OBELA Analysis

After 2018 and 2019, complicated by the United States' trade war with China, Britain's separation from the European Union and the fall in the United States' growth rate as the stock market index rises, 2020 broke all expectations.

The pandemic brought growth, employment and health problems to the economies. Raw material prices and international trade recovered rapidly. The financial boom and the fiscal problems of governments are remarkable.

We reiterate what we wrote a year ago, the general trend of the world economy is expected to continue its slow pace in most economies, with the clear contrast of the Asian economies that will continue to grow. This dynamic will change the economic axes from the Atlantic to the Pacific in a stable manner from now on.

The Regional Comprehensive Economic Partnership (RCEP) reflects the polarisation of world trade that accelerated with the trade war between the United States and China. It reinforces Asian regional integration and offers China the opportunity to increase the influence of the Renminbi (RMB). Since 2009, China has developed a monetary strategy that promotes its currency as a medium of international exchange. 

According to Swift, in October 2020, Chinese money accounted for a meagre 1.66% of transactions as a global currency. We have seen that the opportunity for the influence of the renminbi in Asia and in the world economy has grown, and the open question is why it is not yet a major currency. 

China's participation in global trade and investment builds confidence in the WBN, particularly in parts of Asia and Africa. However, even China uses the dollar in business and holds a high proportion of dollar assets, so it is unlikely to replace the dollar as the world currency in the short term.

The signing of the Regional Comprehensive Economic Partnership (RCEP) indicates a strengthening of regionalism in Asia while in the West it is in decline.

By the end of the last decade, the trade order and multilateralism were already being questioned. Some elements caused the crack in the globalization process in the West. The trade war between China and the United States; the withdrawal of the United Kingdom from the European Union; the emergence of populist and conservative governments in Europe of a nationalist nature, among others.

Latin America is not a region free of similar processes. The Southern Common Market (MERCOSUR), one of the most important integration projects that has been developed in the region, shows slight setbacks in its integration process.