2023-04-23 16:19:30
The global geopolitical map is being redrawn, with the USA and China taking the lead, Russia claiming the part it considers it deserves, and Europe, panting, with a heavy pace, trying to catch up with the developments. A little further, India measures its strength as the fastest growing power on the planet.
And all this in a multipolar international environment, highly competitive, dominated by intense uncertainty, persistently high inflation, continuous interest rate increases, strong turbulence and upheavals. On the horizon, the clouds over the global economy are getting thicker, with the threat of another recession coming back to the fore.
China’s emergence as a leading geopolitical power is confirmed by the promising mediating role it might play between Ukraine and Russia, but also by the visits of top officials that have already taken place or are planned in the near future.
Commission President Ursula von der Leyen and French President Emmanuel Macron, the latest bearers of divergent approaches to a European policy unable to find common ground on critical geopolitical issues such as Chinese investment, the war in Ukraine and the role of USA, energy, subsidies and the transition to green technology.
Washington is also preparing high-profile visits to China, despite the biggest deterioration in bilateral relations between the two countries in several decades in February, culminating in spy balloons found in the airspace of the two superpowers, which had the consequence of postponing the visit of US Secretary of State Anthony Blinken to Beijing. But in a surprise positive diplomatic maneuver, two top US Commerce Department officials, including China expert Elizabeth Economy, made a trip to Beijing to prepare for a possible year-end visit by US Commerce Secretary Gina Raymond.
The last summit between Joe Biden and Xi Jinping took place at the G20 last year in November, with the two leaders agreeing to set a “level” in their bilateral relationship, which appears to have been shaken before it was even established.
Now, US Treasury Secretary Janet Yellen is swinging an olive branch, calling for a “constructive and fair” economic relationship between China and the US and declaring that Washington does not seek to wean its economy off China’s, as that would be disastrous for both. countries and destabilizing for the rest of the world.
“Carrot and Whip”
In a “carrot and whip” policy, the minister, following inviting Beijing to a common point of contact, clarified US policy, which looks forward to continuing to work with allies to prevent Beijing’s “unfair” economic practices. He pointed out that China’s decision to shift from market reforms to a more state-centered approach has hurt both its neighbors and other countries on the planet.
In the latest retaliation once morest Beijing, the US has imposed controls on semiconductor exports on the grounds of protecting critical technologies from the Chinese military.
In this context, Washington is reportedly considering a new program that would limit US investment in some critical sectors of the Chinese economy with a significant impact on US national interests – measures that are expected to once more provoke a reaction from Beijing.
The response of the Chinese embassy in Washington was immediate, saying that cooperation favors both sides but by no means “should not be a zero-sum game”, stating its opposition to the decoupling of economies, but also to the generalization of the concept of national security.
It divides… the E.U. and reigned
Painstakingly cautious in its moves of late, Beijing has been trying to create a counterweight to France and Macron, who wants to usurp the role of former German Chancellor Angela Merkel, creating a contentious balance.
In a clearly different approach towards Macron and the Commission in the person of Von der Leyen, with real but also symbolic ramifications, Beijing tried to “play divide and rule”, which already exists in European politics and was reflected in Macron’s recent statements that Europe should break away from the US.
The French president’s move to seek China’s help to outline the parameters for possible talks between Russia and Ukraine has drawn criticism from some allies, who believe such an effort is premature for fear it might undermine European unity.
The baton was taken yesterday by Irish Prime Minister Leo Varadkar, who said that the E.U. it does not want to find itself “caught in the middle of a dispute between the US and China”, acknowledging that member countries do not share a common position “to the extent they should” on “emerging competition” and that further discussions are needed. He, however, said that Chinese investment is welcome in Ireland and that trade with China is very important, perpetuating opposing approaches within the EU. regarding this issue.
And this is precisely where Europe’s role lies in this divided world, with its diplomacy faltering and the idea of unity and solidarity being tested, unable to meet both its economic needs and its security imperatives. .
Protagonist in this explosive geopolitical field are protectionist policies, with the US coming out strongly with a huge program of state subsidies and tax breaks, amounting to 369 billion dollars, to promote green technology, a move that contains a great lure for European companies that indirectly ” bribes” them to leave Europe.
The E.U. it counterattacked with much delay, opposition and concerns especially from the “core”, with tax exemptions, tax credits and further relaxation of the regulatory framework for state subsidies, amid several question marks regarding its effectiveness and capacity.
The point is that Europe not only has to contend with the US, but also with China, which is pushing massive state subsidies to green technology, making the old continent highly dependent on Chinese imports of solar panels.
The field of intense competition in semiconductors is also ongoing, with China and the US constantly crossing swords with sanctions and restrictions and with the active role of Taiwan and SE Asia in general. Accelerating digitization and electrification have increased the needs of Europe, which has announced a $43 billion program to build semiconductors to become more independent.
The energy front
At the heart of geopolitics is energy, with OPEC and Russia jockeying for market and price control by cutting output in an implicit but not clear Moscow “counterattack” to Western sanctions and caps.
Although its relations with Riyadh remain “frozen”, Washington has recently chosen to keep a low profile on energy, as it is the most favored by the war in Ukraine, significantly increasing LNG exports to Europe, which buys the natural gas 10 times more expensive than the US and five times more expensive than Asian countries.
Questions are also being raised regarding the feasibility of such a large expansion of LNG infrastructure in Europe, as it is estimated that much of the import capacity may be redundant.
A “road race” is taking place between the world’s leading economies and to control the raw materials necessary for the green transition, digitization and electrification.
Clouds are gathering over the economy
Which economy will be able to make the difference and provide the boost the planet needs right now to avoid recession?
China came out ahead with growth of 4.5% in the first quarter, the fastest growth rate in a year and beating analysts’ forecasts of 4%.
The International Monetary Fund (IMF) predicted that the second largest economy on the planet, with its GDP close to 20 trillion. dollars, will grow this year at a rate of 5.2%, much higher than the 2.8% he gave for the global economy, for which he lowered the bar in relation to the January estimate, but also in relation to the growth 3 .4% of 2022.
According to the Fund, China is set to contribute regarding a third of global growth, regaining the role of the driving force it had in previous years.
It estimates that 1% higher growth in China translates into 0.3% higher growth for China-linked economies, IMF Managing Director Kristalina Georgieva said.
For next year, the IMF expects global growth to be 3% and forecast to remain at that level until 2028, marking the weakest five-year average since 1990.
For the USA (with its GDP value close to 26 trillion dollars), the IMF predicts growth of 1.6% for this year and 1.1% for 2024, while for the Eurozone it gives rates of 0.8% and 1, 4% respectively.
All this, of course, taking into account that the IMF’s extreme scenarios involving unexpected developments and reversals, with banking crises and continued high inflation, will not be verified.
World trade will also fall below historical growth trends of 2.6% this year, according to the WTO.
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