more resilient, equitable and sustainable global economy. In 1997 Roderick published his book “Has Globalization Go Too Far?” ”, arguing that globalization is exposing social rifts in an unfettered world market between those “winners” who have education, skills and mobility and those who do not. These apparent “losers” are increasingly concerned about their declining living standards and precarious position in an integrated world economy. The result is high tensions between markets and various sectors of society, with governments forced to be caught in the middle. In 2019, Rodrik published an article arguing that globalization is in trouble, and that this predicament has been exploited by populism represented by Trump, leading to the prevalence of trade protectionism.

The dilemma of globalization has made the winners of globalization also admit that globalization has brought unbalanced benefits and must be changed. Changes in Sino-US relations, the global COVID-19 epidemic, and the conflict between Russia and Ukraine have made the voice of deglobalization louder. More and more countries are embedding security factors into globalization, leading the government to use administrative means to cut off the global supply chain that reflects the characteristics of globalization.

The “Chips and Science Act” passed by the U.S. Congress in July 2022 aims to cut off China’s connection with high-end chips, use chips to tie up China’s development, and achieve the purpose of forming an overwhelming advantage over China. In February 2022, the European Commission released a package of legislation, including the European Chip Act, to strengthen the EU’s sovereignty in semiconductor production and achieve better supply chain resilience. This is the product of the EU’s pursuit of “strategic autonomy.” In August 2022, during the “Economic 2+2” talks between Japan and the United States, the two countries reached an agreement to jointly develop 2 nanometers. This is regarded by the outside world as Japan’s chip strategy.

The chip strategy of the United States, Europe and Japan is to monopolize the chip supply chain, or monopolize a certain link in the supply chain. This operation violates the law of globalization that seeks to optimize the allocation of resources on a global scale. However, after security factors are embedded in globalization, artificial administrative means replace the market allocation of resources, resulting in resource allocation in the pursuit of unreasonable self-sufficiency or the phenomenon of several countries. The phenomenon of conglomeration, “reshoring” and “friendly shore outsourcing” are the verbal expressions of these two phenomena. Judging from the history of globalization, the interests of the domestic economy have always been higher than the interests of the global economy. Britain gave up the gold standard in 1931, and Roosevelt also gave up the gold standard two years later. These were all measures taken to get out of the Great Depression based on the country’s economic interests. The gold standard is an institutional arrangement conducive to global trade.

Judging from the implementation of the chip strategy in the United States, Europe and Japan, it seems to prove the rationality of deglobalization. The key point of deglobalization is to get rid of the interdependence of countries with different political systems in key supply chains. But in fact, the global supply chain is very mature, and its commercial significance is too great to be reversed. The so-called deglobalization is mostly related to China, but the cost of adjusting the global supply chain is too high, forcing globalization to continue on its original trajectory. “China plus one” is a response to deglobalization: keep factories in China but develop suppliers elsewhere to hedge risks. As a result, foreign direct investment in India, Thailand, Vietnam and Malaysia has grown significantly.

Globalization is undergoing adjustment. Single globalization no longer exists. The world is forming a multi-polar globalization, and China is undoubtedly one of the poles. China is the largest trading partner of more than 120 countries around the world. The “Belt and Road Initiative” advocated by China is Chinese style.A concentrated expression of globalization.

Not only that, Chinese-style globalization has broad prospects in Asia, Africa and Latin America. The basis for supporting this prospect is industrialization based on labor-intensive industries. China is the world’s largest manufacturing country and foreign trade country, which provides the basis for China to help the industrialization of sub-Saharan Africa. The combination of China’s direct investment and foreign trade with the industrialization process of sub-Saharan Africa will bring great benefits to the world. Offering an alternative version of globalization.


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Author: clsrich