As globalisation softens, there will be less cost efficiency, less technology transfer, and less innovation. Ultimately, this will lead to less productivity growth, according to Ravi Menon, managing director of Monetary Authority of Singapore (MAS). The head of Singapore’s central bank was during his keynote Tuesday at SuperReturn Asia Conference, where he discussed key uncertainties in the global economy today.  Menon pointed to two major geopolitical tensions today between Europe and Russia as well as the US and China that were likely to persist over the medium term and lead to economic fragmentation.  Specifically, he noted that the “strategic rivalry” between China and the US was deepening across multiple fronts, he said, leading to increased decoupling in technology, finance, and trade.  The Sino-US trade conflict had dampened global trade, where tariffs implemented by both countries on each other had contributed to supply chain frictions and price pressures, he said.  As both countries looked to reduce their reliance on each other, he cautioned of an increasing risk critical technologies would be fragmented. Menon said: “As the two countries diversify their respective technology bases and supply chains, the development of important technologies such as semiconductors, AI, and 5G telecommunications will increasingly bifurcate.” He also highlighted the US government’s restrictions on the export of advanced chips to China, which were widely used to power AI, and the blocking of cross-border mergers and acquisitions between tech companies on both sides over anti-monopoly and national security issues.  Frictions between the two nations also had impacted both markets’ financial systems, where increased scrutiny of Chinese listings in the US had led to some Chinese companies considering a move to delist from US markets. In addition, China–along with other countries–were looking to reduce their dependence on the US dollar and payment system.  Over time, Menon noted, these developments could result in a more fragmented global financial systems.  “The growing decoupling between the US and China in trade, technology, and finance are likely to have far-reaching economic consequences,” he said. “At the broad macro level, this decoupling cannot be good for global economic growth. At the micro level, there will be adjustments in supply chains, trading relationships, technology procurements, and financial arrangements that will have differentiated implications across countries and sectors.”

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