Supply between the US and China fragments the global economy, says the IMF

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George Castro

International analyst

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This was emphasized by the International Monetary Fund (IMF) through its Director – Manager, Kristalina Georgieva the world economy faces the weakest growth rate in the next 5 years of the last three decadeswhich implies an increase of 3% per annum, or less, during that period.

Georgieva added that this figure is significantly below the average of 3.8% per annum over the past 20 years and set the most negative forecast since the 1990s.

The period that began then was the progress of the globalization processwhen the collapse of the Soviet Union in 1991 unified the system, and allowed the large-scale shift of investments from transnational companies towards emerging countries, primarily Asian ones, and above all China.

It should be noted that globalization has been supported by the emergence of a new technological revolution of information processing which made it possible to make strategic decisions in real time on a global scale.

The key to this forecast is the certainty that the expected weakening of the world economy is the product of the fracture caused in the global system due to the confrontation between the two superpowers of the time – the United States and China -, exacerbated by the appearance of the Ukrainian war, in which the United States faces Russia at the head of NATO.

Kristalina Georgieva characterizes the new world situation in the following terms: “This calamity – in direct reference to the Ukrainian war – not only kills innocent people, but exacerbates the cost-of-living crisis, and has caused famine throughout the world, threatening to wipe out the peace dividend the world has enjoyed over the past 30 years, with growing usury of trade and finance.

The IMF also warns that the impact of the Ukrainian war directly affects foreign direct investment (FDI) of large transnational companies, which mainly affects the USA and China, where FDI have practically disappeared since 2015, while in the rest of the countries, both advanced and emerging, the tendency is to direct investments towards geopolitical alliesregardless of the degree of proximity, with a systematic increase in production costs, and a more than proportional loss of overall productivity, while accentuating the financial risks.

The race between the United States and China has focused in the last four years on the direct confrontation between the superpowers, with the initiative entirely in the hands of Washington, which consists in deny the People’s Republic access to advanced technology, especially in terms of semiconductors or “chips”, which are at the heart of the digitalization process of the world economy; and that the United States has focused, with top priority, on the systematic persecution of the Huawei company, the leading manufacturer of high-tech equipment in the global system, based in Shenzhen, southern China; and which is also driving the spread of 5-G (Fifth Generation Intelligent Mobile Internet).

In the North American superpower, a clear and growing hostility to international tradewhich is reversing the fundamental current of the last 30 years, which has consisted in the relentless push for global free trade, with notoriously negative consequences for the sustained boom of the US economy itself, according to what the IMF has just warned.

To this we must add that the United States, historical champion of the free market and private initiative in world capitalism, has now chosen to resemble its geopolitical rival – the People’s Republic -, and he has turned to a ferocious industrial policy with clear statist traits to deal with Chinain which it has invested more than 6 billion dollars.

The consequence of this change is that the global economy would experience a 2% annual decline in output over the next 5 years, of a cumulative nature, which implies a decrease of almost 10 points of world GDP in a decade; and the countries most affected by this brutal negative trend would obviously be the emerging and most underdeveloped ones.

The answer to this monumental challenge is unequivocal, e It is essentially geopolitical rather than economic in nature.; and consists of two movements of strategic importance, which are – firstly – a long-term cooperation agreement between the United States and the People’s Republic; and this, which is historically crucial, would be mediated by the political decision to end the Ukrainian war through diplomatic negotiations.

“Everything in strategy is simple, but simple is difficult,” Clausewitz says.

The task is ahead – the key is reverse the fragmentation process affecting the world economy due to the geopolitical dispute between the United States and China, intensified by the Ukrainian war.

This is simple to do, but simple is hard to dobecause it is always and in any case essential.

Source: Clarin

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