The tumult we saw in 2018 is not going to let up in 2019. Political, technological and climate changes will create uncertainty.
SINGAPORE (Dec 31): The biggest driver of change in the world now is undoubtedly the shifting relationship between China and the US. According to global consultancy Control Risks, what started as a trade conflict between the two countries has now morphed into a strategic rivalry of sorts that “will ultimately harden into a more permanent stance” next year.
Dane Chamorro, senior partner at Control Risks, says the current US administration sees China as a threat to the US and the liberal world order, and is seeking to prevent that through limiting China’s access to technology. Yet, Beijing sees technology as the key to development, has built the country’s economic structure around it, and is therefore unlikely to give it up. “You can have a trade agreement but it will be superficial,” Chamorro says.
Separately, businesses ought to think about the risks they face from climate change. According to Control Risks, the worst business disruptions that can be expected will not be from incidents of political violence, such as terrorist attacks, but from extreme weather and its consequences. Costs related to interrupted production and distribution, and weather-related insurance claims, are likely to skyrocket.
To be sure, we have known about the risks of climate change for years. And, the downside of the protectionist policies being pursued by the US is well known. But things are coming to head because of the ongoing turmoil in the Trump White House, rising interest rates and decelerating global growth. “There was enough unpredictability as it was, with climate change and how the global economy operates,” says Chamorro. “What [the US] has added to the world that wasn’t really there before in the same way, is this level of unpredictability. Political, but also financial, economic, because of the way the leadership in the White House operates.”
Clearly, this is having a negative impact on business confidence, and companies are putting capital expenditure plans on hold. But it is also creating opportunities. Chamorro says uncertainty over US-China relations has pushed some companies to build redundancies into their operations, by investing in factories in other countries. Meanwhile, new technologies in the automotive sector — autonomous driving and electric vehicles — are converging with the developments in the ride-sharing industry, giving rise to evolved modes of transport.
On the other hand, the big issues of climate change and growing inequality is awakening sensibilities among investors — particularly millennials inheriting family wealth. Banks and asset managers are spurred to launch new investment products aimed at environmentally conscious investors, who are in turn pushing corporates to act responsibly. At the same time, the rich are keenly aware of how their wealth looks to the rest of the world, prompting them to shun conspicuous consumption.
The French government, for instance, is still battling the Yellow Vests, which had started out as a petition against fuel tax hikes, but then grew into a movement fuelled by anger at social injustice and anti-elite sentiment. Business, policymakers and society at large have the collective responsibility to tackle the growing wealth disparity and its challenges, to restore some balance, before another unpredictable event takes hold and this time spirals out of control.
In the pages that follow, our reporters and editors have pulled together a collection of stories that will matter for everyone looking to navigate the world of business and markets in the year ahead.
This story appears in The Edge Singapore (Issue 863, week of Dec 31) which is on sale now. Subscribe here
