Economically on the mend, but technologically divided

Global trends

Handelsblatt International correspondent Torsten Riecke analyzes interesting data and trends from all over the world in his column every week. You can reach him at [email protected].

(Photo: Klawe Rzeczy)

Many call it the time between the years. For the professional prophets of the financial world, the calendar no man’s land at the end of the year is the time to look back and look back, and at the end of this year looking back seems just as frightening as looking ahead. Even if the exemplary change of government in Berlin should give us Germans courage.

The world around us looks much darker. We have seen a change of power in America that was almost prevented by a coup. A shameful US withdrawal from Afghanistan, which for many symbolized the decline of the once sole superpower America. A global supply chain crisis, which was symbolized by the container ship “Ever Given” lying across the Suez Canal. And a pandemic that was only contained by pharmaceutical pioneers with new vaccines and is now coming back with new mutants and full of force.

Even if the omicron wave is keeping most people in suspense at the moment, for many economists and finance professionals the pandemic is no longer the greatest risk for the year 2022. This is not only because most governments and central banks are determined and with the crisis of the century have successfully fought a lot of money. In the USA, and soon also in Europe, we have returned to the pre-crisis level economically.

The collateral damage caused by this rescue operation, however, includes a global surge in inflation, for which we could still pay a high economic and political price in the coming year. Much will depend on whether Omikron closes the bottlenecks in global supply chains again or whether we can use resilience and technology to resolve the traffic jams in the global economy.

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In geopolitical terms, however, we are still in a recession. Which is mainly due to the fact that the two most powerful countries in the world are suffering from an operational disruption. America has freed itself from the Trump trauma for the time being, but has by no means defeated the demons of a deeply divided nation. The mid-term elections to Congress in November could polarize and block the USA again – which would affect the rest of the world even more.

China, too, is not the refuge of stability that the authoritarian rulers in Beijing like to portray. The “Zero Covid” strategy is driving the country further into isolation. The personal external contacts of companies and politicians have decreased drastically, which can lead to dangerous misunderstandings in view of the many smoldering international conflicts. In addition, the Middle Kingdom, with its less effective vaccines and rigorous lockdowns, is still to be put to the test by Omikron. In the financial markets, China is now more of a risk factor than a panacea for the global economy. Only the German carmakers seem to have escaped this development so far.

A year of relaxation between Beijing and Washington?

However, it is unlikely that the two pseudo giants will come to a skirmish over Taiwan in the coming year. This is countered by the fact that China’s strong man Xi Jinping wants to be declared ruler for life by the party congress next fall. Before that he will hardly risk a military conflict with the USA, which is also controversial in Beijing. Since Biden also has an interest in scoring foreign policy points up to the midterm elections in November, 2022 could more likely be a year of détente between the two rival great powers.

Rivalry of superpowers

US President Joe Biden at a virtual meeting with China’s President Xi Jinping in November.

(Photo: AP)

This does not mean, however, that the USA and China will slow down their technological decoupling. It is no coincidence that the financial professionals at Blackrock, after all the world’s largest asset manager, consider the so-called “tech war” between the two superpowers as the greatest geopolitical risk for 2022. Both Washington and Beijing know that the struggle for geopolitical dominance is a technological race for AI, chips, 6G and quantum computing. The fact that this competition is increasingly taking place to the exclusion of the competition is a shame for the world, both economically and technologically.

The big unknowns of the “tech war” are the global technology corporations themselves. Facebook, Apple, Amazon and Google, but also Tencent, Alibaba, Huawei and Baidu are not only more powerful than many nation states, they are also behaving more and more like sovereign governments who make their own rules. The “tech war” is a multi-front war not only between nation states, but also between governments and technology corporations. It is quite possible that this will become the decisive debate in 2022 and beyond.

More: Inflation, omicrons, delivery bottlenecks: the Christmas rally will probably be canceled on the stock market this year

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