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Global Perspectives
How to Prosper in a G2 World
For much of the past 30 years, global economic policy was shaped by a quiet confidence that the direction of travel was settled.
Markets would continue to open, capital would find its most efficient uses, trade would expand, and regulation would gradually align. Geopolitics, it was assumed, would matter less with time.
That era has ended.
What has replaced it is not chaos, nor the collapse of global commerce, but something more exacting: a world in which power, security and economics are once again tightly intertwined.
The defining feature of this landscape is the emergence of a G2 reality, in which the rivalry and dominance of the United States (US) and China now frame global outcomes across trade, capital, technology and regulation.
For governments, investors and institutions alike, the challenge is no longer whether this shift will endure, but how to operate within it. For outward-facing economies, and particularly for international finance centres, the stakes are high.
Yet so too are the opportunities, provided the world is interpreted as it is, rather than as many would prefer it to be.
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From Globalisation to Geopolitics
The post–Cold War period fostered a belief that economic integration was both self-reinforcing and politically neutral. Supply chains stretched across continents. Finance became frictionless. Efficiency was the dominant organising principle. Risk was priced, diversified, and deemed manageable.
That assumption now looks complacent.
Strategic rivalry has returned to the centre of economic decision-making. Trade, investment and regulation are no longer seen as economic tools, but as instruments of national resilience and influence.
Supply chains are being redesigned around trust and security rather than cost alone. Capital flows are scrutinised through a geopolitical lens. Regulation has become a means of shaping markets as much as supervising them.
This change is not deglobalisation in any simple sense. Trade continues to grow, particularly in services. In 2024, global trade in goods and commercial services expanded by around four per cent, reaching an estimated US$32 trillion, with services accounting for more than a quarter of total global trade, their highest share in nearly two decades.
Capital remains abundant and mobile. But the pattern of globalisation has changed. Flows are becoming more regional, more selective and more politically conditioned. The world economy is fragmenting into blocs, even as it remains deeply interconnected.
The G2 Reality
At the heart of this fragmentation lies the relationship between the United States and China.
Together, they account for an outsized share of global output, trade, investment, technological capacity and military power. In aggregate, the two economies represent over 40 per cent of global GDP and dominate global capital markets, research and industrial production.
More importantly, they embody two distinct models of political economy, each seeking to shape the global environment in ways that reflect its own interests and values.
The United States has moved decisively away from the assumption that open markets alone will secure prosperity or strategic advantage. Industrial policy has returned to favour.
Tariffs, subsidies, tax incentives and regulation are being deployed to reshore production, secure critical supply chains and maintain technological leadership. Fiscal expansion has been embraced with relatively little concern for deficits, on the assumption that growth, scale and the centrality of US capital markets provide room for manoeuvre.
Today, the United States accounts for around half of global equity market capitalisation and remains the anchor of the international financial system.
China, meanwhile, has consolidated political authority and reoriented its economic strategy towards self-reliance and long-term security.
The goal of maximising growth has been replaced by asserting independence: reducing reliance on external technology, securing access to energy and resources, and maintaining social and political stability amid slower growth and challenging demographics.
Since 2000, China’s share of global manufacturing value added has risen from around six per cent to approximately one-third, underscoring the scale of the structural shift underpinning its geopolitical confidence.
Internationally, China continues to champion a more multipolar order, expanding its influence across the Global South while managing a competitive, and necessary, relationship with the United States. Neither system is static. Both face internal constraints.
Yet together they define the strategic parameters within which others must operate. The more realistic prospect is prolonged rivalry, managed competition, and periodic tension – not a decisive victory by either side.
The G7, the European Union and the Strain on Multilateralism
The emergence of a G2 world has not rendered other actors irrelevant, but it has altered their agency.
The G7 and the European Union (EU) remain economically powerful, norm-setting and institutionally sophisticated.
What they no longer possess is the ability to shape the global system independently of the gravitational pull exerted by Washington and Beijing.
The G7 continues to function as a forum for strategic coordination among advanced democracies, particularly on security, sanctions, financial stability and technology standards. Yet its cohesion increasingly depends on alignment with US strategic priorities. Where interests diverge, its influence becomes more consultative than directive.
The EU's position is more nuanced. Economically comparable to the United States and China in aggregate, the EU has pursued “strategic autonomy” in energy, defence and critical technologies. In practice, this ambition is constrained by internal fragmentation and demographic headwinds.
Nonetheless, the EU exerts disproportionate influence through regulation. Its standards on data, competition, climate disclosure and digital markets increasingly shape global behaviour, even beyond its borders.
The challenge is to balance regulatory ambition with competitiveness in a world of mobile capital, amid a Western alliance increasingly shaped by US national interests.
These shifts place a growing strain on the multilateral system. Institutions designed for a convergent, rules-based order are now operating in an environment defined by rivalry and selective cooperation.
The International Monetary Fund (IMF) and the World Bank remain central to crisis response, debt sustainability and development finance, particularly as emerging economies navigate higher interest rates and climate-related shocks.
In recent years, IMF lending volumes have risen sharply, reflecting heightened financial stress across developing and frontier economies. Their relevance has arguably increased, even as questions over governance and legitimacy persist.
The Organisation for Economic Cooperation and Development continues to shape standards on tax, transparency and governance, but increasingly relies on voluntary alignment rather than universal consensus. The World Trade Organisation, meanwhile, illustrates the limits of multilateral enforcement in a world where its dispute settlement mechanism has weakened and trade policy is increasingly pursued through bilateral or bloc-based arrangements.
Security institutions have evolved in parallel. The North Atlantic Treaty Organisation (NATO) has been revitalised by renewed geopolitical tension, reinforcing the connection between security, industrial capacity and economic policy.
Multilateralism endures, but in a more pragmatic, conditional form.
Trade, Capital and the New Logic of Alignment
Fragmentation does not imply stagnation. Global trade continues to expand, albeit unevenly and along altered routes. Services trade remains particularly robust, reflecting the growing weight of finance, digital and professional services in the global economy.
Investment decisions are increasingly shaped by alignment. Firms and governments alike are reassessing exposure to geopolitical risk, regulatory divergence and sanctions.
Resilience has become as important as efficiency. Redundancy, once viewed as wasteful, is now seen as prudent. Where backups were once avoided to save cost, they are now considered essential protection against disruption.
Capital flows tell a similar story. Global foreign direct investment has softened in recent years — falling by around 10–15 per cent from its post-pandemic peak — not because capital has disappeared, but because it has become more cautious and more selective.
The world is not short of capital; global investable assets now run into the hundreds of trillions of dollars. What is scarce are jurisdictions, structures and institutions capable of deploying that capital across borders in a manner that is both compliant and credible amid divergent regulatory regimes.
Developed economy surveys indicate that 80 per cent of firms plan to invest in or increase their commitment to AI. Google, Microsoft and Meta will battle to dominate the AI landscape, racing to incorporate generative AI into their platforms. The prize attached to market leader status is enormous. ChatGPT attracted 100 million subscribers just two months after its launch.
AI has rapidly morphed into a multi-modal, text, image and video capability. Productivity gains will likely lag as it takes time for new technologies to mature and embed. Still, there can be no doubt that the boost from this revolutionary technology will be huge.
AI is divided into two camps; the first hails AI as the world's saviour, the solution to turbocharging productivity and beating dreadful diseases, such as cancer and dementia. Some claim it will solve the climate challenge.
Others predict a doomsday scenario where AI will become more capable and advanced than human intelligence. Like Frankenstein's monster, it will outstrip the ability of its creators to control it. Others predict the military deployment of AI will trigger global instability and Armageddon scenarios.
The saviour camp has the upper hand for the moment, and the race to develop AI is in full flow. The moral arguments about how it can be controlled and made to serve society will be made and contested. Still, interestingly, the EU has stepped into the debate with the introduction of AI Act regulation. Whether this tiger can be taken by the tail and tamed remains to be seen.
Structural Forces That Will Not Reverse
Overlaying geopolitical rivalry are structural trends that will shape outcomes regardless of political preference. Ageing populations and fiscal stress are constraining public finances across much of the developed world. Technology — particularly artificial intelligence and automation — is transforming productivity and shaping investment priorities.
The transition to a lower-carbon economy is driving vast flows of capital into energy, infrastructure and innovation, with global energy transition investment now measured in several trillion dollars annually, even as the pace and pathway diverge sharply between blocs.
These forces are capital-intensive and long-duration. They favour patience, institutional depth and sophisticated intermediation over short-term optimisation.
Private Capital, the Role of Intermediation, and Opportunity for International Finance Centres
Private capital has emerged as a principal beneficiary of this environment.
Infrastructure, energy transition, digital systems, and emerging-market development all require investment on a scale that public balance sheets alone cannot provide. Institutional investors, sovereign funds and private wealth holders are seeking diversification, yield and duration.
The challenge lies not in capital availability but in its deployment across borders in a world of regulatory fragmentation and geopolitical risk. Jurisdictional credibility, governance standards and political neutrality have become central considerations.
For well-governed international finance centres, the current environment is often portrayed as threatening. That view is incomplete.
In a fractured world, the value of trusted, neutral intermediaries increases. International finance centres do not compete with major economies; they enable flows between them. Their role is to manage complexity, reconcile divergent regulatory regimes and allow capital to move where it is needed despite political tension.
Success will depend less on scale than on institutional quality: legal certainty, regulatory credibility, political stability and adaptability. Those centres that understand the G2 dynamic — and can operate across blocs will remain indispensable to global capital formation.
Conclusion: Prosperity Without Illusion
The fracture of the global economy is often described as a loss. It is a redistribution of advantage.
The assumptions that underpinned the previous era were comfortable, but ultimately fragile. They relied on convergence, benign geopolitics and a tolerance for risk that is no longer politically or economically acceptable. The world now taking shape is more demanding: more strategic, more contested, and less forgiving of complacency.
In this environment, prosperity will not belong to those who wait for stability to return, nor to those who mistake neutrality for passivity. It will accrue to governments, institutions and jurisdictions that recognise power as a permanent feature of economic life, and that invest accordingly — in resilience, credibility and institutional strength.
For outward-facing economies and international finance centres, the task is neither to resist fragmentation nor to choose sides, but to operate intelligently within it.
Those that do so — with clarity, realism and adaptability — will remain essential to global capital formation. Those that do not will find that scale alone offers little protection.
A G2 world does not mark the end of opportunity. It simply demands a clearer reading of where opportunity now lies, and a willingness to act on it.
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Mourant is a law firm-led, professional services business with over 60 years' experience in the financial services sector. We advise on the laws of the British Virgin Islands, the Cayman Islands, Guernsey, Jersey and Luxembourg and provide specialist entity management, governance, regulatory and consulting services.
