In an era of rising geopolitical uncertainty, it is tempting to succumb to pessimism. But the truth is, geopolitical chaos doesn't only create losers. It has the power to create winners, too.
2024 will be a year marked by critical elections and higher odds for many negative geopolitical outcomes. Fear of escalation in the Middle East is growing, while the outcome of the election in Taiwan sets the stage for more discord in China-U.S. relations. More aggressive rhetoric coming out of North Korea is raising concerns over a potential war with the South.
These developments are unnerving. Yet risk in one part of the world often brings opportunity in another—and not just in the Global South but in the West, too.
For example, Europe is poised to benefit from U.S.-China discord. Since 2016, China's disengagement from the U.S. has been evident in the data. And you can expect to see more investment from China into Europe as Europe offers Beijing a relatively better investment environment than the U.S. While we have not yet seen a significant increase in Chinese investments into Europe, the picture is beginning to change. Chinese investment in Europe is growing, in particular in strategic sectors such as battery and EV production.
While China's motives are certainly economic, ultimately, this adds new manufacturing jobs to Europe and will allow the EU to accelerate the green transition by providing cheaper batteries and EVs at a faster pace.
Having some of the manufacturing supply chain on shore also allows European countries greater control.
For now at least, Europe offers Beijing a relatively safer investment environment than the U.S.—and vice versa, European investors will also be "safer" in China than their American peers. Too much is riding on Europe's economy to break with China, especially against the backdrop of President Biden's Inflation Reduction Act, which has increased U.S.-E.U. commercial competition.
Meanwhile, in the Global South, a significant group of winners are also emerging. There are the countries benefiting from the need to diversify away from China and Russia, and those helping China to diversify away from the U.S. These are countries increasingly at the center of new or rejigged supply chains but also countries rich in natural resources and relative stability.
Malaysia and Vietnam are becoming more important places for shipping re-routing, while Morocco's automotive sector has benefited from diversification because of the war in Ukraine. China is investing in Morocco and Mexico to better serve Western markets.
Japan and South Korea, with their geographic proximity to China and advanced technology sectors, are also benefiting from some of the divestment away from China. Commodity-centric economies are making the most of the situation too, not only by seeking to export more and finding new export destinations, but also by elevating their position in the value chain, transitioning from being predominantly commodity exporters to producers of intermediary goods.
For example, Indonesia has banned raw nickel exports, instead urging foreign buyers to invest in local smelters to process materials before they export. The policy aims to position the country a couple of notches higher up in the value chain.
Furthermore, Indonesia's plan to establish a domestic EV battery industry could lead to taxes on ferronickel exports, thereby lowering input costs for the homegrown Indonesian industry.
There are also countries benefiting from new security treaties with the U.S., as these often come with investment carrots that go beyond defense. The Philippines is a good example. In addition to agreeing to host U.S. military bases, it is receiving significant investment commitments from the U.S. across various sectors.
Then there are the countries gaining global influence by establishing themselves as new poles in the increasingly multi-polar world. India is benefiting from an abundance of new agreements spanning technology and green energy with the U.S., knowing that as the country's new priority partner in Asia, it can ask for a lot in return.
It makes sense to be wary of an ongoing period of elevated geopolitical uncertainty. It is creating a global realignment of partnerships and supply chains, and there is a risk of tensions spilling over into more conflict and disruption. Add a busy year of electoral campaigning, and you could forgive people for their pessimism. But we would be wise to think optimistically. Geopolitical upheaval creates winners, too.
Anna Rosenberg is Head of Geopolitics at the Amundi Investment Institute.
The views expressed in this article are the writer's own.
Uncommon Knowledge
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