The power struggle between the U.S. and China could encourage the development of a multipolar world order. Why? The most likely outcome is a stalemate that would once again divide the world into two systems.
The world is in chaos. At least in terms of the old order. The U.S. is questioning how and whether to maintain its global leadership role. It is also strengthening its economy with an “America First” foreign policy. China, for its part, is aiming to reshape the global balance of political and economic power in its favor. It is not clear where the other BRICS countries are headed. And Europe? It is struggling to hold itself, and its place in the international system, together.
Stalemate in the power struggle
It is unclear where these developments will lead. One thing is undeniable, though: The outcome will be heavily influenced by the U.S.-China trade war. The potential impact of this conflict on the global economy is analyzed in the whitepaper “The Next Digital Superpower”. It posits three potential scenarios. In the base scenario, the West cannot develop a coordinated response to China. As a result, China manages to close the last remaining development gaps and compete head to head with the U.S. economically, militarily, and technologically. In this scenario, the U.S. is highly concerned about the information and communications technology (ICT) industry. If China uses advanced technologies to gain an advantage in key growth sectors, the global balance of power could shift away from the U.S., undermining its economy and national security.
To be clear: The U.S.-China conflict is about more than technological supremacy. It is nothing less than a protracted to and fro to tip the global balance of power. Since neither country currently has an overwhelming advantage over the other, their battle for influence and ideological preeminence will probably end in a stalemate.
The world split in two
The base scenario could culminate in a world that is divided in two. If the stalemate causes the U.S. and China to decouple, two different supply chains would emerge for two separate economic and technological ecosystems with different rules and standards. Further escalation beyond the purely economic realm could produce a dynamic very similar to the Cold War. However, cooler heads might prevail and prevent the stalemate altogether. And that could lead to a grand bargain that keeps the international system unified —something that could only be a net positive. Without such an agreement, every country would have to pick its preferred ideological alignment.
Coming up soon on Inspiration: How likely is a scenario where the West resurges?
The Next Digital Superpower: Scenarios for the U.S.-China conflict
The U.S.-China trade conflict dominates global business headlines. However, it is about more than a hand-ful of trade disagreements. Instead, the present conflict is the cumulation of a long-building undercurrent of fundamental disagreement about the state of the world.
In the whitepaper “The Next Digital Superpower”, Vontobel, working in cooperation with the Eurasia Group, conveys an understanding of the drivers of the complex interdependencies between political, so-cial, and economic trends. The study also analyzes the potential impact on the global economy over the next five years.
Download the whitepaper here for free!