china de facto

Extract from our "China and the De Facto Asian Economic Union" research paper, published on the 8th of May 2023. Register for a free trial* to access the full paper.

The global economy is approaching a major watershed: for the first time in modern history, the three economic blocs – the US, Europe, and Asia – now have similar economic heft, in terms of constant dollar GDP, with Asia being the economic bloc that is on track to surpassing both EU27 and the US in size in the next five years. Against this backdrop, the heightened geopolitical tensions in the world ought not come as a surprise. Investors should pay more attention to Asia as a de facto economic union and the role that China plays in nurturing this already efficient industrial ecosystem.

  1. China is already one of the biggest sources of foreign direct investment (FDI) flows in the world now; much of these flows are going to other Asian countries.

  3. Intra-Asia trade is already intense, almost as intense as that within the EU and more than twice as intense as that within NAFTA. Economic sanctions against China will likely lead to a more robust Asia, as most of the divested industrial capacity will likely leave China but stay in Asia.

  5. With the de facto Asian economic union working as a protective shield for China against economic sanctions from outside Asia, the only country that can stop China’s economic rise is China itself, in our view.

The full report contains the following sections:

  • China is one of the biggest sources of FDI in the world, and in Asia
  • Intensifying intra-Asia trade
  • The US’ trade sanctions could push trade from China to Asia
  • Cheap shipping within Asia
  • Risks of China undermining its own economic rise
  • Bottom line

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