To understand where we are headed in terms of this “decoupling” risk, we first need to look at the evolving geopolitical context, and work out what shape it might take. We also need to study recent policies and corporate responses. Only then can we work out how much decoupling there might be and the impact it might have on Asian economies. Our conclusion is that extreme outcomes can be ruled out for now, that the economic losses will be contained and that the Asian region can weather these stresses.
It was nice to see US Secretary of State Antony Blinken visit Beijing and hold substantive talks with President Xi Jinping and other top leaders in China. But, relations between the two have deteriorated so badly that the most that can be achieved will be guard rails to prevent the two powers’ tussles from escalating into outright clashes.
In the meantime, there will be spillovers into the global economy. One fear is that we get two separate economic blocs that only weakly interact with each other. Even if that can be avoided, the potential economic losses for the world economy from two blocs going their separate ways could be considerable.
