Globalisation 2.0

Is globalisation advancing or stuttering? We debate why this question is back on the agenda and give our view on how a changing world order will affect investors.

Globalisation 2.0

For many years the world has followed a pattern of becoming ever more integrated thanks to closer trade links, easier travel and better communication aided by technological game changers like the internet. This connectivity suggests globalisation as a forever advancing concept, but can its pace continue, or might it even change in nature?

An unstoppable force

Since the 2007/8 financial crash when trade levels dramatically fell, some erroneously believed globalisation had stalled. Yet, despite more recent trade tensions and shifting international politics within the US, we believe globalisation remains a juggernaut difficult to stop or reverse. Our view is in line with that of UN Secretary-General Kofi Annan’s words, spoken almost 20 years ago "Globalisation is an irreversible process, not an option"1.

New trade paths

Trade continues to unite all corners of the globe but there are signs of change. America has become more inward looking. Whilst Europe remains as a constant presence, China is now opening its doors and creating opportunities to a degree never seen before. The Belt and Road Initiative and a long list of foreign investments by Chinese companies are being underpinned by a surge of middle class consumerism across Asia.

Even if China were to find it difficult to trade with the US for example, there remain plenty of regional and global markets for Chinese goods and services. And outside of China, the ASEAN celebrated its 50th birthday last year, while the world’s fastest growing nation, India, is making strides towards further regional integration. So, we see the world order shifting to the East, reflecting the stronger structural growth in these emerging markets. Trade, in our view, may find new paths, but should remain vibrant, in turn helping keep global economic growth at healthy levels.

An improved 2.0 model

So where does that leave investors looking for global opportunities? As the underpinnings of globalisation 2.0 continue to reveal themselves in all kinds of new and exciting ways, our HSBC Private Banking investment strategy remains nimble to reflect the changes and grasp the latest opportunities via our portfolio allocations. Notably, we are adopting a more domestic strategy in the US, while we adopt an international focus in Europe and Asia. China’s internationalisation and liberalisation in our view create a wealth of promising opportunities.

1 https://iccwbo.org/media-wall/news-speeches/globalization-is-irreversible-and-not-an-option-kofi-annan/

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