US-China decoupling: if it comes down to a US bloc vs China bloc, who stands to gain the most?
- Prominent Beijing adviser says loss of access to hi-tech goods from US would equate to having an abundance of rice but no delectable foods
- China is already trying to tackle the challenge through its dual-circulation strategy that aims to reduce reliance on other economies
If the decoupling between the world’s two largest economies were to continue gradually – with supply chains rearranged rather than completely severed – the consequences would be much more disruptive to the China bloc than to the United States bloc, according to a new report by Capital Economics.
This is largely because most of the global economy rests in the US bloc. Based on bilateral relationships involving all 217 global economies recognised by the World Bank, plus Taiwan, a total of 114 are categorised in the US bloc, while 90 are in the China bloc, the report says.
It also noted that although the China bloc has a slightly larger share of the global population, it accounts for just a quarter of the world’s gross domestic product (GDP), while the US bloc accounts for 68 per cent.
“China has a large number of countries in its camp, but most are small in economic terms,” the report said. “China still relies far more on the West for both final demand and inputs.”
A key implication is that the China bloc is far more dependent on demand from the US bloc than vice versa
Penned by economists Julian Evans-Pritchard and Mark Williams, the report contends that the biggest economic impact from decoupling will be on trade.
More than half of global trade takes place within the US bloc. But that figure is just 6 per cent within the China bloc – with 40 per cent of that small percentage being between mainland China and Hong Kong, and a good portion of those goods are then re-exported to countries outside the China bloc, the report said.
“A key implication is that the China bloc is far more dependent on demand from the US bloc than vice versa. 59 per cent of China bloc exports go to the US bloc, even before accounting for Hong Kong re-exports. In the other direction, the share is just 15 per cent,” the report said.