New Economic Reality: Geopolitical Risks and Globalisation Reset

October 2023

The global economy is facing weaker growth and increasing fragmentation, as a result of rising geopolitical tensions, especially due to the war in Ukraine and the US-China strategic rivalry. Protectionism, industrial policy and a focus on resilience are altering the global trade and foreign direct investment landscapes, creating considerable risks. Yet, the changing global operating environment also comes with new growth opportunities in the years ahead, especially in the Asia Pacific region.

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This report comes in PPT.

Key takeaways

Major geopolitical shifts fuel the reset of globalisation and weaken growth

Geopolitical risks, emanating primarily from the war in Ukraine and worsening US-China tensions, are the primary drivers of the globalisation reset. This will be a drag on global growth and will transform the global operating environment for businesses. In addition to heightened volatility and uncertainty, recurring economic disruption will become more likely.

The global economy will see growing fragmentation in trade and investment

The reset of globalisation will be fuelled by the rise of protectionist industrial policies, leading to significant shifts in global trade, investment and technology. Increasing fragmentation in the global economy among geopolitically aligned countries will alter the global trade and foreign direct investment landscapes, creating growth impulses, especially in Asia Pacific.

Highly concentrated industries likely to be first to diversify geographically

Due to high geographic concentration of industries supplying critical goods, government and companies have been reassessing their trade relationships and interdependencies amid rising geopolitical volatility. Hi-tech goods, machinery and textiles are some of the most heavily concentrated industries and are therefore most likely to drive production diversification efforts.

The reset of globalisation will provide numerous opportunities for business

Strategic decisions to diversify or relocate manufacturing sites will be driven by the competitive advantages of economies, including a broad labour pool, attractive operating costs, favourable trade policies and productivity growth. The reset of globalisation will facilitate the emergence of new manufacturing hubs in these economies over the next decade.

The Future Manufacturing Hubs Index supports sound strategic decisions

The Future Manufacturing Hubs Index highlights that economies in Asia Pacific are best positioned to benefit from the reset of globalisation. Numerous other developing economies have opportunities to attract light manufacturing sectors. Developed economies can successfully attract investment from sectors that are less sensitive to higher operating costs.

Key takeaways
Exploring geopolitical risks and the reset of globalisation
Rise of emerging markets has had implications on the global economic order and geopolitics
The reset of globalisation results from the cumulative impact of multiple events since 2008
Geopolitical risks and the reset of globalisation uncovered
Rising geopolitical tensions increasingly influence global business strategies
Growing geopolitical rivalries raise the risk of broader global economic fragmentation
Global fragmentation scenario: A long-term drag on the global economy
Industrial policy and global infrastructure investment to shape globalisation reset
Rising geopolitical tensions and global fragmentation require companies to monitor risks
Global trade flows reshuffle as governments and companies seek diversification
Geopolitical alignments reshape global FDI landscape to the benefit of emerging Asia
Emerging Asia, Eastern Europe and Mexico gain prominence in global hi-tech value chains
Commodity supply remains highly concentrated, risking protectionism and fragmentation
Case study: Tesla builds a new Gigafactory in Mexico, seeking to cut costs and nearshore
Case study: Siemens to invest in a new Singapore factory to boost resilience and innovation
Global trade and investment to evolve further as geopolitical alignment rises in importance
The need to secure supply of critical goods drives supply chain diversification
Industries with high concentration to lead diversification efforts
Identifying the next manufacturing relocation opportunities
Southeast Asian countries are best positioned to win amid a globalisation reset
Supporting industries are required to benefit fully from the globalisation reset trend
Case study: Zetwerk benefits from “China plus one” supply strategy
Supporting strategic diversification/relocation decisions with competitiveness analysis
Key takeaways
Geopolitical risks and globalisation reset: How to win
Evolution of geopolitical risks and the reset of globalisation
Questions we are asking
Future Manufacturing Hubs Index 2023 Results
Future Manufacturing Hubs Index 2023 Results


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