Since these factors have not changed significantly, the global economic order will have less probability to undergo drastic changes
In recent months, the congestion in the ports of Southern California has continued to set a record. As of October 21, 79 container ships were waiting to be unloaded near the ports of Los Angeles and Long Beach, compared with only 40 at the end of August. The backlog of ships is not limited to Southern California. Data from Goldman Sachs shows that delivering a container by main U.S. ports now takes 3 times so long as it usually does. According to Goldman Sachs' estimates, there is a backlog of USD 24 billion in cargo outside of the two ports of Los Angeles and Long Beach. Solving congestion in U.S. ports may greatly help alleviate the shortage of cargo that has caused a sharp increase in prices in the past year. Goldman Sachs predicts that the backlog of U.S. ports may continue at least until the middle of next year, as there is no immediate solution to the potential imbalance between supply and demand in U.S. ports in the short term.
The situation facing the U.S. supply chain is merely one of the results of the impact of the COVID-19 pandemic on the global economy. Counting from the beginning of 2020, the pandemic has ravaged the world for almost two years, and even today it has yet to be substantially alleviated. With the global supply chain blocked, energy prices rising, inflationary pressures increasing, and geopolitical frictions rebounding from time to time, these issues constitute complex uncertainties and hinder the global economic order from moving towards a sustained and stable recovery. The whole world is now eagerly anticipating to exit such a predicament.
The initial judgment of ANBOUND's founder Chan Kung is that the global economic order will not emerge from the pandemic until the autumn of 2022 at the earliest. However, this result will not arrive unconditionally. If the world ushers in a new wave of outbreaks in the spring of 2022, and the response policies of various countries remain to be in disorder, under such circumstances it is likely that the world will only see the economic order gradually return to normal in 2023.
While such judgment might be thought of as overly pessimistic, we stress that we cannot afford to project our wish as reality and ignore the complexity of the current situation. With the outbreaks of COVID-19 in the past two years, economic, trade and investment activities globally have been impacted. Countries have responded to the pandemic at different paces, standards, and things have become rather chaotic. From this point of view, our judgment is not exactly pessimistic. If there is no substantial change in the situation, it will be difficult for the world economic order to return to normal in the short term.
We believe that for the world to exit the current situation, the following factors are involved:
- The spread of the pandemic: There are still between 300,000 and 500,000 newly confirmed cases every day in the world. Among them, the daily number of new cases in some countries remains considerably high. On October 26, more than 80,000 people in the United States, 43,000 people in the United Kingdom, 36,000 people in Russia, 30,000 people in Turkey, and 20,000 people in Germany were infected. In China, which aims to have zero cases, there have also been local outbreaks recently, and this has triggered the rapid tightening of local control measures. As ANBOUND has analyzed previously, there is the possibility of the recurrence of the pandemic in the spring of 2022.
- Recovery of the global supply chain in linking production countries to consumer countries: Judging from the status quo of the global supply chain, the situation is far from ideal. In the United States, the world's largest consumer market, the recent supply chain disruption has shown the fragility of the global supply chain system. In the global supply chain system established in the past period of rapid globalization, a systemic obstruction may occur even if a single part of the chain faces the problem. Goldman Sachs recently projected that the tight supply chain may continue until the middle of next year before it eases. Such projection also supports ANBOUND's aforementioned judgment.
- The deterioration of global inflation, and if the stimulus policies of major countries have begun to shrink: In the face of the severe capital surplus brought about by post-pandemic global stimulus policies, it is the general trend for countries to start tightening policies. Recently, global energy prices have continued to rise, which has stimulated market inflation expectations. Wall Street has recently predicted that the Federal Reserve might raise interest rates in advance, and this has triggered a wave of U.S. debt selling. If the global inflation situation deteriorates and the major countries are encouraged to start tightening policies, this will be bad news for global economic recovery.
- Deterioration in geopolitics: De-globalization, the COVID-19 pandemic, and the deterioration of the geopolitical situation are the main negative situations facing the global economy in recent years. It now appears that the spread of the pandemic has slowed down a bit but has not completely improved, while geopolitical frictions have eased but have not been reversed. All these are causing fluctuations in the geopolitical situation. Similar fluctuations will occur in U.S.-China relations and Russia-Europe relations. To cite an example, the U.S. government's recent promotion of Taiwan's entry to the United Nations is to make Taiwan issue a new geopolitical weapon. This is a bigger issue that the United States is utilizing against China after the Hong Kong issue.
- The pace and consistency of the post-pandemic global reopening: The world now is inclined to relax in the measures against COVID-19, save China which is still implementing stricter control standards. Major powers such as the United States have decided to reopen for international tourists in the near future, but China has a different rhythm. To be sure, China will not implement substantial policy relaxation before the end of the Beijing Winter Olympics. What happens next year will depend on the development of the pandemic situation. If the pace and degree of the world's post-pandemic opening-up are different, it will affect the recovery of the global economic order and prolong the time of obstruction in the supply chain.
- Major progresses in the treatment of COVID-19, and if it is promoted worldwide: The use of vaccines to control the pandemic has shown its effects, but this only plays a part in restoring the global order. More importantly, there is the need to find effective medical treatments before things can truly be "normalized". So far, there has been no major progress in the medical treatment of COVID-19, nor is there the widespread use of such treatment.
Final analysis conclusion
The main factors affecting the recovery of the current global economic system are as listed above. Since these factors have not changed significantly, the global economic order will have less probability to undergo drastic changes. On the whole, the current pandemic, economic, and trade situations will continue on the current trajectory. If things go well, the global economic order is expected to return to normal in the autumn of 2022. Conversely, any major changes will cause the global economic order to take a longer time in its recovery.