Guest post by Kavitha Ravikumar

Globalization and free trade are having a tough few months. Inward looking policies and populist movements in politics are showing up and uncertainties are mounting. A Trump presidency in the US, Brexit negotiations in Europe, Russia flexing its military influence are some of the overarching events that have global impact on economic movements.

Free trade is often discussed as a ‘currency for goods’ flow with developed countries being the source of demand for manufactured goods. This is somewhat blinkered when one considers the increasing wealth in emerging economies and the fact that a manufacturing superpower like China sits bang in the middle of them and has much to gain from their emergence.

The risk of the US pulling back significantly from involvement with the Asian, African and even Latin American economies is that it creates a vacuum, one that China should be eager to fill.

China has already floated an alternative to make up for the eventual expected fall or dormancy of the Trans-Pacific Partnership (TPP) and is likely to go for more.

china-global-trade
Source: UN Comtrade

 

Between 2013 and 2015 the percentage increase in Chinese exports is pretty impressive to countries like Egypt (68.3%), Kenya (58.4%), Saudi Arabia (34.8%) and India (30.9%). One might argue that the base was low, however these countries are where the middle class is increasing, working age population growth is booming and GDP growth rates are significant i.e. economic powers of the future. If access to developed markets becomes more conditional and difficult, all of them might have something to gain by forming stronger regional alliances.

The ‘One Belt, One Road’ (OBOR) is a Chinese foreign policy initiative that aims to redirect China’s domestic overcapacity and capital for regional infrastructure development by focusing, building upon and creating trade routes and business opportunities within China, across South-East, Central & South Asia, Europe, the Middle East and North Africa.

OBOR is a long term initiative that is not only economic but also geopolitical and is expected to go on for several decades.

The next few months will give us more clues to what increasingly looks like a new phase of global trade with shifting power and focus.

Kavitha Ravikumar is currently a strategist in the Emerging Markets space. She is trained in Economics and Anthropology, is a mentor in the Social Enterprise sector and a keen supporter of the Maker culture

Advertisements