Trade growth slowed to 2.1% in 2026 as FDI shifted from China to Vietnam, Indonesia, and India under “China 1” diversification driven by geopolitics rather than pure markets.

Asian supply chains are splitting into dual systems—one Western-aligned (transparency, data security) and one China-integrated—raising costs through duplicated capacity and conflicting standards.

The US and China advance incompatible tech rules while Asian states pursue mixed strategies (Singapore’s openness, Indonesia’s autonomy, Vietnam’s hybrid path), with regional partnerships forming to manage investment screening and digital governance.

Global trade growth declined to 2.1% in 2026, while foreign direct investment (FDI) was flowing out of China into other parts of Asia. Supply chains were undergoing significant diversification, as the economic geography of Asia was being dramatically reshaped. A new economic order was emerging in the region, increasingly governed by geopolitical considerations, rather than by market forces.

The post-Cold War era of globalization is slowly coming to an end. In order to compete with China, the United States has recently begun to implement an industrial policy of an unprecedented scale and scope. The CHIPS and Science Act, worth $52 billion, and the Inflation Reduction Act, worth $369 billion, for the sectors of semiconductors, electric vehicles, and clean energy, are two examples of this. At the same time, the outbound investment screening of American capital in order to prevent it from flowing into Chinese AI, quantum computing, and other advanced semiconductors is becoming stricter. China, in turn, is accelerating its dual circulation strategy. Here, state support for the development of strategic industries is being increased, and at the same time, capital controls are being tightened in order........

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