Economic power projects diplomatic power. Trading partners will listen to each other. This is both a reality and necessity; however, the influence may be one-sided.
Economic powers will project their values, political system, and culture. It may not happen immediately; however, cultural and political hegemony will march with economic trade.
The switch in trading hierarchies from the US to China is astounding and consistent with the strong growth in China and its need for resources. The China effect is driven by extraction from emerging markets and the sale of goods to developed markets. This process is still relatively young so the credit, banking, and currency implications have still not matched the trade relationships.
Given the current struggles between the US and China, the exertion of power on trading partners will grow. China may not look for active but silent partners who will not interfere with their politics. The US will look for friends to shore its trade, but it is less dominant around the world. All this will play-out in debt and equity markets as EM firms may have to side with their economic interests. We have already seen some of these trade politics play through the oil markets.
No comments:
Post a Comment