Complete US-China decoupling would be catastrophic for global economy, CEO says at Davos

Policymakers on both sides realise the consequences and are keen to find areas where the world's two biggest economies can co-operate

Workers at the Foxconn plant in Shenzhen, China. The Taiwanese company, which makes Apple’s iPhones in China, is also making them for the US company in India. AFP

A complete decoupling of the US and China would have catastrophic consequences for the global economy and policymakers on both sides are keen to find areas where the world’s two biggest economies can co-operate, the chief executive of money manager Fidelity International said in Davos.

There is a lot of “rhetoric” in terms of what is being said by officials, however, it is really important to “listen very hard to get what is actually being said”, said Anne Richards.

“My take is that the realisation that complete decoupling would be catastrophic for the global economy means that there is a genuine desire on both the US and Chinese sides to find the areas where co-operation can happen,” Ms Richards told a panel at the World Economic Forum on Tuesday.

The fact that these conversations are taking place between the two sides and there is an intent “not to completely fracture the global economy” is really important, added Ms Richards, whose company has $9.6 trillion in assets under administration globally.

The US and China have been at loggerheads since Donald Trump's Republican administration took control of the White House in 2016. The two sides engaged in a tit-for-tat tariff war that has seen the US slapping duties on more than $300 billion worth of Chinese imports.

The US has also imposed embargoes on advanced technology sales to Chinese companies and the US markets regulator has sought more scrutiny of the financial affairs of Chinese enterprises listed on US stock exchanges.

The situation has improved little in terms of a rollback of tariffs or China’s access to advanced technology under the Biden administration, but the rhetoric has toned down considerably.

Last year, China’s President Xi Jinping called for greater global economic integration and warned against decoupling, saying international affairs should be conducted by way of negotiations and discussions.

As Chinese companies seek to develop their own advanced technology industrial base, US enterprises that have relied on China for supplies and manufacturing for decades are now seeking alternatives.

Exports of iPhones made in India crossed the $1 billion mark last year, as Apple tries to cut its reliance on China, where the bulk of its smartphones are manufactured.

Most businesses, however, do not want a complete breakage in global supply chains and want to follow a “China plus one” policy, Ms Richards said.

• 

  Lawrence Summers, president emeritus and professor at Harvard University, speaks during a panel session on day three of the World Economic Forum's Annual Meeting in Davos, Switzerland. Bloomberg

• 

  Netherlands Prime Minister Mark Rutte and Tanzanian President Samia Hassan during a panel discussion in Davos. AP

• 

  EU Parliament President Roberta Metsola speaks at the forum. AP

• 

  Greek Prime Minister Kyriakos Mitsotakis, left, speaks to CNN journalist Fareed Zakaria at the Congress Centre in Davos. AFP

• 

  Iranian-American journalist and women's rights activist Masih Alinejad takes part in an interview with a TV news channel in Davos. AFP

• 

  Mr Mitsotakis is seen on a TV camera viewfinder at the Congress Centre in Davos. AFP

• 

  Faisal Alibrahim, Saudi Arabia's Economy and Planning Minister, speaks during a panel session in Davos. Bloomberg

• 

  Climate activist Greta Thunberg addresses journalists in Davos. Reuters

• 

  Mary Erdoes, chief executive of JP Morgan Chase's asset wealth management arm, listens during a panel session in Davos. Bloomberg

• 

  Officials take part in the World Economic Forum's Busting Business Barriers session. Photo: World Economic Forum

• 

  Dr Thani Al Zeyoudi, the UAE Minister of State for Foreign Trade, is among the senior officials in Davos. Photo: WEF

• 

  Former US vice president Al Gore, who is also a member of board of trustees of the forum, at a session titled Leading the Charge through Earth's New Normal. Photo: WEF

• 

  Famed cellist Yo-Yo Ma performs at the event. Photo: WEF

• 

  Deemah Al Yahya, secretary general of the Digital Co-operation Organisation in Saudi Arabia, at the forum's Turning Technologies into the Markets of Tomorrow session. Photo: WEF

• 

  US climate change envoy John Kerry at the Keeping the Pace on Climate session. Photo: WEF

• 

  Shoes worn by Rodrigo Oliveira, founder of Brazilian group Green Mining, emphasise support for environmental initiatives. Photo: WEF

• 

  Mina Al-Oraibi, Editor in Chief of The National, moderates a session on the Middle East that featured Prince Faisal bin Farhan, Saudi Arabia's Minister of Foreign Affairs. Photo: WEF

• 

  Officials and delegates take part in the Middle East: Meeting Point or Battleground? session. Photo: WEF

• 

  Polish President Andrzej Duda speaks at the Restoring Security and Peace session. Photo: WEF

• 

  Mr Duda, Nato chief Jens Stoltenberg, Canada's Deputy Prime Minister Chrystia Freeland, Yuliia Svyrydenko, first deputy prime minister in Ukraine, and US Director of National Intelligence Avril Haines attend a session hosted by broadcaster Fareed Zakaria. Photo: WEF

• 

  Olena Zelenska, Ukraine's first lady, watches as Ukrainian President Volodymyr Zelenskyy addresses the forum. Photo: WEF

• 

  Mohamad Al Ississ, Jordan's Minister of Finance, takes part in the session titled The Middle East: Meeting Point or Battleground? Photo: WEF

• 

  Mr Zelenskyy gives a video address to the forum in Davos. AFP

• 

  Former US secretary of state Henry Kissinger appears on screen during the annual meeting of the World Economic Forum, in Davos. AP

• 

  US governors Brian Kemp and JB Pritzker, senators Chris Coons, Joe Manchin and Kyrsten Sinema and representatives Maria Salazar and Mikie Sherrill take part in a panel discussion at Davos. AP

• 

  Saudi Foreign Minister Prince Faisal bin Farhan attends a session in Davos. AFP

• 

  Chinese Vice Premier Liu He on the opening day of the forum. Bloomberg

• 

  Fifa president Gianni Infantino, left, and Patrice Motsepe, billionaire founder of African Rainbow Minerals, arrive at the forum's venue in Davos. EPA

• 

  Finland's Prime Minister Sanna Marin, right, is interviewed by Fareed Zakaria in Davos. AP

• 

  Delegates visit the refreshments area between sessions in Davos. Bloomberg

• 

  Singer Angelique Kidjo performs in Davos. EPA

• 

  From left, WEF founder Klaus Schwab, European Commission President Ursula von der Leyen, Ukrainian first lady Olena Zelenska and Swiss President Alain Berset pose together during the 53rd annual meeting of the forum in Davos. EPA

• 

  Ms Zelenska hit out at Russia and said 'we cannot allow a new Chernobyl to happen'. AFP

• 

  Mr Berset addresses delegates in Davos. EPA

• 

  Ms von der Leyen said the 27-nation bloc would become much more forceful in countering unfair trading practices. Reuters

• 

  Ferdinand Marcos, President of the Philippines, arrives to attend a session in Davos. AP

• 

  Former US vice president Al Gore is expected to discuss decarbonisation, as well as efforts to build clean energy infrastructure and ensure equitable growth. EPA

• 

  From second left, WEF president Borge Brende, Carbon Direct vice chairwoman Nili Gilbert and US climate envoy John Kerry with other delegates in Davos. EPA

• 

  Credit Suisse chairman Axel Lehmann speaks during the 53rd WEF Annual Meeting. EPA

• 

  DP World chief executive Sultan bin Sulayem in Davos. Bloomberg

• 

  UBS chief executive Ralph Hamers speaks during a television interview on the opening day of the forum. Bloomberg

• 

  From left, Hong Kong Exchanges & Clearing Ltd chairwoman Laura Cha, Banco de Portugal Governor Mario Centeno, Bloomberg TV anchor Francine Lacqua, Credit Suisse chairman Axel Lehmann and S&P Global president and chief executive Douglas Peterson during a panel session on the opening day of the forum. Bloomberg

• 

  Mr Kerry delivers a speech at the Congress Centre in Davos. AFP

• 

  Musicians take part in a concert during the official opening of the forum. Photo: WEF

• 

  Jordanian vocalist Farah Siraj, centre, and Egyptian-Australian multi-instrumentalist Joseph Tawadros, left, perform during the I Sea You concert. Photo: WEF

• 

  Tawadros is one of the world's leading oud performers and composers. Photo: WEF

• 

  WEF managing director Alois Zwinggi speaks during a session called 'In Harmony with Nature'. Photo: WEF

• 

  Gail Whiteman, left, a professor of sustainability at the University of Exeter Business School, speaks during the 'In Harmony with Nature' panel discussion. Photo: WEF

• 

  Mr Schwab delivers a speech during the 'Crystal Award' ceremony in Davos. AFP

• 

  Actor Idris Elba, right, and his wife Sabrina Dhowre Elba, left, smile on the podium during the Crystal Award ceremony. AP

• 

  Kyiv Mayor Vitali Klitschko attends the Crystal Award ceremony. EPA

• 

  Singer Renee Fleming, right, receives a Crystal Award from Hilde Schwab, wife of WEF founder Klaus Schwab. AP

• 

  Delegates at the welcome reception before the official start of the forum. Bloomberg

• 

  Food for attendees at the welcome reception. Bloomberg

• 

  A kiosk serving hot chocolate from the UAE at the forum. Bloomberg

• 

  The Infosys pavilion at the forum. Bloomberg

• 

  Ukraine's pavilion in Davos. Reuters

• 

  Swiss police officers on patrol in Davos. Reuters

• 

  From left, German Vice Chancellor Robert Habeck with Swiss ministers Guy Parmelin and Albert Roesti before the start of a bilateral meeting in Davos. EPA

• 

  A delegate passes a digital display in Davos. Bloomberg

The trend of adding resilience to supply chains by having an alternative is evident from a rise in foreign direct investments into countries such as Indonesia, Mexico, Cambodia and other places, she said.

“I think that's important. It's a realisation,” she added.

For major companies, especially those that are publicly traded, it will be extremely difficult to completely cut off ties with China if sanctions similar to those imposed on Russia were levied against China, Lubna Olayan, chairwoman of Olayan Financing Company’s executive committee, told the panel.

“The pressure on the companies, and especially, [publicly-traded companies] who have major [revenue] contributions from China, I don't think there is going to be that choice [for them],” she said.

Most companies are having a hard time because the bulk of their supply chain is in China, but little by little, they are moving away to alternatives, Carmine Di Sibio, global chairman and chief executive of EY, said.

“China is very different to Russia. I mean, there's just too much revenue, there's too much at stake,” he said.