"Over the past year, investors have seen the term "decoupling" often. It had one definition for decades, while now it has another. The two meanings are related, but they aren't the same.
The first "decoupling" has its origins decades ago. After World War II, America reigned supreme among world economies. But as other countries rebuilt, some economists thought there might be a decoupling of the U.S. economy from world growth, with other countries taking up leadership.
Economists discussed decoupling extensively, but it never happened, says Robert Wright, an economic historian at the American Institute for Economic Research. "There was no alternative to the U.S.," he says. Other economies, such as those in Europe and Asia, weren't strong enough to fill America's economic shoes.
Currently, "decoupling" is increasingly used when referring to the breaking of economic links with China.
This idea seemed to get sparked by the lack of Chinese-government transparency surrounding Covid-19, combined with longstanding complaints about China's human-rights violations and alleged mass theft of intellectual property from Western companies. "This sort of decoupling makes a lot more sense," Mr. Wright says.
"Why go to China, which has all these problems and where billionaires disappear?"
As China continues its recentralization, "I expect more decoupling from the rest of the world," writes Peter Tchir, head of global macro at Academy Securities, in a recent report.” [1]
1. Investing in Funds & ETFs: A Quarterly Analysis --- In Translation: Explaining Decoupling
Constable, Simon. Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 04 Oct 2021: R.2.
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