economics Economics () is a behavioral science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. Economics focuses on the behaviour and interac ...

, decoupling and re-coupling is where countries are no longer economically impacted by the economies of other countries and visa versa. A financial crises is typified by the decoupling hypothesis that, in 2007, held that Latin American and Asian economies, especially emerging ones, had broadened and deepened to the point that they no longer depended on the

United States The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...

economy for growth, leaving them insulated from a slowdown there, even a fully fledged

recession In economics, a recession is a business cycle contraction that occurs when there is a period of broad decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be tr ...

. Faith in the concept had generated strong outperformance for stocks outside the United States. However, over the course of 2008, as fears of recession mounted in the United States, worldwide stock markets declined heavily. Contrary to the decoupling hypothesis, the losses were greater outside the United States, with the worst experienced in

emerging markets An emerging market (or an emerging country or an emerging economy) is a market that has some characteristics of a developed market, but does not fully meet its standards. This includes markets that may become developed markets in the future or we ...

and developed economies like

Germany Germany, officially the Federal Republic of Germany, is a country in Central Europe. It lies between the Baltic Sea and the North Sea to the north and the Alps to the south. Its sixteen States of Germany, constituent states have a total popu ...

and

Japan Japan is an island country in East Asia. Located in the Pacific Ocean off the northeast coast of the Asia, Asian mainland, it is bordered on the west by the Sea of Japan and extends from the Sea of Okhotsk in the north to the East China Sea ...

. Exports make up especially large portions of economic activity in those places, but that fact was not supposed to matter anymore in a decoupled world because domestic activity was thought to be so robust. On the other hand, after the slump the emerging countries experienced a strong recovery, much stronger than that in advanced economies. Since 2017 the expression has also been used for an ongoing, partial technological decoupling between the

and

China China, officially the People's Republic of China (PRC), is a country in East Asia. With population of China, a population exceeding 1.4 billion, it is the list of countries by population (United Nations), second-most populous country after ...

. Washington has placed more than 1,000 Chinese firms on

export control Export control is legislation that regulates the export of goods, software and technology. Some items could potentially be useful for purposes that are contrary to the interest of the exporting country. These items are considered to be ''controlled ...

or investment blacklists and, via the 2022

CHIPS and Science Act The CHIPS and Science Act is a U.S. federal statute enacted by the 117th United States Congress and signed into law by President Joe Biden on August 9, 2022. The act authorizes roughly $280 billion in new funding to boost domestic research and ...

, reserved US $54 billion to reshore advanced-semiconductor production. Current policy aims to “selectively” sever high-technology supply-chains that are deemed sensitive for national security, while leaving most trade in ordinary goods intact. Independent estimates for a full U.S.–China economic split suggest annual U.S. output losses of up to US $738 billion and the risk of the world economy bifurcating into two rival tech blocs. The classic explanation for both decoupling and subsequent re-coupling holds that an initial crisis cuts global demand for capital and commodities, easing financial conditions for still-healthy regions; once lenders begin to absorb significant losses they tighten credit globally, transmitting the shock more widely. The modern U.S.–China episode adds a strategic dimension: governments can actively deepen or reverse decoupling through export controls, investment screening and industrial subsidies. The phenomenon of decoupling and re-coupling has been explained by observing that global demand for factors such as capital and raw material declines when one part of the world economy suffers a crisis, which benefits the remaining healthy parts of the world economy through lower interest rates and lower commodity prices. However, once the crisis reaches the stage where global lenders suffer significant losses, they will cut back on their loan supply and interest rates for everybody will rise.

References

{{reflist Great Recession Organizational theory

See also

References