A year ago, experts predicted the “Roaring ‘20s,” a decade in which a tamed pandemic would unleash a new era of global growth. But 2021 had other ideas: Supply chains broke down, inflation spiked across the world, and gross domestic product (GDP) growth fell short of forecasts. Then came Omicron, the latest COVID-19 variant forcing a new series of restrictions.
As the year comes to a close, our GeoEconomics Center’s staff and senior fellows called out the numbers behind the headlines that best capture the shape of the global economy in 2021—and what to expect in 2022.
Those are the percentage declines from February to mid-December in the S&P/BNY Mellon China Select ADR Index and the Nasdaq Golden China Index, respectively, two key stock market indices measuring the performance of Chinese companies listed on Wall Street. Both indices hit all-time highs in February but subsequently fell sharply as US-China tensions and Beijing’s regulatory crackdown on its technology sector gained momentum. On the bilateral front, the US Securities and Exchange Commission has set the wheels in motion to delist Chinese companies as soon as 2024 because Chinese authorities refused to allow them to open their books to US regulators’ scrutiny. Meanwhile, China ordered the ride-hailing giant Didi Global to delist only months after its $4.4 billion initial public offering on the New York Stock Exchange. That order was only the latest peremptory move by Beijing to rein in internet and e-commerce giants like Alibaba Group and Tencent Holdings, whose shares likewise have plumbed new depths. All of this adds up to big losses for US investors and points to an eventual sundering of the financial-market ties that once appeared destined to bind the American and Chinese corporate sectors.
— Jeremy Mark is a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center. He previously worked for the IMF, The Wall Street Journal, The Asian Wall Street Journal, and CNBC Asia.
That’s the value of Chinese stocks and bonds held by non-Chinese portfolio investors in 2021. Over the past five years, this amount more than quintupled. Some are calling upon Western investors to further increase their holdings, while others argue that investing more in China poses a national-security risk for the United States and its allies. Capital markets are becoming the next front in the geopolitical competition between democracies and autocracies. This trend is not only affecting national-security policy, but it is also likely to increasingly impact international investors and financial stability.
—Elmar Hellendoorn is a nonresident senior fellow at the GeoEconomics Center and former economic adviser to the government of the Netherlands.
This is the anticipated total of remittance flows to lower- and middle-income countries in 2021, a more than 7 percent jump from 2020. Remittances are now 50 percent higher than foreign direct investment and more than three times official development assistance. Remittances routinely encourage economic development by raising consumption and aggregate demand, and in many cases directly support individuals’ education or provide micro- and small-business capital. Given COVID-19’s disruptions to work, income, and learning that brought disproportionate hardship to the most vulnerable and exacerbated inequalities, remittances are critical to household economic security, inclusive recovery, and growth in developing countries.
—Nicole Goldin is a nonresident senior fellow at the GeoEconomics Center and global head of inclusive economic growth at Abt Associates, a consulting firm.
In 2021, long-standing concerns about the financial stability of China’s property development sector forced a reckoning. The largest developer, Evergrande, defaulted in early December after teetering for months. Others followed. No group faces greater risk than urban households. Americans on average have 22.6 percent of their net worth in real estate. Due to skepticism about investing and prior government tendencies to prop up property, Chinese now have more than 70 percent of their life savings in property—the most at-risk asset class in the nation. Liquidity is limited, and if people want to reduce their exposure in a hurry, property prices will fall.
—Daniel Rosen is a nonresident senior fellow at the GeoEconomics Center and a founding partner of Rhodium Group.
So far, US President Joe Biden has nominated zero individuals to be administrator of the Office of Information and Regulatory Affairs (OIRA), making this the longest time the position has stood vacant at the start of a presidency. On his first day in office, in fact, Biden issued a memorandum pushing agency officials for recommendations on taking into account the distributional consequences of regulations, especially for disadvantaged and vulnerable communities; on ways OIRA can play a more proactive role in proposing beneficial regulatory initiatives; and on improving the transparency of the review process. But no recommendations have been released to date. And the lack of official leadership suggests that OIRA may have been sidelined altogether, which could have implications for the effectiveness, value, and viability of federal regulations.
— Caroline Cecot is a nonresident senior fellow with the GeoEconomics Center and an assistant professor of law at Antonin Scalia Law School at George Mason University.
That’s the share of the population that is fully vaccinated against COVID-19 in Guinea-Bissau. Low vaccination rates in even the smallest economies are the Achilles’ heel for global economic recovery, and vaccine nationalism is a direct threat to economic growth in 2022. Sensible and coordinated management of this global pandemic would see initial shots given in Guinea-Bissau before boosters are administered in, say, Germany. Omicron will hardly be the last variant as long as large undervaccinated populations exist. While the Group of Twenty (G20) nations and others have made some efforts to ensure vaccine supply to countries in need, much stronger logistical support of vaccine rollout is needed.
—Bart Oosterveld is a nonresident senior fellow at the GeoEconomics Center and an independent advisor to companies and governments in the areas of macroeconomic, credit, and country risk.
The United States, Canada, and Mexico traded more than $2.4 million per minute on average during the first ten months of 2021. The United States’ two neighbors are its top two trading partners this year, followed by China. This trade supports up to 12 million jobs in the United States and millions more in Mexico and Canada. The three countries not only sell to each other, but they also co-produce many products, with high percentages of US content coming back to the United States in finished manufactured products bought from its two neighbors. These facts signal that the economic partnership in North America is very important for economic competition with China, in addition to its direct impact on prosperity in the UnitedStates, Mexico, and Canada. It is, thus, very welcome that the three countries are rolling up their sleeves to improve supply-chain resilience, cross-border infrastructure and processes, workforce development, cybersecurity coordination, and more in the context of commitments in the November North American Leaders Summit, the revived US-Mexico High Level Economic Dialogue, the US-Canada Partnership Roadmap, and implementation of the United States-Mexico-Canada Agreement (USMCA). In addition to building cooperation on important tasks, officials must also work through sticky issues that can impact future North American competitiveness, such as Mexican proposals for energy reform and US proposals to favor US-made electric vehicles and for interpreting the USMCA’s rules of origin for vehicles (the most integrated North American industry). A great deal is riding on the joint work to solve problems and make the most of the excellent economic opportunities for North America.
—Earl Anthony Wayne is a nonresident senior fellow at the GeoEconomics Center and a former US ambassador to Mexico.
This is the amount the International Monetary Fund (IMF) estimates is lost in global tax revenue because of corruption each year. Can US Treasury Secretary Janet Yellen, Deputy Secretary Wally Adeyemo (who recently cited this figure in a speech about corruption), and their key lieutenants make the changes necessary to clean up glaring holes in US regulations that have led, as Yellen said recently, to the United States being perhaps the best place to launder money? Can the White House and Treasury help internationalize efforts to clean up the global financial system? It’s not just lost tax revenue at stake; financial transparency makes markets more efficient, creates greater and more equitable growth, and serves essential US national-security and foreign-policy goals by shining a light on the corruption that autocrats and others use to maintain power and repress people.
—Brian O’Toole is a nonresident senior fellow at the GeoEconomics Center and former senior US Treasury Department official.
That is the number of homeless people in the United States, estimated at the start of 2020 before the pandemic—among the highest in the Organization for Economic Co-operation and Development (OECD), a group of wealthy countries. Although low as a percentage of total population, that number is still a shameful stain on the richest country on earth and reflects a deep polarization in US society—where the top 1 percent of Americans have $41.5 trillion in wealth, or more than 30 percent of the total. This inequality contributes to deep and bitter social division, compounding seemingly irreconcilable differences over cultural issues such as abortion; gun control; whether racism in the United States is systemic; or, more recently, whether vaccine and mask mandates are necessary public health measures or a curtailment of personal freedom.
—Hung Tran is a nonresident senior fellow at the GeoEconomics Center and former IMF official.
This is the estimated value of global sales of semiconductors in 2022, up from $350 billion only five years ago. After years in which large economies had outsourced semiconductor production, often to offshore foundries, now they are trying to support a domestic industry, mainly for geoeconomic reasons. Some examples: Sony is building up a domestic chip plant in Japan through a joint venture with Taiwan Semiconductor Manufacturing Company. The United States has allocated approximately $52 billion to provide grants and incentives to the semiconductor industry over the next five to ten years, primarily for research, through a measure known as the CHIPS for America Act. The European Union has announced a goal of doubling domestic semiconductor production as a proportion of the global market share (from 10 percent to 20 percent) with the forthcoming European Chips Act. But most important, the end of September 2021 saw the first meeting of the EU-US Trade and Technology Council, during which the two sides committed to building a partnership on rebalancing global semiconductor supply chains in order to improve their respective security of supply and ability to design and manufacture semiconductors. It’s ground for transatlantic cooperation.
— Andrea Montanino is a nonresident senior fellow at the Atlantic Council and a former executive director of the IMF.
That’s the number of designations to the Entity List, which imposes export-licensing restrictions. The US Department of Commerce has increasingly utilized Entity List designations (among other controls) to advance US national-security and foreign-policy objectives. These restrictions are intended to inhibit the supply of often critical US-regulated goods, technologies, and software to actors posing a threat to US national security. Not surprisingly, the additions thus far this year include parties located in countries presenting heightened risk to the United States, including China (the highest represented country year-to-date) and Russia. Importantly, implication in human-rights violations and abuses appears to have a been a growing basis for designation, consistent with the Biden administration’s condemnation of these activities. Also notable is that several of this year’s designations target the development of spyware intended for use on government officials and others. Given that cybersecurity is a national-security priority, additional designations (along with other regulatory controls) of parties that engage in malicious cyber activities seem likely going forward. Commerce also added several parties in Myanmar on account of their support for the Burmese military, whose coup overthrew the democratically elected government. Critical for compliance purposes, close monitoring of Entity List designations also sheds light on how the administration may be contemplating security and policy threats, allowing exporters to better anticipate and adjust to regulatory trends.
— Annie Froehlich is a nonresident senior fellow at the GeoEconomics Center and Director and Senior Counsel, Sanctions and Export, for Carrier Corporation.
That’s the latest retail inflation reading in South Korea. With inflation likely to come in around 5 percent in the United States for the year, it’s been easy to point to unprecedented fiscal and monetary stimulus as the culprit (indeed, the United States, at $5.3 trillion, spent nearly as much as the rest of the world combined on stimulus in 2020 and 2021). But no one in South Korea got two-thousand-dollar stimulus checks from the US Treasury. The underlying drivers of the global inflation story are antiquated supply chains facing unprecedented demand. This was a year in which the machinery of the global economy had to rapidly adjust to a new reality, and it struggled in the process. No single image captured this idea more than the cargo ship Ever Given stuck in the Suez Canal for six days. But market forces are powerful. In the second half of 2021, we have already seen an easing of the supply-chain crunch as companies and governments have collaborated in unprecedented ways to modernize the way ships, trucks, and trains all communicate. That’s good news for those looking for inflation to come back down in 2021.
—Josh Lipsky is director of the GeoEconomics Center and a former IMF official.
That’s the combined GDP (as of 2019) of the members of the Regional Comprehensive Economic Partnership (RCEP) trade agreement, which supplanted USMCA as the world’s largest free-trade agreement. Ratified last month, RCEP is China’s first multilateral trade agreement and constitutes the first time in a generation that the United States is not at the helm of the world’s largest free-trade agreement. Although Chinese leaders have not explicitly pointed to RCEP as a milestone for China’s ascendancy over US economic leadership in Asia, the agreement is a clear example of Beijing solidifying its role as the driver of the region’s trade flows. RCEP will also be a litmus test of whether China might eventually be incorporated into the region’s other major free-trade agreement: the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). China formally submitted a request to join the CPTPP in September but was met with strong skepticism over its ability to comply with the agreement’s regulatory requirements. However, if China shows it can comply with RCEP without issue, key CPTPP nations have suggested there may still be a path for a Chinese ascension to CPTPP. It seems the world is content to continue the push for free trade—with or without the United States.
—Niels Graham is a program assistant at the GeoEconomics Center.
That’s the price increase for lumber between October 2020 and May 2021. This historic “lumber bubble peak” of $1,515 per thousand board feet in May contrasts sharply with the traditional historic trading range of three hundred and fifty to five hundred dollars. From their peak in May, prices plummeted in August by about 75 percent to under four hundred dollars. So what’s behind this historic rise and fall, and what’s ahead?
From October 2020 to May 2021, lumber prices increased because of lumber-mill closures, pandemic-induced labor shortages, an increase in tariffs on lumber, and an increase in demand by contractors. However, starting in May, sawmills ramped up production while the demand for lumber fell, leading to lower prices.
Now buyers are returning, driving prices back up. Meanwhile, sawmills again curbed production due to the summer excess inventory and wildfires in the Pacific Northwest and British Columbia. While we are nowhere near spring 2021 lumber prices, they are trending upwards. President Biden’s recent decision to double the duties of Canadian softwood lumber from 8.99 percent to 17.9 percent means that the biggest lumber exporter to the United States is now faced with an additional ninety-nine dollars for every thousand feet of softwood lumber. This, coupled with flooding in British Columbia that affects lumber transportation infrastructure, could lead to a new record high price of woodwork in early 2022.
—Marie Kasperek is a nonresident senior fellow at the Atlantic Council and director of the Institute of International Economic Law at Georgetown University.
A total of 274 million people will need humanitarian assistance and protection in 2022—or one twenty-ninth of the global population, an unprecedented number which represents an increase of more than 250 percent since 2015. The new year will also mark record numbers of people experiencing hunger and being forcibly displaced. Needs continued to rise through 2021 in crisis zones with restricted access to COVID-19 vaccines and an unrelenting pandemic, political instability, and climatic shocks. In some areas, such as Afghanistan, Ethiopia, and South Sudan, the confluence of all these drivers has significantly worsened the crises. This reflects a failure of states, statecraft, and the international economic and legal system in fulfilling their responsibilities toward civilians. As humanitarian needs continue to bulge, the ability of multilateral institutions to rise to the challenge will be a critical test of their relevance in global governance.
—Mrugank Bhusari is a program assistant at the GeoEconomics Center.
This is the amount of money US companies paid in ransom in the first half of 2021, exceeding the total amount paid in 2020 by 42 percent. Ransomware business is booming and the black hole in the US economy is widening as American tech, insurance, and energy companies choose to make payments to cybercriminal groups. The main problem is that ransomware payments encourage cybercriminals to carry out more attacks. The US government put several measures in place to prevent American companies from paying cybercriminals, such as disclosure requirements and sanctioning of cybercriminal groups. However, in most cases, companies prefer paying the demanded amount over losing their reputation. With no solution in sight, ransomware payment could reach an all-time high in 2022.
—Maia Nikoladze is a program assistant at the GeoEconomics Center.
The last time the world agreed to new rules for cross-border taxation, the year was 1920. It wasn’t the OECD but the League of Nations that helped broker the so-called 1920 Compromise. So when 136 countries signed a deal this past October aimed at ensuring companies pay a minimum tax rate of 15 percent, it marked a notable shift in global taxation dynamics. The basics are clear enough: 15 percent is the new effective corporate minimum rate, and there will be revenue sharing between jurisdictions where companies operate versus where they are headquartered. The OECD estimates the minimum tax will generate $150 billion in additional global tax revenues annually. Beyond the numbers, there’s a bigger takeaway: For years folks said the Group of Seven (G7) countries would never agree to a deal. Then they said the G20, which includes China, wouldn’t sign on. Then they said Ireland and Hungary wouldn’t budge. But they did. Just a reminder that even if you have to wait a century, progress is possible.