Decoupling of economies could cause disruptions

Decoupling of Chinese and US economies could have severe consequences

In his speech at the World Economic Forum (WEF)- Singapore Prime Minister Lee Hsien Loong warned the world that a possible decoupling of the Chinese and United States economies could have severe consequences. He spoke to the experts and economists at Swiss ski-resort Davos where 50^th WEF is taking place.

Lee said that the US, China and globalisation are three major external factors that have driven the economic prosperity of Singapore, but they are all changing now. “So we would like to continue to work with America, we would like to continue to work with China,” he said, adding that from time to time, Singapore will find itself being pressed to choose sides.

Lee has expressed the fears that many countries are feeling now after the US pressed its security allies and partners to ban Chinese telecom giant Huawei from their 5G networks. Singapore has so far not excluded any vendors from building its 5G network, but said any systems must meet security requirements.

Lee said that the prospect of “bifurcation in technology, whether in 5G or the whole supply chain” would lead to a series of reactions of distrust that would force nations to set up their own separate supply chains. “It will take a long time for that process to come, to run its course, but it is a very expensive process, which is going to hurt us,” he said.

Singapore PM Lee also expressed his worries that the mutual suspicions and doubt between China and the US will only create more friction and problems, and that the consequences of a decoupling scenario would be very bad. It is a serious issue, he said, how an incumbent superpower like the United States accommodates a rising new power, China.

Some economist and experts share the sentiments expressed by Singapore PM. They believe that decoupling of some sort will happen. It might not be full decoupling but some will happen. And it is going to be very painful and troubling. It will disrupt the world trade and economic growth as the result.

US and China has sign a partial trade agreement to halt the trade war but many experts see this truce temporary that might not be able to hold long.  

                                                                                   Khalid Bhatti