A massive global social transformation will take place globally, triggering strong economic tremors.
1. Causes
The primary reasons for the global-scale social transformation:
The root of all problems is economic.
The existing globalized economic order is fraught with issues:
Since the 1940s, dollar-led globalization—using the dollar as fiat currency for circulation and value anchoring—has catered to the significant productivity gains and rapid economic development of democratic nations after the Industrial Revolution.
Driven by the U.S., industrial upgrades and developments from the semiconductor industry in the 1970s to the internet industry in the 1990s have continuously elevated the fruits of globalization, enabling most countries and regions with sound political systems, robust laws, and economic independence to benefit from international division of labor, achieving unprecedented wealth accumulation and social welfare.
Since joining the WTO in 2001, China began enjoying globalization dividends along with its demographic dividend, leveraging cost and efficiency advantages to emerge as a standout, leaping to become the world’s second-largest economy, once reaching 70% of U.S. GDP.
China’s economic miracle is built on extreme exploitation of various factor resources to achieve enormous cost advantages. In essence, it lacks a sustainable mechanism for productivity growth and wealth generation, creating a "selfish, zero-sum" wealth deflation effect.
Since the 20th century, as global monetary and financial systems shifted from the gold standard to a dollar-based gold exchange standard, and then to a dollar fiat currency system—set against the geopolitical backdrop of the Cold War and the wealth dividend Western Europe gained from the Soviet Union’s collapse—U.S. and dollar-led globalization brought half a century of prosperity to Europe and America. Only with China’s rise in the 21st century has global trade balance become so delicate and fragile, exposing deep flaws in this round of globalization. China’s "involutionary" model as the world’s factory has posed a severe threat of cutthroat competition to other nations.
Democratic nations, led by the U.S., have come to deeply recognize the immense damage China’s model inflicts on globalization and shared development, effectively sealing the fate of globalization.
The U.S. has formally declared "Trump Doctrine / Trumpism"! To restructure an internally balanced economic development model and protect its own interests, the U.S. has begun and will continue to lead the restructuring of geopolitical, trade (tariffs), monetary, financial, and technological orders.
Geopolitics: Issues in the Middle East, Russia-Ukraine, Iran, Venezuela, Cuba, Colombia, the Taiwan Strait, along with annexing Greenland, stabilizing its backyard, mediating in the Middle East, Eastern Europe, and East Asia to achieve a new geopolitical landscape—prioritizing energy and sustainable economic benefits over blindly "maintaining" the so-called world order.
The current U.S.-led "international order" consumes vast economic resources with diminishing returns, fostering internal issues like bureaucracy and corruption in the U.S., as well as inefficiency and inaction in international organizations (UN, World Bank, etc.). The old order is entirely uneconomical for the U.S., with input-output imbalances long overdue. The U.S. has already withdrawn from several international economic, trade, and political organizations and will continue to exit and form new order-based organizations.
Technology and advanced industries: To maintain leadership and curb China’s technological catch-up in fields like AI, the main measures include: (i) preventing core technologies and advanced products (e.g., Nvidia’s high-end chips) from flowing to China; (ii) blocking talent in advanced research fields from moving to China (e.g., controlling visa approval rates for Chinese students and workers); (iii) coordinating with other democratic nations to enforce a blockade against China (e.g., Netherlands’ ASML, NEXPERIA).
Supply chains and trade: The U.S. heavily relies on imports of manufactured goods dominated by China. While these imports provide cheap consumer goods and low-cost supply chain products for industry, they have caused severe industrial hollowing-out, imbalanced industrial sectors, and unemployment among skilled workers. By raising tariffs, the U.S. aims to: (i) curb cheap manufactured imports, (ii) encourage domestic manufacturing growth, and (iii) increase government revenue. Additionally, through subsidies and low corporate taxes, the U.S. encourages industrial reshoring. However, given current factor costs, availability of skilled labor and engineers, government approvals, etc., industrial reshoring faces immense difficulties.
Dollar interest rates: The next 3~5 years will be a period of low dollar interest rates. Massive issuance of U.S. Treasury bonds and government borrowing over the past decade-plus has caused severe inflation and soaring prices in the U.S. To curb inflation, the Federal Reserve raised rates 11 times from March 2022 to July 2024, a cumulative 525 basis points, lifting the federal funds rate from 0%~0.25% to 5.25%~5.50%. High rates also suppress economic growth, so from September 2024 to December 2025, the Fed cut rates 6 times for a cumulative 175 basis points, lowering the federal funds rate to 3.50%~3.75%. Further cuts are expected.
Web3.0 brings a new wave of monetary and financial transformation, upheaval, and change.
AI-driven productivity upgrades are fostering major economic structural shifts.
2. Impact on Hong Kong
Dividends Hong Kong has enjoyed
Trade and capital dividends from the past half-century of dollar-driven globalization.
A gateway for Mainland China’s reform and opening-up, attracting foreign investment and advanced technology.
A bridge for Western capital to invest in Mainland China.
Hong Kong’s economic growth transition challenges
The reversal of globalization.
Changes in capital and trade cycles.
Hong Kong’s role in international finance and trade
Remains the first stop for Mainland capital exiting the country.
Also serves as a channel for Western capital to indirectly enter China.
