As the rift between China and the US widens, ongoing geopolitical tensions, including over critical technologies, could lead to further rifts. The two economic giants’ efforts to expand their respective core technologies and supply chains will result in different branches of key technologies, such as artificial intelligence (AI) and 5G communications.
As globalization loosens, cost efficiency decreases, technology transfer slows, and innovation slows. Ultimately, this leads to lower productivity growth, according to Ravi Menon, managing director of the Monetary Authority of Singapore (MAS). Speaking at the Super Return Asia conference on Tuesday, Singapore’s central bank chief discussed key uncertainties in the global economy today.
Menon points to two major geopolitical tensions today between Europe and Russia and the US and China that could persist in the medium term and lead to economic disintegration.
In particular, he said, the “strategic competition” between China and the United States is expanding on several fronts, leading to increased ties between technology, finance and trade.
The Sino-US trade conflict has weakened global trade, and tariffs imposed by both countries on each other have contributed to supply chain tensions and price pressures, he said.
As both countries seek to reduce their dependence on each other, they warn that increasingly dangerous technologies could be dispersed.
Menon said, “As the two countries separate their respective technology bases and supply chains, the development of important technologies such as semiconductors, AI and 5G telecommunications will expand.”
He also explained the US government’s ban on the export of advanced chips widely used to harness the power of AI to China, and the ban on cross-border acquisitions by technology companies on both sides over antitrust and national security concerns.
The dispute between the two countries has affected the financial system in both markets, and the scrutiny of Chinese listings in the US has led some Chinese companies to consider withdrawing from US markets. In addition, China – along with other countries – were looking to reduce their dependence on the US dollar and the payment system.
Menon suggests that these developments may eventually lead to more fragmented global financial systems.
“The growing relationship between the US and China in trade, technology and finance could have many economic consequences,” he said. “At the broad macro level, this convergence will not bode well for global economic growth. At the micro level, there will be adjustments in supply chains, trade relations, technology acquisitions and financial arrangements, with implications that differ between countries and sectors.”
