StanChart chairman: It’s grown more likely that the world will split in two

4

As tensions between the U.S. and China rise, it’s become increasingly likely that the world will split in two, warned the chairman of a major British bank on Friday.

Such an event, if it materializes, will be “detrimental to the world,” said Jose Vinals, group chairman at Standard Chartered Bank. His comments came as rivalry between the world’s two largest economies extend into areas beyond trade such as technology and global influence.

“Something that I think will be detrimental to the world is if we were to move from the present state … to a sort of bifurcation of globalization,” Vinals told CNBC’s Nancy Hungerford at the Institute of International Finance’s spring meeting in Japan.

He explained that some countries and companies may start “doing more business and operating in the half of the world which is globalized along the western line,” while the other half may work “in the part which is globalized along the eastern line.”

“I hope it’s not (going to happen) but this is something which is a more likely prospect now than it used to be a few years ago. And I think it’s a very adverse reality if it eventually materializes,” he added.

Vinals is not the only business executive who has warned of a potential split in the world because of the rivalry between Washington and Beijing. Late last year, former Google CEO Eric Schmidt predicted there would be two distinct internets within the next decade: one led by the U.S. and the other by China.

The U.S. and China have engaged in a year-long tariff fight that many analysts and investors hoped could be resolved some time this year. But developments and escalating rhetoric from both sides in recent weeks have dimmed those hopes.

U.S. President Donald Trump raised tariffs on $200 billion worth of Chinese imports last month, which led to Beijing retaliating with its own set of levies. High-level negotiations for a trade deal between the two countries have since halted.

Adding to the conflict, Washington placed Huawei on a blacklist that limits U.S. companies from doing business with the Chinese tech giant.

Those recent developments indicate that it’s become harder for Washington and Beijing to reach a deal – a “marked” change from the optimism seen a few months ago, noted Vinals.

“It is very hard to know what will happen,” he said. “I think that what we have seen is a marked shift in the past couple of months of the mood. Two months ago, everybody was thinking: ‘There is going to be a deal.’ Now, expectations are: ‘It’s going to be very hard for a deal to be there.'”

– CNBC’s Sam Meredith contributed to this report.