Not Picking Sides Is Paying Off for These Countries
More than 100 nations are embracing a new kind of geopolitical neutrality. For many, it’s working.
Geopolitics is shaping the flow of trade and investment around the world in ways it hasn’t in decades, fueling talk of another Cold War. Sandwiched between a US-led western bloc and another dominated by Russia and China sit at least 101 nations that we’ve dubbed the New Neutrals. Members of this informal group are betting they can attract investment from both blocs and benefit economically if they avoid picking sides. And there’s evidence that’s happening.
The Global Economy Is Splintering Into Blocs
Sources: UN Digital Library, IMF World Economic Outlook and World Bank
Note: 2022 GDP was used for Afghanistan, Lebanon and Sri Lanka.
The Global Economy Is Splintering Into Blocs
Sources: UN Digital Library, IMF World Economic Outlook and World Bank
Note: 2022 GDP was used for Afghanistan, Lebanon and Sri Lanka.
There’s one big way the New Neutrals are benefiting from staying above the fray: They’re drawing a growing share of foreign companies’ investment in new factories and projects. (The technical term is greenfield foreign direct investment.) One factor driving the trend is Chinese businesses spending more heavily to put factories in other countries to sidestep import tariffs and other protectionist measures from the US and the European Union.
Watch Why Some Nations Aren’t Picking Sides
What’s happening with trade flows is more complicated. The neutral countries’ share of trade with China, Russia and friends has been rising. At the same time the share of trade with the western bloc has declined. Two big reasons: Countries in the middle have been importing more Chinese-made goods and discounted Russian oil. Government officials in the US and Europe are concerned China is once again dumping its excess industrial capacity (this time electric vehicles) on the rest of the world.
In the emergence of these new blocs some see a powerful force running out of steam—globalization and the decades-long impetus to knit economies closer together. But as we show, that’s not the case. The global economy is just changing shape even as geopolitics drives flows of investment and trade.