In 2020, Sebastian Mallaby of the Council on Foreign Relations announced the beginning of the “age of magic money,” in which advanced economies would “redefine the outer limits of their monetary and fiscal power.” By July 2022, Mallaby was predicting that this age was coming to an end. But, while most major central banks are now reversing quantitative easing (QE) and raising interest rates, China may need to head in the opposite direction.

Impacts of the United States’ ban of semiconductor exports to China have yet to be fully understood. Beijing must scramble to discover new ways to access the most critical supply chain.

News headlines described the Biden administration’s latest semiconductor-focused sanctions on China as sheer annihilation, which could ‘decapitate’ the overall semiconductor industry.

We are living in a very different world. Shifting macroeconomic trends including diversification and second sourcing because of de-globalization and de-coupling have significant implications for the global economy. The strategic competition between the United States and China and other major geopolitical developments will fundamentally shape the world we live in.

Modernization is the only way forward for China, which is offering enormous opportunities, not threats, to the world. There is every reason to seek areas of mutual benefit with the United States and the road map to the future, if followed, will be good for China and good for America.

After the 20th Party Congress, relations with the U.S., Europe and Japan are likely to improve, as China continues to pursue high-quality development and the integration of domestic demand with supply-side structural reforms.

Sanctions placed on Russia by Europe and the U.S. have only allowed Moscow to continue making money off exports, while simultaneously strengthening its relationship with Beijing.

Export controls are central in economic competition between the U.S. and China. A new U.S.-led multilateral export control regime could further entrench efforts to exclude China from accessing Western technology.

Last January, China’s government forecast that the country’s economy – which, at the time, was experiencing a strong rebound after the initial pandemic slowdown – would grow by 5.5% in 2022. But by the second quarter, unfortunately, the rapid spread of the Omicron variant of COVID-19 had forced the government to implement emergency containment measures in its most economically dynamic cities, including Beijing, Guangzhou, Shanghai, and Shenzhen.

America may not be able to block China’s core momentum in the manufacture of high-end semiconductors, even with its suppressive CHIPS Act. Rather, the global semiconductor industry will inevitably divide into two parallel, competing systems.