World Bank President David Malpass on Wednesday said he expects a "strong effort" by major economies to reduce their dependence on Russia for energy supplies and China for supply chains, although cross-border trade and investment flows would continue.
Asked about the growing risk of a fragmentation of the global economy in the wake of Russia's invasion of Ukraine, Malpass said there had been an overdependence on Russian energy and Chinese supply chains, and shifts underway were necessary.
"That can be good for China," he told a news conference. "As specific supply chains are less dependent on China, it allows China to move into other sectors and to look forward to the markets for the future."
Malpass said he expected trade and investment across borders to continue, despite the adjustments, arguing that fragmentation into separate blocs would subtract from global productivity.
"I don't see this as a negative step. It's a necessary step for the world to look at regional trade growth," he said. "I'm quite sure that the world will continue trading."
Malpass said he was seeing strong sentiment among World Bank and International Monetary Fund members meeting in Washington this week to keep markets open and even expand market access to help address the current food security crisis.
Russia-China Alliance Would Be a 'Tectonic World Shift'
Meanwhile, International Monetary Fund Chief Economist Pierre-Olivier Gourinchas warned Tuesday that China and Russia could create a financial system to rival that of the United States, spurred on by the sanctions the West has imposed on Russia following its war in Ukraine.
A China-Russian alliance would be a "tectonic shift" for the world economy, Gourinchas said.
"The war increases the risk of a more permanent fragmentation of the world economy into geopolitcal blocs with distinct technology standards, cross-border payment systems, and reserve currencies," the IMF chief economist said.
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