Trends Report

Invest in a Fragmenting World


Table of Content


A brief look at globalisation

Globalisation - deglobalisation is not new

Global trade tension is not new. It surfaces ever so often. On Google Trends, the term “deglobalisation” first appeared in 2004. However, the word has recently been overshadowed by “derisking” – a term European Commission President Ursula coined and subsequently popularised by the Biden administration.

The World Trade Organisation has examined this tension in greater depth in their latest annual World Trade Report1 published in September 2023. More facts and figures confirm that the once-globalising trade faces fragmentation risks.

Honestly, this is not the first time the world has witnessed a rise and fall in global trade relations. According to Roman Szul2, the first wave of globalisation would have started in the 1400s with Spain, Portugal and the Netherlands conquering new territories in the name of God, pursuing gold and rare commodities. However, it was disrupted by the Napoleonic war and new ideas represented by the French Revolution.

The second wave spurred by the United Kingdom in the 1800s brought European civilisation to Africa and Asia. Likewise, it ended abruptly with the First World War, which marked the start of three decades of deglobalisation.


Global trade slows

Slowing global trade

The most recent third wave started in the 1980s with the decline of communism and the rise of democracy and free market capitalism. This third wave was driven mainly by Wall Street America and built on new ideas, values and global institutions.

The rise of the internet in 1989 and a relaxation of global capital control in 2000 further fueled global integration in the financial markets.

But, like the previous waves of globalisation, it now faces several challenges. There are four of them.

Four disruptions to globalisation

  1. While global trade integration has brought about greater production, consumption and expanding population, it has strained the environment. We are all experiencing it, if not parts of it.
  2. Macroprudential policies adopted by many central banks after the Global Financial Crisis in 2010 also unpicked the seam of the global financial quilt.
  3. Global trade also slowed as early as 2012, six years before the US-China trade war. This was inevitable as the global tariffs had reached a historical low by about mid-2010. Most trade barriers have been removed except those in trade-in services, which are harder to agree on standards and rules of practice. Aside from India, the world further lacks another successor country to China, whose entry to the WTO lifted global trade in 2001.

The great awakening

Awakening to the ideological differences

  1. Lastly, the awakening of the US to the ideological differences with China, which led to the start of the trade war in 2018, is the proverbial straw that broke the camel’s back.

    It is an awakening because the ideological differences have always been there. On the one end – we have the general laissez-faire policies favoured by liberal democratic US. Conversely, we have China’s preference for a statist, mercantilist- Leninist approach. Or simply, free market capitalism versus socialism with Chinese characteristics.

    This difference has always been there; it is the undercurrent upon which the two nation’s relationship was built. It is just that in the early days of their relationship, the US was convinced that China would, over time, as they engage in global trade, gradually lean towards a more open capital market and adopt greater democratic values. But, alas, that didn’t happen.

    Not only did that not happen, but trade imbalances between the two countries further amplified these ideological differences. As some say, the unmet expectations in the US about China’s political and economic reforms reached their pinnacle in the outbreak of the US-China trade war in 2018, when the trade deficit peaked at $419.4 bil.

The White House’s attitude toward China has moved from a long-held expectation of a fully liberalised and democratic China, following an open, inclusive and cooperative bilateral relationship in the beginning, to one that views the country as a threat that needs to be contained today

The political economy and dynamics of bifurcated world governance and the decoupling of value chains: an alternative perspective. Jan 21, 2023, Journal of Int Biz Studies.


Trade bifurcation

Global trade fragmenting into regions

This trade war, or the great decoupling in 2018, then under President Trump, continues today under President Biden.

Although, the geopolitical tension has been driven more by the US’s techno-nationalistic policies, protecting the US’s technological lead and preventing China’s rise. The decoupling, now renamed derisking by the US, focuses on sensitive sectors such as Information and Communication Technology. US FDI into China in 2020 has halved the peak in 2008.

Most recently, the US has further restricted new investment in China’s cutting-edge technology, such as semiconductors, quantum computing, and AI3.

Naturally, these politicised economic policies created a greater urgency for industries to leave China, fragmenting global trade and driving regionalism. TSMC (Taiwan Semiconductor Manufacturing Company), the world’s 2nd most valuable semiconductor company, has moved several of its outfits from China & Taiwan to Japan.

Recently, Bloomberg reported that the company is weighing on a third factory in Japan to produce cutting-edge 3nm technology, making Japan, potentially, a global chip-making hub4.

Many relocating industries also ended up in ASEAN. Consequentially, we have seen regional trade activity rising substantially, at a compounded annual growth of 20-30 per cent in the last couple of years compared to only 10 per cent over the past 10 years.

Fragmenting along political lines

As trade and capital flow slow, the former has also bifurcated into geographical blocs based on political alignment.

The WTO study measured the impact of trade tensions where the world was hypothetically classified into Western and Eastern blocs (China, most of North Africa, South East Asia) based on the similarities of their foreign policy. As a result of bifurcation, the goods trade flows between these hypothetical blocs have expanded by 4 to 6 per cent more slowly than trade within these blocs since the start of the Ukraine war in Feb 2022.

The WTO study measured the impact of trade tensions where the world was hypothetically classified into Western and Eastern blocs (China, most of North Africa, South East Asia) based on the similarities of their foreign policy. As a result of bifurcation, the goods trade flows between these hypothetical blocs have expanded by 4 to 6 per cent more slowly than trade within these blocs since the start of the Ukraine war in Feb 2022.

Amid the fragmentation, rulebook is being rewritten

As the fragmentation unfolds, global trade remains resilient, and trade policy is evolving. WTO members are modernising the WTO rulebook to support more inclusive, resilient and sustainable trade.

The recent COVID and Ukraine war also demonstrate the resilience of international trade. The production of medical supplies and vaccines was quickly scaled up and brought to where it was most needed. Countries could also source new wheat producers due to international trade relations.

The period of trade integration has enabled developing and emerging market to increase their economic growth and helped lift many out of poverty. The skills transfer from developed nations has also improved market productivity and alleviated many developing countries into the developed league.

As WTO has reported, global value chains have expanded and helped many developing economies, such as Vietnam, Cambodia, Lithuania, and Poland, over the past ten years.

Regionalism is not the only alternative

Nonetheless, the problem with this fragmentation lies in its divisive nature. WTO flagged that this phenomenon is problematic as it would result in greater divisiveness and risks to global economies and trade.

The argument that regionalism would avoid the concentration risks associated with production based on comparative advantages is flawed in that there would be few alternatives if these regional suppliers were interrupted. The alternative would only result in stunted growth for these nations.

Even at the regional level, self-sufficiency could potentially lead to greater risks as the alternative options will be minimal compared with global trade.

On this basis, the WTO advocates re-globalisation with new enhanced rules and institutional framework.

The global nature of the environmental challenges is another reason for the world to reconnect and collaborate. But nations must also develop credible programs to reduce home-based income inequality, a springboard for populist political movements pushing back against global trade integration.


APAC remains sound

Risk on the downside but APAC offers opportunities

Despite weakening global demand, Asia Pacific has reaped the benefits from the earlier periods of global trade. The region still possesses fundamental strengths that will continue to drive growth both in investment and consumption These factor, of which there are five, include;

  1. A large population with a substantial young working cohort, for that matter, continues to provide the demographic dividend to push for continual growth. But this is a double-edged sword, as the case of China’s youth unemployment can attest.
  2. APAC is a consumer and an early adopter of technology. Digitalisation is in full swing in APAC and will likely continue to drive the transformation of the APAC economy and the demand for supporting infrastructure, particularly data centres.
  3. Rising consumption on the back of middle-income growth and rising affluence will propel e-commerce retail further.
  4. Internet natives are coming into the workforce. And we can expect greater digital-reliant consumption by this cohort. Logistics assets and services will have to fulfil this growing demand.
  5. Equally, while the population is young, there is a rising greying pressure in South Korea, Singapore, Thailand, and China. Over the next decade, this cohort of retirees will balloon on the back of longevity. The need for health care, senior activity centres, retirement homes, and lifestyle villages will pressure these urban areas and provide the most significant investment opportunities.

These conducive fundamentals are probably the reasons why investors are still looking to invest into this region. According to ANREV, over 40% of global investors expect to increase RE investments in APAC, Europe and the US over the next two years, with 85% planning to deploy capital into RE during 2024.


Rising affluence in APAC

APAC offers many opportunities both from a production and consumption perspective. This is reflected in the more resilient real estate capital market in APAC, which finished the year on a more optimistic note, with retail, hotel, and apartment assets recording upticks in the fourth quarter. However, the full-year tally of capital market activity in 2023 is the lowest since 2012, given the high-interest rate environment that had clipped demand. Transaction volume (dollar value) in 2023 has fallen 20 per cent in APAC while globally, the activity has fallen 37 per cent, according to MSCI Real Capital Analytics (RCA) report.

The depth and liquidity of the regional capital market are reflected in the continual rise of regional capital as a formidable driver of APAC real estate market activities in recent years. This divergence between global and regional (APAC) cross-border capital activities in APAC countries since 2019 continues till today. On a full-year basis, global funds retreated to near the historical low, contributing some 9% and widening the gap with regional capital, which took up 16 per cent of transactions in 2023. Singapore- based capital has most recently displaced US-based funds as the top cross-border capital source into APAC.

In Short

To summarize, amid a politicized global trade environment, trade flow should remain at a moderated level going forward. Regionalism will continue due partly to more firms opting for the” just in case” production model rather than the “just in time” previously. ASEAN should be a net beneficiary of this trend.

While real estate investment has slowed recently, cross-border funds, i.e. APAC regional capital, have picked up, suggesting a deeper, more resilient capital market environment, offering foreign investors the liquidity they desire.


1World Trade Report 2023- Re-globlisation for a Secure, Inclusive and Sustainable Future.

2 Roman Szul, “The end of a new quality of the third wave of globalisation?” Beyond Globalisation:
Exploring the Limits of Globalisation in the Regional Context (conference proceedings), 2010,

3 ”Yi, Wu “US Bans New Investments in Targeted High-Tech Sectors in China.” China Briefing News, 27
Sep. 2023,

4 Mochizuki Takashi, and Jane Lanhee Lee. “TSMC Weighs Third Japan Chip Plant With Cutting-Edge
3nm Tech.”, 21 Nov. 2023,

About the Author

Dr Chua Yang Liang

Dr Chua Yang Liang heads up the Group Research & Analytics team at ESR. He is responsible for monitoring the economic and property markets across the Asia Pacific, and providing strategic data analytics to the Firm.

Dr Chua has almost 20 years of experience in the research and planning-related field. His most recent stint was with JLL where he headed their research teams across South-East Asia.

Trained as an urban planner, Dr Chua brings to the Firm a different perspective to property market research and he publishes original papers on property market trends as well as investment issues.

Dr Chua obtained his doctorate and Masters in City Planning from the University of Pennsylvania, USA, where he developed agent- based simulation for modelling the behaviours of real estate market. He has a Bachelor of Science (Estate Management) First Class Honours, from the National University of Singapore.

Up next