THE current global economic landscape will continue to evolve toward a tripolar system with the United States, China and the European Union as its pillars, posing widespread ramifications and negative credit effects across countries, sectors and industries.
“In the wake of the pandemic, we expect countries’ heightened focus on repairing economic damage will lead to more emphasis on achieving economic self-sufficiency, particularly in key strategic industries,” said Moody’s Investors Service managing director and chief APAC credit officer Michael Taylor.
“As a result, competition and conflicts in technology, trade and politics will continue, and in some cases, intensify.”
While it is unlikely that the economies of the US and China will decouple, they will become more disengaged. And although the EU shares a number of common objectives with the US with respect to China, Taylor believes it will have to balance them against its greater economic exposure to China.
“Over time, the EU will likely be pushed in a more protectionist direction, and its interests will increasingly diverge with those of the US in areas like the taxation of digital services, data privacy and certain other regulatory standards,” adds Taylor.
On the trade front, relationships will increasingly have a regional focus which will partly offset slowing interregional flows on the world stage.
Meanwhile, more competition in emerging technologies such as 5G, digital technology and clean energy will lead to an increased government role in fostering the development of strategic industries, through setting policy and regulatory standards among other means. – Nov 21, 2020