The Fund, in particular, pointed to laws enacted amid growing tensions between the U.S. and China
The International Monetary Fund said in its report that global tensions could lead to disruptions in foreign investment and a 2% loss of global GDP in the long term.
Companies and policymakers around the world are exploring ways to make their supply chains more resilient by “moving production home or to trusted countries,” the IMF warned in its report, noting that this would fragment foreign direct investment.
The IMF pointed to laws recently enacted amid heightened tensions between the US and China, such as the US law to support microchip manufacturing and research.
Japan recently imposed restrictions on 23 types of semiconductor manufacturing equipment joining U.S. efforts to curb China’s ability to produce advanced microchips.
A recent survey by the American Chamber of Commerce in China showed declining interest in direct investment in China. For the first time in 25 years, fewer than half of respondents mentioned China among their top three investment priorities.