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Trading places: de-globalisation, longer supply chains and China Plus
Bobby Esnard
Chau Nguyen

After several decades of rising globalisation and the world becoming increasingly interconnected, that trend plateaued in the post-financial crisis period – and there are signs of it going into reverse.

Whether we call this de-globalisation, or borrow the International Monetary Fund’s ‘slowbalisation’ term, the pandemic has clearly laid bare a shifting backdrop for global trade. This paper examines three core factors − geopolitical fragmentation, the need for supply chain resilience and competition for scarce resources – that are driving this de-globalisation through four channels: production and trade, foreign investment, financial friction and technological restrictions.

Top Foreign Direct Investment recipients over recent decades

Top Foreign Direct Investment recipients over recent decades

Source: United Nations Conference on Trade and Development FDI database, CEIC for Mexico and India’s FDI origin data. How to read the chart: For example, the US has been the #1 recipient of global FDI flow in the past five decades. China has elevated from 16th place to 2nd

Production and trade − with recent China Plus One supply chain movements – has received the most spotlight so far but it is equally important to look at the other channels for a glimpse of what the future might hold.

What this revealed is that while trade can potentially evolve as production shifts, no one country can currently match China’s breadth of advantages, despite growing noise around certain contenders.

Bobby Esnard is an economist at Capital Group. He has nine years of investment industry experience, all with Capital Group. He holds a bachelor's degree in linguistics and cognitive science from Dartmouth College, graduating cum laude. Bobby is based in Los Angeles.

Chau Nguyen is an economist at Capital Group. She has four years of investment industry experience, all with Capital Group. She holds a master's degree in economics for development from the University of Oxford and a bachelor's degree in economics and mathematics from Denison University. Chau is based in Singapore.