Globalisation with Multipolar Characteristics: The West is FREAKING OUT | Dr. Warwick Powell

## China's Economic Shift & Response to US Tariffs The recent tariff episode was less a surprise than a stress test: it exposed how much China had already retooled its economy in anticipation of pressure from the West. The exchange makes clear that Beijing did not stumble into confrontation unprepared. Rather, over the past decade China has deliberately reshaped the composition of its growth to reduce vulnerability and increase strategic autonomy. That shift — moving away from a real estate‑heavy growth model toward a capital allocation favoring high‑tech manufacturing, energy transformation and automation — is central to understanding how Beijing weathered tariffs and signalled a different posture to Washington. A decade ago China’s boom was fuelled by explosive credit flows into property. The housing sector had become massively leveraged: developers borrowed to acquire land and build, while consumers borrowed to buy homes. This twin-sided credit binge produced rapid asset inflation and falling affordability. Beijing’s response — an intentional deleveraging of real estate — was consequential. Public policy nudges, regulatory interventions such as the "three red lines", and directed sales of overseas assets pulled credit out of speculative construction without precipitating a banking collapse. The result was a substantial contraction in the real estate sector’s share of activity, with property values reverting to levels seen earlier in the decade while unemployment and wages remained relatively stable. That reallocation of capital matters politically and economically. By redirecting finance into strategic sectors — semiconductor supply chains, robotics, renewable energy, and advanced manufacturing — China has rebuilt resilience into its growth model. It has also created leverage of a different kind: an industrial base capable of satisfying domestic demand and exporting value‑added goods. When recent tariff measures were announced, China’s rapid and measured response within days reflected not panic but calculation. The government could both protect domestic producers and frame its actions as defence of a stable international economic order. The short‑term stability that followed the turmoil indicates the deleveraging project largely achieved its aims: less systemic exposure to property cycles, more capacity in sectors that matter geopolitically, and a higher threshold for external coercion. ## China's Role in "Globalization 2.0" What we are watching is not merely a rebranding of old globalization but the emergence of a second, multipolar chapter. The contours of global trade that dominated the postwar era — a system stitched largely around U.S. demand, dollar finance, and Western institutions — are being reshaped by the diffusion of production networks, finance and infrastructure outside the old core. China has been a central actor in this transition, not because it seeks to replicate American hegemony, but because its economic footprint and institutional initiatives are remaking the practical mechanics of cross‑border interaction. One visible vector of this transformation is the geographic reorientation of trade. Over the past two decades China has become the largest trading partner for well over a hundred countries. That shift brings with it not just bilateral flows of goods, but new power to recycle surpluses into global investment. Historically, China’s current account surpluses were largely parked in dollar assets; more recently Beijing has used those assets both as collateral to support RMB‑denominated credit and as direct finance for overseas projects. This recycling accomplishes two things: it internationalizes the renminbi incrementally and it backs infrastructure and industrial development in partner countries, reinforcing alternative institutional linkages to existing Western‑led channels. Institution building is another facet. Initiatives like the Belt and Road, the BRICS Bank and proposals for regional development banks and currency swap networks are creating parallel architectures. These are not simply copies of Western institutions; they reflect different priorities — scale of physical connectivity, pragmatic project finance, and a willingness to accept a range of governance models in exchange for economic engagement. Over time, these networks can mature into durable, if heterogeneous, layers of global governance that permit trade and investment to flourish outside a single hegemon’s shadow. Yet it’s important to be cautious about linear narratives of “replacement.” The renminbi will not overnight supplant the dollar simply because trade flows tilt toward Asia. Currency and financial dominance rest on deep liquidity, institutional trust, and a broad ecosystem of market makers and legal arrangements. China’s current strategy — enabling trade settlement in non‑dollar terms where practical, building alternative payment mechanisms, and locking in long‑term infrastructure ties — aims to create the practical preconditions for a multipolar currency architecture rather than a sudden switch to a new reserve currency. In short, Globalization 2.0 looks like an evolving mosaic of interlinked regional hubs and cross‑regional corridors, not a one‑for‑one handover. ## Is a Networked Future Replacing the Hegemon? The deeper question is whether the era ahead will be characterized by a single dominant state or by a more distributed, networked order. The evidence discussed in the exchange suggests the latter. Instead of a classic hub‑and‑spoke system with one preeminent hub, the emerging pattern resembles a constellation of centers — overlapping webs of economic, technological and political ties with multiple nodes of influence. Trade and finance flows are increasingly multidirectional; supply chains are diversified across several centers; digital and technological architectures are plural and partially interoperable. This networked future has important implications. First, it reduces the ability of any single actor to unilaterally coerce the entire system, because alternate pathways and partners exist. That is precisely what makes tariffs and sanctions less determinative than they were in a more centralized order. Second, distributed networks can be more resilient: shocks at one node are often absorbed or rerouted, provided the network has redundancy. Third, this dispersal complicates traditional alliance politics: states will seek transactional relationships with different poles to balance risk and secure gains rather than aligning exclusively behind one patron. But networks are not the same as benign pluralism. Multipolarity can be competitive, featuring overlapping, sometimes conflicting norms and standards. Where institutional fragmentation occurs, transaction costs rise and political frictions can escalate. The challenge for policymakers is to shape the emerging networks so they are transparent and rules‑based enough to lower uncertainty, while flexible enough to accommodate diversity. As Dr. Warwick Powell observes, China’s approach seems less about replacing the United States than about amplifying the number of viable centers, nudging the system toward a multidimensional order that is more complex but potentially more stable if properly managed. ## How Asia is Adapting to a Multi-polar World Asia’s response to the end of undisputed American primacy is pragmatic and diverse. States across East and Southeast Asia — including middle powers like Australia and Japan — are recalibrating by hedging, deepening regional economic integration, and nurturing their own industrial and technological capacities. Hedging strategies involve engaging economically with China while maintaining security ties with the United States and other partners. This dual engagement reflects a calculation that economic interdependence with China is too important to sever, even while strategic anxieties push for diversification. Practical adaptation takes many form

Globalisation with Multipolar Characteristics: The West is FREAKING OUT Today I’m talking again to Dr. Warwick Powell, an Adjunct Professor at Queensland University of Technology in Brisbane. In this part 1 of the discussion, we dive into China's strategic economic transformation and its response to US tariffs. We explore how China successfully deleveraged its overheated real estate market, redirecting capital into high-tech manufacturing to build resilience against external pressures. We then broaden our discussion to the emergence of "Globalization 2.0," questioning whether we're witnessing a simple replacement of one hegemon or the rise of a more complex, networked, and multi-polar world. We analyze China's role in shaping this new global system through initiatives like the Belt and Road and the push for non-dollar-based trade. Finally, we turn our attention to how nations across East and Southeast Asia, including Australia and Japan, are adapting to the end of undisputed American primacy and navigating the shifting dynamics of this new era. Links: Warwick's substack: https://warwickpowell.substack.com/ Warwick's YouTube channel: https://www.youtube.com/@TIOTalksWithWarwickPowell Timestamps: 00:00:00 Introduction 00:00:14 China's Economic Shift & Response to US Tariffs 00:12:36 China's Role in "Globalization 2.0" 00:21:14 Is a Networked Future Replacing the Hegemon? 00:25:25 How Asia is Adapting to a Multi-polar World #Pascal Hello, everybody. This is Pascal Lottaz from Neutrality Studies, and today I'm talking again with Dr. Warwick Powell, an adjunct professor at Queensland University of Technology in Brisbane. Warwick, welcome back. #Warwick Powell Great to be back with you, Pascal. #Pascal Always glad to have you. I really want to ask you first a bit about China, and then we’ll switch over to the United States. We’re now a couple of months past the whole tariff frenzy that was explicitly designed for and against China. China kind of did the opposite of what the EU did—they didn’t capitulate. They basically said, “No, fine, we’re going to defend our economy,” and that scared the United States quite a bit once it realized how dependent it was on those rare earths from China. So, where are we now, and how is China currently dealing with the mixed messaging coming from the United States? Let’s put it that way. -- 1 of 9 -- #Warwick Powell Look, I think when the tariffs were introduced on the 2nd of April this year, China’s response within 48 hours told us something very important about the approach it was going to bring to the table this time around. That approach really drew heavily on the experiences China had during the 2017–2018 period, when President Trump, version 1.0, began the trade war. China felt quite unprepared then. It certainly didn’t believe it was in a position to weather the storm as much as it does today—and I’ll come back to today shortly. At that time, it in some respects reached accommodations with the United States probably a little quicker than it would today. The other issue, of course, at the time—so this is 2017, 2018—we need to remember that China’s economic structure was quite different from what it is today. The structure of China’s economy eight years ago was still heavily geared toward real estate as a critical driver. Real estate delivered close to 30% of GDP growth in China, and it was heavily leveraged. It wasn’t really the kind of industry China needed to rely on in the face of what was beginning to unfold as a concerted effort to contain China’s economic development—both through tariffs that restricted China’s access or penalized Chinese manufactured products going into the U.S. market, as well as through the introduction of restrictions on China’s ability to purchase high-end technologies. So China had to make a very radical adjustment in terms of the structure of its own economy from that time onwards, and it’s done that with a relatively high degree of success. It’s managed to deleverage real estate to a point now where the real estate industry represents about half of what it did back then. But at the same time, it didn’t tank the economy or cause contagion through the Chinese financial sector. The restructuring led to growth in capital and finance lending to high-end manufacturing. That’s the structural change China had to undertake, which has enabled it to address today’s challenges with a different posture. #Pascal Sorry, I just—I'm not—what do you mean by “leveraging”? I don’t really understand the term. How is the housing market so leveraged, and then how did they deleverage? What does that mean? #Warwick Powell So, credit growth—leverage is the amount of credit tied up in a particular industry, and the credit flowed to both the buy side and the developer side. On the developer side, there were substantial amounts of credit growth for land acquisitions and construction. On the other side, there was tremendous credit growth for mortgages. So both the demand and supply sides, so to speak, were being fueled by massive credit growth. That credit growth came off the back of China’s core response to the global financial crisis. You can see how these events unfolded and triggered downstream consequences. -- 2 of 9 -- So when the 2008 financial crisis took place—mainly in the United States, then spread to Europe and eventually seeped into other parts of the world—China’s response was a very substantial $400 billion fiscal injection into its economy. That created stimulus domestically but also generated significant liquidity in the global system. The stimulus was directed toward major capital investments, particularly in transportation, electricity systems, and, of course, urbanization. So the period from about 2012 through to 2020 saw a massive expansion of urban areas and the urbanization process that came with it. As that took place, we saw that by around 2017, the rate of credit growth—the annual rate at which credit was accelerating into real estate—had reached close to 24%. So it was really flying. The rate of acceleration is actually one of the critical drivers of growth and asset price inflation. What began to emerge around 2017–2018 was a concern that the real economy—the pace at which real assets could actually be developed, you know, property, housing, apartments, and things like that—was never going to be able to keep up with the rate at which credit was pouring into the system. #Pascal Right. #Warwick Powell It’s a bit like the Japanese problem in the 1980s. Yeah. And the fact that we’re now starting to see asset price inflation—well, asset price inflation meant real estate and housing prices almost doubled as a ratio to income. So we were looking at what was, in effect, a halving of affordability across the board. By 2017 or 2018, the banking authorities, together with the government at large, sought to deleverage the real estate industry. People will remember President Xi Jinping saying that real estate is for living in, not for speculation. The governor of the PBOC, the People’s Bank of China at the time, explicitly talked about the risk of China’s own “Minsky moment,” meaning that exuberance in credit creation could lead to a crash when the real economy couldn’t keep up. And they sent out messages to the industry. The messages initially came through political signaling, basically saying, you know, calm down, slow down what you’re doing. They also sent messages privately—through back channels, at the boardroom level—to development companies, essentially telling them, you need to sell some of your assets and reduce the amount of loans you’ve got outstanding. Many companies actually did that, particularly with their overseas holdings. A lot of the property development firms had gone around the world, and in Australia, for example, many assets were acquired with a view to being developed later on. A lot of those were liquidated between 2018 and 2020. Not all companies did that, as we know. And in fact, some continued borrowing. So by 2020, the “three red lines” were introduced, which more or less squeezed credit growth to real estate development. The real estate guys largely accepted it. Those that didn’t sought money offshore—and that’s Evergrande and others. They -- 3 of 9 -- literally said, well, if we’re not going to be able to get credit lines from mainstream banking on the mainland, we’re going to raise money through corporate bonds in the international market, secured by our mainland assets. The end result was ultimately what we’ve seen now, which is that Evergrande was delisted a couple of months ago from the Hong Kong Stock Exchange. International investors in the bonds have taken a substantial haircut, and in the end, the assets have been partly transferred to state-owned development companies to finish off projects. Some of the founders of these development companies have been severely punished, incarcerated, and so on. That was the deleveraging that took place, aimed at shifting national resources into areas the government at the time believed would become vitally important if China was going to manage the external risks that emerged as a result of Trump 1.0. Biden, of course, carried on from where Trump left off, insofar as China was concerned, and so China really had to double down on its investments in high-tech manufacturing, robotics, energy transformation, and the like. So today we’ re at a point where, in trying to manage this transition, real estate prices are back to roughly where they were at the beginning of the boom. So they're back to roughly where they were in 2013 or 2014. Unemployment system-wide has stayed around 5.2%. Real wages have increased, and there was no banking contagion. So I think it's fair to say that, as far as a macro deleveraging of one sector is concerned—without tanking the economy—this has been a relatively successful effort. But it was essential not only to recalibrate the growth drivers of China’s economy for its own sake, but also to enable China to be in a position to deal with what it clearly anticipated would be an extended period ahead in which Western powers, particularly the United States, would seek to contain and pressure it. So it's now at a point where I think China is dealing with the United States from a position of greater confidence—more confident in its ability to absorb shocks and to respond when necessary. And that’ s not only in the name of protecting and defending the Chinese economy and Chinese enterprises, but also, interestingly, Pascal, in the name of defending the global international system. #Pascal Yeah, I mean, China positioned itself really well to take up the mantle of a different kind of globalization, after the United States basically threw it on the ground and said, “No, we’re now going full steam into mercantilist, protectionist measures.” And not just protectionist, but actually, “We’re going to start using these tools—especially tariffs—as a kind of sanction-lite, in order to harm others,” out of this idea that if they’re hurt more than we are, then structurally we win, right? Because it’s like, either I win and you lose, or the other way around. It’s not possible to do win-win, at least with the current mindset in the U.S. So, what do you think—apart from the Belt and Road Initiative, the interlinking and reaching out to other states, building railroads all over Southeast Asia, including Indonesia and so on—apart from that, what else is China doing to shore up and strengthen the global economic system? -- 4 of 9 -- #Warwick Powell Look, I think when Trump launched the tariffs in early April, many people jumped on board and talked about the end of globalization. Certainly, I think globalization version 1.0—or post-war globalization, as we understood it—which was largely driven by the United States, Western Europe, and Japan, has transformed. But it transformed even before the tariffs were introduced. The tariffs from Trump were