The redistribution of the cards between the United States and China raises several questions about the global balance since the economic world is no longer centered on the USA.
Of course, in the short term, we can still see Washington’s powerful influence on world affairs.
The White House’s tariff policy has shaken every capital. Discussions about the independence of the Federal Reserve are unnerving investors. The halt to the energy transition and the emphasis on fossil fuels represent a clear step backward.
Furthermore, trade dynamics and therefore direct influence on the global economy have shifted sides. The United States, the long time powerful country in emerging countries, has now been overtaken as the main partner by China.
All these elements suggest that short-term impulses will still be the preserve of the Americans, but that long-term impulses, those which structure the global economy, will come more from China.
This will have several major consequences.
1️⃣ The institutional framework will evolve. The institutions established after the Second World War were calibrated to best satisfy developed countries. The IMF has a European managing director, the World Bank is headed by an American.
Institutions more focused on emerging countries and China will emerge. The New Development Bank (NDB) established by the BRICS and based in Shanghai is a first response.
Institutions structure growth and development. This is a major step that necessarily has a political dimension, as demonstrated by the Shanghai Cooperation Organization summit, which brought together all the leaders of the countries of the South.
2️⃣ The importance of Chinese technology will accentuate China’s role in defining technological standards. From drones to superconductors, Chinese high-tech will gradually shape the global economy. Technological dependence will shift gears. As a result, the revenues associated with these technologies will gradually become more Chinese than American.
From this perspective, we understand Washington’s desire to occupy the field, to give back to the USA a role that it is losing, to flood the world with dollars to have the perception of being a leader.
3️⃣ If the world changes, then inevitably, the dollar will change regime. But it’s still too early to subscribe to this logic. Moreover, the Americans, with stablecoins, are doing everything to maintain its importance. But on an international scale when economic systems are integrated, there is only one currency, the one associated with the lender of last resort.
The risk is that the United States will no longer have this capacity, in the long term, but that the Chinese do not yet have it, if one day they do.
To be continued