Far from dying, a new globalisation is emerging – driven by China and the digital economy
- An important feature of the new globalisation is China’s Global Development Initiative and a renewed, non-exploitative focus on the Global South
- The other is the growth of the digital economy and non-dollar-denominated digital currencies that enable cross-border trade
The idea that globalisation has ended is growing in popularity with some economic analysts. Parallel to this is the idea that China is no longer a player in globalisation as near-shoring replaces the offshoring of supply chains.
Most obviously, Western economies depended on more cheaply produced Chinese goods and services to keep inflation down. This deflationary impact was felt from computers to household goods and the equipment that underpinned economic growth.
The forecast end of globalisation is at best an example of Western market hubris. In reality, globalisation has been with us in some form for hundreds of years.
Writing in 1817, the British economist David Ricardo formalised the philosophical foundations of globalisation. At the turn of the 19th century, the London Times carried an article boasting the benefits of globalisation, with meat from Australia, fruit from South America, sugar from Africa and tobacco from the US.
But this has not prevented some from suggesting that China’s economic growth has somehow been permanently damaged as a result of Covid-19 restrictions. It’s a fallacy that suits a hegemonic narrative, but it ignores economic reality.
Emerging economies will help China achieve goal of peaceful rise
Globally, Covid-19 accelerated the digital economy but it was from a low starting base in many Western countries. In the US, the almost obsolete chip-and-PIN card system is not yet used by all shops but China had already moved beyond this with WePay and other similar systems.
Globalisation is a more powerful force than protectionism, ideologically driven sanctions and tariff barriers. The locus of economic development is changing and the forces of globalisation will shift accordingly. China is the first major economy to recognise that change and it will drive the new iteration of globalisation.
Globalisation is more than just logistics chains. Globalisation is driven by the competitive advantage unique to each country. Usually, these change slowly but the Covid-19 disruption created the conditions for a seismic shift.
Globalisation post-Covid will be different from globalisation pre-Covid, but it will not disappear.
Daryl Guppy is an international financial technical analysis expert and a former national board member of the Australia China Business Council. The views expressed here are his own