Forward by CEO Jane Fraser
In my position as CEO, I have the privilege of running one of the world’s most global banks. We move $4 trillion in volume — equivalent to the GDP of Germany — for 5,000 of the most important multinational companies, every single day. This represents a constantly innovating network that helps underpin the global financial system and international trade.
With clients operating in nearly 160 countries and jurisdictions, we’ve had a front-row seat to the evolution of globalization over the course of our bank’s more-than-200-year history. Today, we are witnessing a monumental shift towards another new era — and trade and supply chains are at the heart of these changes.
A year ago, Citi published a comprehensive Citi GPS report examining global supply chains, and many of those elements, especially those focused on geopolitical and macroeconomic challenges, still ring true today. For the last several decades, there was a strong emphasis on sourcing and moving manufactured goods as efficiently as possible to cut costs. But the geopolitical and macroeconomic shocks of late have upended this approach, and we’re now reaching a critical tipping point.
This latest report, published by Citi experts leading our thinking on the evolution of global supply chains and backed by survey responses from the world’s most complex multinationals and SMEs around the world, highlights the profound challenges many corporates are actively navigating.
Today, amidst the backdrop of transformative technological innovations, increasing resilience is the clear and resounding call. We see nearly every country and company focused on security — be it food, water, energy, cyber, financial, or operational security. And consequently, they’re reconfiguring supply chains to meet the demands of customers and other stakeholders. It took too long but we’ve all woken up to the fact that concentrating the sourcing or production of any good — let alone essential goods — in one part of the world can have dire consequences.
This heightened focus on resilience has given birth to a new era of diversification, and as businesses and countries adapt to this era, we’re starting to see clear benefits in economic growth.
As the old system continues to be disrupted, the new era of diversification will evolve to meet new demands. But we should be clear-eyed that these changes won’t happen overnight. Any significant movement, especially deeper in supply chains, is much easier said than done. Supply chains and trade relationships take years to build. And in some cases, it will take a decade for new players to achieve the scale and manufacturing quality that traditional production hubs developed over the last half-century.
Still, the demand to make these new connections and foster new relationships is palpable. And we anticipate the movement will continue to gain more and more momentum in the years to come.
We are far from the end of globalization, but it is changing. And with those changes, we’re seeing tremendous opportunities for all our economies to work together to tackle the unique challenges of the 21st century.
Resilience doesn’t mean retreating to our corners. In some sectors, national security requires us increasing our domestic production capabilities. But excessive self-reliance, in the name of national security, won’t make us more secure. True resilience comes from open markets and robust and diversified supply chains. A decoupling of the world’s dominant economies is neither possible nor prudent. De-risking — or diversification, as we prefer to call it — has become the name of the game.
The new era of diversification offers a new way forward for globalization, not a reversing of course. We mustn’t lose faith in the tools that have enabled growth and progress over these past decades. And we should be conscious to avoid policies that swing the pendulum too far towards resilience and away from affordability and economic growth. Security and resilience go hand-in-hand in most cases — and we ought to seek enhancements to both through more global cooperation, not less.