We are closing two long cycles to which we had become dangerously accustomed: a thirty-year cycle in the West, where the hope of westernizing the whole planet was maintained, and a twenty-year cycle in China, where the opening and internationalization should lead to “happy globalization”.
We are returning today, and for a long time, to a Second Cold War between the United States and Chinawhere Europe is in the process of “Yemenization”: in the same way that Iran and Saudi Arabia are confronting each other today in Yemen, Beijing and Washington are fighting not on their own soils, but on another field.
A future GNP shock
However, in this second cold war, it is neither Iran nor Saudi Arabia that is looting us, but China, which is appropriating Russian hydrocarbons at a low price, while the United States sells us their gas out of price !
Combined with the triple cost of environmental transition, reglobalisation and the agri-food crisis, the European energy umbrella – of more than 800 billion euros since the invasion of Ukraine – announces a future GNP shock two to three times higher than that of the crisis of 1973-1975, which had forced our parents to change their lifestyle.
Geopolitics is reappearing with a bang in the business world, which had tended to forget it during the previous cycle and decades of abundance.
In a “war economy”, the benchmarks of peacetime are reversed: the economy is no longer driven by demand, but by supply bottleneck ; trust gives way to mistrust; the balance of power yields to dependence; the bilateral relationship must become multilateral; the legal turns into the arbitrary; free trade is replaced by borders; cyber risk shifts from public to private and conflict escalates from low to high intensity.
For companies, a whole new modus vivendi is needed: operational leverage is replaced by risk control; outsourcing to marketplaces is giving way to vertical reintegration, so that companies regain control of their value chain.
Concentration becomes diversification, the framework contract is relegated to “deal by deal” and “just in time” logistics must now respond to “just in case”.
A new pricing policy is based on the security premium, no longer on volume-related discounts, “pricing power” replaces the cost approach, government subsidies dominate private demand, competition becomes a cartel and the “value for money” reverses to “money for value”.
Cost management must be completely rethought: deflation becomes structural inflation, the monostructure must multiply tenfold into a dual structure for the two potential blocks and B2C digitization is now turning towards B2B.
Finally, the balance sheet policy must integrate past over- and under-investment, destocking must give way to strategic restocking, the financial leverage effect of low rates must be corrected by deleveraging with high rates and financial stability is swept away. by monetary instability.
This new war economy will lead to a permacrisis, a situation of permanent crisis giving birth to reglobalisation. It is undoubtedly the Chinese private entrepreneurs, such as Geely, BYD and CATL, who, because they are accustomed to leading in uncertainty and managing chaos, are the most threatening to impose themselves in the industries of the future in Europe. .
Faced with this new situation, the survival of European companies depends on the forced adoption of a new ESG benchmark: the environmental, social and governance criteria being replaced by an “energy, security, war” triptych. This software change is brutal. How many of our boards of directors are already prepared for it?
David Baverez is a investor based in Hong Kong since 2011.
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