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The High Costs of Disengagement for China

In this new era of strategic competition between China and the West, disengagement is the order of the day. While this trend will impede economic growth, increase business costs, and raise prices for everyone, the economy that loses the most may well be China’s.

OXFORD – For more than three decades, the global economy was defined by unbridled integration and unprecedented interdependence. Neither political spats nor localized wars could slow the globalization train. Markets were markets, business was business, and multinational firms became more multinational. Not anymore.

In this new era of strategic competition between China and the West, disengagement is the order of the day. While this trend will impede economic growth, increase business costs (via supply-chain restructuring), and raise prices for everyone, the economy that loses the most may well be China’s.

The People’s Republic would not be where it is today without globalization. International trade, investment, and capital-market access drove economic growth, while knowledge transfer – aided by engagement among students, scientists, and scholars – enabled technological leveling-up.

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