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Jeffrey Wu

As global trade fragments and tariffs return, economic power is increasingly defined not by financial scale alone, but by productive strength. At the World Economic Forum in Davos last month, leaders spoke openly about a harsher world order.
Chinese Vice-Premier He Lifeng warned that trade wars have no winners. European Commission President Ursula von der Leyen called for a new security architecture amid rising protectionism. French President Emmanuel Macron described a world becoming more fragmented and brutal.
What is changing is not just trade policy, but the basis of power itself: from who prices assets best to who can still build, supply and sustain them when systems come under strain.
Behind these concerns lies an older question: can nations sustain influence when finance outpaces production?
History suggests they struggle. Power has long rested on the ability to produce things – roads, ports, machine tools and more recently, software, data and artificial intelligence systems, at least so long as these translate into real output rather than inflated expectations.
Problems arise when societies become better at trading titles to future income than at expanding productive capacity in the present.

Finance itself is not the enemy. It becomes destabilising only when detached from production. When claims on future value grow faster than the capacity to deliver them, fragility follows.
The pattern is ancient. In the 16th century, Spain appeared dominant, enriched by silver from the New World. Yet bullion inflows did not catalyse industry. Capital flowed into loans, speculation and imperial maintenance. Spain imported what it no longer produced, financed wars it could not sustain and discovered too late that financial abundance was not the same as productive strength.
This was not an exception. The Dutch Republic drifted towards financial dominance as manufacturing faded. Britain’s 19th century shift towards finance over factories coincided with the rise of industrial competitors in Germany and the United States. In ancient Rome, currency debasement and elite retreat from civic production preceded decline. The contexts differed, but the mechanism was consistent.
Financial returns begin to eclipse productive investment. Capital migrates from building capabilities to trading claims. Elites detach from production. Inequality rises and resilience weakens. When shocks arrive, the gap between paper wealth and real capacity is exposed. That tension is still visible. The US and China increasingly embody different approaches to growth. The contrast is not moral but structural, and it carries growing geopolitical consequences.

In the US, finance plays an outsize role in value creation. Over recent decades, the financial sector has captured roughly 25 to 40 per cent of corporate profits, far exceeding its 7 to 8 per cent of the real economy. Finance can function as a coordinating system, allocating risk and capital efficiently. But when financial signals dominate economic substance, innovation risks being monetised before it becomes widely productive.
Artificial intelligence (AI) illustrates this dilemma. US hyperscalers are projected to spend more than US$600 billion on AI-related capital expenditure this year. The technology’s potential is undeniable. The open question is whether this investment diffuses into economy-wide productivity or remains concentrated as financial claims on future promise. For investors from New York to Hong Kong, the concern is less about AI’s promise than whether monetisation can keep pace with expectations.
China has taken a different path. From Deng Xiaoping’s insistence that science and technology are major productive forces to today’s emphasis on “new quality productive forces”, policy has sought to embed innovation in the real economy. Financial profits are restricted to supporting manufacturing upgrades, infrastructure and applied technology. AI is deployed not only in digital platforms but in factories, logistics and robotics.
This approach is not without risk. Debt-funded projects with limited returns can be as unproductive as financial bubbles. Bridges to nowhere are no more valuable than derivatives to nowhere. Productive depth is not immunity from stagnation; without demand, diffusion and institutional reform, it can become a more capital-intensive form of misallocation. Capability, not construction, remains the true test.

Finance accelerates growth; production anchors it. Highly financialised systems can expand quickly, but they are more vulnerable to shocks. Recent safe-haven flows into gold and other defensive assets reflect a familiar anxiety: when confidence in productive returns weakens, capital retreats into preservation. Production-led systems may grow more slowly, but they tend to be more resilient.
For emerging economies, this distinction is critical. Many across Asia, Africa and Latin America have experienced repeated crises driven by volatile capital flows rather than weak productive capacity. For them, building depth in manufacturing, technology and skills is not ideological – it is a matter of economic security.
The lesson is not anti-market or anti-finance. The most successful economies align finance with production. The US once did the same, through policies that built industrial capacity, infrastructure and research institutions. Whether today’s wave of subsidised reshoring represents a durable rebuilding of productive capability or a financialised form of industrial policy remains an open question.
In a world of rising trade barriers and strategic competition, alignment between finance and production is becoming more important, not less. Nations that rely too heavily on financial claims risk losing resilience when conditions change. Those that continue to invest in productive strength – physical and digital – are better positioned to adapt and shape the rules that follow.
History does not doom nations, but it does instruct them. Economies that stop making things eventually lose leverage. Those who remember how wealth is created endure.


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US-China rivalry: great powers that don’t make things won’t be great for long

Children play next to The Bund Bull sculpture in Shanghai on April 9, 2025. Photo: AFP

A worker labours in the spinning workshop of a chemical fibre company in Suqian, Jiangsu province, China, on January 22. Photo: CFOTO/Future Publishing via Getty Images

A data centre is seen in Vernon, California, in the US, on October 20, 2025. Photo: Getty Images/TNS

Customers shop at the Haikou International Duty Free City in Haikou, Hainan province, on December 31, 2024. Photo: Xinhua

Gradually, then suddenly, the world is waking up to the US threat

US President Donald Trump raises his fist after a “Board of Peace” meeting at the World Economic Forum annual gathering in Davos, Switzerland, on January 22. Photo: AFP

Fears of overcapacity ignore China’s full balance of payments picture

People shop at an international duty free shopping centre in Haikou,  Hainan province, on December 18, 2025. Photo: Xinhua

People visit a booth promoting Chinese carmaker Geely during an expo in Yangon, Myanmar, on July 18, 2025. Photo: Xinhua 

What ruptured globalisation means for international finance

Shipping containers are stacked at a port in Montreal, Quebec, Canada, on August 1, 2025. While the unravelling of globalisation has been a major theme for some time, the primacy of national security and geopolitics is a relatively new phenomenon that is reshaping the global economy and markets. Photo: AFP

Canada Prime Minister Mark Carney departs Zurich, Switzerland, on January 21 after attending the World Economic Forum in Davos. Photo: The Canadian Press via AP

An aerial drone photo taken on August 23, 2025 shows an international goods train bound for Vientiane, Laos departing from Yuxi, Yunnan province. Photo: Xinhua

A Chinese yuan and US dollar banknotes. Dollar dominance is much more secure than American policymaking. Photo: dpa

On EV targets, Europe should take a page from China’s playbook

Workers assemble electric vehicles in Shijiazhuang, Hebei province, on December 24, 2025. Photo: VCG via Getty Images

EVs being charged at a smart green supercharging and battery-swapping station that can simultaneously service 57 electric vehicles in Beijing, China, on December 26, 2024. Photo: Xinhua

Employees work along an assembly line that produces electric and hybrid vehicles in Flins-Sur-Seine, France, on May 6, 2020. Photo: AFP

Opinion

World Opinion

China Opinion

News

World

China

Economy

Policy

Global Economy

China Economy

As globalisation falters, it is countries that focus on building productive capacity, not financial excess, that will come out on top


As globalisation falters, it is countries that focus on building productive capacity, not financial excess, that will come out on top.


History

Chinese history

Deng Xiaoping

China manufacturing

China trade

Trade

US-China trade war

US-ally trade wars

China tariffs

Banking & finance

Spain

The Netherlands

Britain

France

United States

Ursula von der Leyen

Emmanuel Macron

He Lifeng

Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


US-China rivalry: great powers that don’t make things won’t be great for long

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}As globalisation falters, it is countries that focus on building productive capacity, not financial excess, that will come out on top

As globalisation falters, it is countries that focus on building productive capacity, not financial excess, that will come out on top