Shanghai, August 4, 2026. At the 2026 Frost & Sullivan GIL Summit, Prof. Vinod K. Aggarwal — Global Chief Economist of Frost & Sullivan, Distinguished Professor at UC Berkeley and Director of the Berkeley APEC Study Center (BASC) — delivered a speech. He argued that even as the world remains deeply interconnected, it is rapidly fragmenting. Tariffs, export controls and investment screening — tools of what he calls the New Economic Statecraft — mean that market strategy alone is no longer sufficient. His message to executives: adopt an integrated strategy that links market and non-market areas and adapt it to each market — this is how companies can remain profitable in an increasingly fragmented world.
2026年8月4日，上海。在2026沙利文峰会现场，沙利文全球首席经济学家、加州大学伯克利分校杰出教授、伯克利亚太经合组织（APEC）研究中心主任葛万威教授（Prof. Vinod K. Aggarwal）发表致辞。他指出，世界在深度互联的同时正加速走向碎片化；关税、出口管制、投资审查等"新经济治国方略"手段，意味着仅靠市场战略已远远不够。他寄语企业家：以整合战略打通市场与非市场两大领域，并针对不同市场因地制宜——这才是企业在日益碎片化的世界中持续盈利、行稳致远的关键。
Professor Gwei Wai, Global Chief Economist at Frost & Sullivan, Distinguished Professor at UC Berkeley, and Director of the Berkley APEC Research Center
Prof. Vinod K. Aggarwal, Global Chief Economist, Frost & Sullivan; Distinguished Professor, UC Berkeley; Director, Berkeley APEC Study Center (BASC)
以下为葛万威教授（Prof. Vinod K. Aggarwal）致辞要点：
Thank you to all of you. It is a great honor to be here. I would like to thank David Frigstad and congratulate him on this remarkable occasion. I also extend my thanks to Aroop Zutshi for her outstanding work in globalization. Additionally, I would like to thank Neil Wang for providing me with this opportunity to speak with you. As I have been to Shanghai before, each visit is different. Therefore, I tell my friends: if you want to see the future, come to Shanghai. I am delighted to be here. Let me begin by discussing something that may not be conventional. We often talk about globalization. David mentioned that we are experiencing a dramatic transformation. However, in reality, over the past 40 years, we have seen a fragmentation of the world. Companies have been preparing for globalization. Unfortunately, globalization is not the only phenomenon occurring. We are also witnessing a world that is becoming more fragmented. This is something important to keep in mind when pursuing your globalization strategy. What I will discuss is some of my research on what we call new economic statecraft. And why this is essential for your consideration. Due to new economic statecraft, companies must develop both market strategies and non-market strategies. I will explain what this means and how Frost & Sullivan can assist you in achieving this. Finally, we will talk about the tactics you can use to implement your strategies, which is crucial for success in business.
Thank you all. It is a great honor to be here. First of all, I would like to thank Fu Dawei and congratulate him on this important event. I also appreciate Zuyu Ru for his outstanding achievements in globalization-related work. Additionally, I am grateful to Dr. Wang Xin for giving me the opportunity to meet with you all here. I have been to Shanghai before, but each time I visit, the city looks completely new. I often tell my friends: If you want to see the future, come to Shanghai. I am very happy to stand here today. Next, I would like to discuss a topic that differs from traditional perceptions. We always talk about globalization, and Fu Dawei mentioned that the world is undergoing a major transformation. Over the past forty years, globalization has continued to advance, and companies have been developing strategies for it. However, unfortunately, the world is not solely driven by globalization; we are also witnessing a fragmented global landscape. When formulating globalization strategies, everyone must keep this in mind. Today, I will share my research topic—New Economy Governance Strategies—and explain why companies must pay attention to this concept. Influenced by New Economy Governance Strategies, companies need to develop both market strategies and non-market strategies, as Zuyu Ru mentioned. I will then explain its meaning and how Frost & Sullivan can assist companies in achieving this. Finally, I will introduce practical methods to implement these strategies, which are crucial for business success.
So, let us consider how the world was, and hope it will be. It was like this for 30 or 40 years. Deals were being made, people traveled around the world, and everything proceeded smoothly. The underlying theory is a well-known concept called commercial peace theory. When I ask executives which of many theories they prefer, they favor commercial peace theory. Because commercial peace theory suggests that the more interactions there are, the more business is done, and the better the world will become. I am not against that; I wish it were entirely true. There is evidence to support this. We see more mechanisms to resolve disputes among governments, businesses, and individuals. We observe that breaking ties is highly detrimental to the global economy. The European Union serves as an example of this—it was established to prevent war between France and Germany, and it has been extremely successful. After hundreds of years of conflict, Europe has largely become a peaceful region. However, we also see various bilateral and multilateral trade agreements being negotiated. In some cases, these agreements are beneficial, while in others they are harmful. So what was the vision? The vision is that the world is flat. This idea has become a popular book, stating that the world is flat.
Looking back over the past three to four decades, we hoped that the world would develop into a scenario where countries reached business agreements, people traveled across borders, and everything operated smoothly. The theory that supports this vision is the famous theory of commercial peace. When I teach corporate executives, I ask which theory they prefer the most, and the theory of commercial peace is always favored. This theory holds that the more interactions between countries and the closer business ties, the better the world will be. I do not deny this view, and I sincerely hope it is entirely true, as there are indeed supporting evidence in reality. We see that governments, businesses, and citizens have more channels for resolving disputes; we also see that cutting off economic and trade connections can cause significant losses to the global economy. The European Union is a typical example. Its purpose was to prevent another war between France and Germany. From this perspective, the EU has achieved great success. After hundreds of years of conflict, Europe has largely become a peaceful region. At the same time, various bilateral and multilateral trade agreements have been implemented. Some agreements have brought benefits, while others have had negative effects. The former vision was "..."The world is flat"This also comes from a globally popular book."
Technology is connecting the world. Everyone will have equal opportunity. And we will see the rise of nations outside of the industrialized west. That's true we've seen the rise of China. We've seen the rise of India. The rise of Mexico and Brazil and many other countries. But the argument that Thomas Friedman made was only a technological argument. But the technological argument needs to be merged together with the political economic structure in which we operated. And that is under threat. We see a rise of protectionism in the global economy, very critical for firms trying to operate globally. We see what we call a spaghetti or a noodle bowl of trade accords. Since I'm in China, we all know that Marco Polo took spaghetti from China. So, we should use the term noodle bowl, not spaghetti bowl. But this kind of description of what's going on in the world economy suggests that pure globalization is having a problem. We see the rise of what we call mega free trade agreements, agreements among the Asian countries China, Japan, Korea, Australia and New Zealand. We see the effort to create a transatlantic trade and investment partnership. And we see the Trans Pacific Partnership which is subset of APEC members which has now become CPTPP, Comprehensive and Progressive Trans Pacific Partnership. The problem is however that we see that whereas we have a lot of economic interdependence, it is also possible for countries to manipulate economic interdependence.
The book suggests that technology will connect the world, providing equal opportunities for everyone. Beyond Western industrialized countries, many emerging nations will rise. This is indeed the case; countries such as China, India, Mexico, and Brazil have all achieved growth. However, YUAN CAPITAL, MagnaTEC, SULLIVAN TELE-TREND CLOUD TECHNOLOGY, TradeGo, LeadLeo Research Institute, LeadLeo, and other entities are involved in various sectors.Thomas FriedmanThe discussion remains solely at the technical level. Technical projections must be integrated with the political and economic realities in which we operate, and today, this framework is under pressure. Protectionism is rising worldwide, which has a significant impact on multinational companies. The complex web of global trade agreements creates what is known as the “noodle bowl effect”. Since I am in China, everyone knows that noodles were brought from China to the West through Marco Polo, so we should call it the “noodle bowl” rather than “pasta bowl”. This analogy precisely illustrates the difficulties faced by pure globalization. Various large-scale free trade agreements are emerging: agreements between China, Japan, and South Korea, as well as Asian countries such as Australia and New Zealand; negotiations for the Transatlantic Trade and Investment Partnership have been promoted by various parties; and the Pacific Alliance, originally a member of APEC, later evolved into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.CPTPP）。但问题在于，即便各国经济深度相互依存，部分国家依旧会利用这种经济依存关系谋取私利。
We observe the politicization of people, goods, and data. We see that the World Trade Organization, which provided the fundamental foundation for globalization, is increasingly under threat. China joined the WTO in 2001 and successfully integrated into global markets. States are now giving priority to national security concerns. Often, they claim it is for national security, but it is often simply protectionism. Therefore, there is a lot of intervention in the market. This phenomenon can be described by one of my former students, now a professor at Berkeley, as “New Economic Statecraft” – the use of economic tools such as industrial policy, trade restrictions, or investment regulations to achieve geopolitical strategic goals. Now, how do countries implement this? They take measures at the border, behind the border, and beyond the border.
人员、商品、数据都被卷入政治博弈。作为全球化基石的世界贸易组织，正不断受到冲击。中国2001年加入世贸组织，顺利融入全球市场。如今不少国家把国家安全放在优先位置，嘴上打着国家安全的旗号，很多时候本质却是赤裸裸的保护主义，市场干预行为层出不穷。我和我从前的学生——如今任职于伯克利大学的一位教授，共同提出了新经济治国方略这一概念：国家运用产业政策、贸易限制、投资监管等经济工具，来实现地缘政治与战略目标。各国会通过三类手段达成目的：边境层面、境内层面、跨境层面。
We can see examples of trade policies using tariffs, quotas, export taxes, and customs regulations, as mentioned in the previous presentation. In terms of investment, we see various investment regulatory rules. For instance, the U.S. Foreign Investment Risk Review Modernization Act regulates foreign investment. What does this mean for companies? They cannot simply enter any market without understanding the relevant stakeholders and governments that may use these measures to restrict market access. At the border level, we see measures such as subsidies, regulations, health standards, and safety standards. Many of these standards are reasonable, but sometimes they are used merely to protect local businesses from competition. Governments also implement policies to encourage or restrict foreign investment in their markets. Finally, we see cross-border examples of trade or investment promotion in other countries, regulations by international organizations, and even EU efforts to regulate AI. This is a challenging issue for the EU, as it lags behind leading countries like China and the United States in AI development. Regulating rapidly evolving technologies is very difficult, and the EU faces this challenge. What do we see? I edited a journal called Business and Politics, where we need to analyze both the market and non-market environments.
Trade policy measures at the border include tariffs, quotas, export taxes, and customs regulations. In the investment sector, there are various investment regulatory rules, such as the Foreign Investment Risk Review Modernization Act in the U.S., which controls foreign investment. What does this mean for companies? To enter a market, companies must fully understand the stakeholders and government agencies involved. Some countries use these measures to limit foreign participation in their markets. On the domestic level, we see subsidies, regulations, health standards, and safety standards. Many standards are valid, but sometimes they are used to protect local businesses from competition. Governments also introduce policies to promote or restrict foreign investment. Finally, at the cross-border level, there are trade and investment promotion activities in other countries, regulations by international organizations, and EU attempts to legislate AI. For the EU, this is a difficult problem because it is far behind China and the United States in AI. Regulating such rapidly evolving technologies is challenging, and the EU is facing this issue. I edited a journal titled Business and Politics, which emphasizes that companies need to analyze both market and non-market environments.
You are all familiar with Michael Porter’s Five Forces model, which every business school student learns. It is very important as it helps understand the company’s organizational and market environment. However, it is a limited model as it does not cover all participants, including courts, media, government policies, and other stakeholders. As David Frigstad said, as CEOs, we must consider all stakeholders, which is crucial for success. Therefore, whether as managers, CEOs, or ordinary managers, we need to consider both market and non-market strategies. The market environment determines the importance of non-market issues. For example, AI development is not just a commercial technology; many people worldwide, not just in China and the United States, are concerned about job losses, changes in business operations, and potential negative impacts. It can be positive or negative. Non-market strategies shape business opportunities. The establishment of the EU changed Germany’s competitive landscape. The RCEP agreement, centered on China, will affect how Chinese, Thai, and Japanese companies operate in this new free trade agreement. How should we approach these issues?
Everyone knows Michael Porter’s Five Forces model, which almost all business school students learn. It helps companies understand their organizational and market environments, and its value is clear. However, it has limitations. It does not cover all participants, such as courts, media, government policies, and other stakeholders. As Fudaiwu said, CEOs must consider all stakeholders, which is essential for success. Therefore, whether as executives, CEOs, or managers, we need to consider both market and non-market strategies. The market environment determines the importance of non-market issues. For instance, AI development is not just a commercial technology; many people worldwide are concerned about job losses, changes in business operations, and potential negative impacts. It can be positive or negative. Non-market strategies shape business opportunities. The EU’s establishment changed Germany’s competitive landscape. The RCEP agreement, centered on China, will affect how Chinese, Thai, and Japanese companies operate in this new free trade agreement. How should we address these issues?
I won’t go into great detail. But let me talk about what David Baron at Stanford Business School calls the need for an integrated strategy. Companies need to pursue a market strategy, but they also need to understand non-market strategies. How can I work with stakeholders in different countries? How can I be successful? It’s not about one model fitting all. As a Chinese company, we may have a global strategy, but it must be adapted to each market. American companies have realized this. If they follow one global strategy, they cannot assume the Chinese, Korean, or German markets are the same. Strategies must be tailored to each market, and implemented through various tactics. I will spend a few more minutes on this. Based on David Baron’s theory, the first step is to identify the issue, what concerns people, and what concerns your stakeholders. The second step is to identify the key players in that issue. As you know, TikTok in the United States caused a complex situation, as did Huawei in the United States or American companies entering Europe. We need to know what interests the players have and where they will interact. Is it social media or formal institutions? We need to know the information the players have. Finally, we need to know their assets. Just as you analyze the market, you need to analyze the non-market environment.
I won’t go into details. I will briefly explain the integrated strategy approach proposed by David Baron at Stanford Business School. Companies need to implement a market strategy, but also understand non-market strategies: learning how to interact with stakeholders in different countries to succeed. There is no one-size-fits-all global strategy. Even Chinese companies must adapt their global strategies to each market. American companies have learned this. You cannot assume that the Chinese, Korean, or German markets follow the same approach. Strategies must be tailored to each market and implemented through various tactics. Based on David Baron’s theory, here is a basic analysis framework: First, clarify the core issue—what people and stakeholders are concerned about. Second, identify the key players in that issue. Third, understand the interests of all parties. Fourth, determine the arena of competition—social media or formal institutions. Fifth, know the information available to each party. Sixth, assess their resources. Analyzing the non-market environment requires the same rigor as analyzing the market.
I won’t list all of them, but it is clear that the explosion of new technologies and innovations is causing such reactions, whether it’s Google Maps. There’s a well-known example. I know you might think I’m making this up. When Google Maps became popular, there was a woman in Oakland, California, where I live, who complained that her cat appeared in the window. She said her cat has the right to privacy. Then Google began changing its policies and market strategy to remove images of cats and people. So companies and many engineers think, “This is a great product,” but they don’t consider the societal and political implications of their product—such as child labor, pollution, or changes in institutions. There are many different actors involved. It’s not just about the market, competitors, and customers. It includes regulators, governments, and NGOs. You need to identify the key actors in any issue and understand their interests and goals. Are they united? Are they aligned? This helps you determine your strategy. We need to know the context: is it informal, formal, or online? How does interaction take place? In the world of social media, many interactions happen online, not in formal institutions. We need to consider what information we have. People often focus on money, but information is crucial. Understanding markets and the non-market environment, along with scientific evidence, is essential. Finally, we need to know our assets. Money is important for managing a company, but good relationships with decision-makers are also necessary. You need to know who has authority over issues and who you can ally with. American technology companies, which compete fiercely, often collaborate on regulatory issues. Let me conclude by mentioning the tactics you can use, and how Frost & Sullivan can assist you in considering them. Which tactics can improve your non-market position?
New technologies continue to emerge, yet they often trigger social reactions. For example, there’s a real case: when Google Maps became popular, a woman in Oakland, California, complained that her cat was shown in the map, claiming her cat had the right to privacy. As a result, Google changed its policies and strategies to blur images of people and cats on street views. Many engineers focus only on the product’s advantages, ignoring its social and political impacts. Whether it’s child labor, pollution, or changes to institutions, these factors must be considered. There are various players involved—not just competitors and customers, but also regulators, governments, and NGOs. For each issue, companies must identify key stakeholders, understand their interests, and determine if their positions are unified or opposed. This helps in developing a strategy. Also, determine the nature of the environment: informal or formal? Online or offline? In the age of social media, many interactions occur in cyberspace rather than traditional institutions. People often focus on money, but information is equally important. It’s essential to understand both markets and non-market environments, along with scientific evidence. Money is fundamental for business operations, but good relationships with decision-makers are also vital. You need to know who has power over issues and who you can partner with. American tech companies often compete fiercely, but they often cooperate on regulatory issues. Finally, I’ll discuss practical methods that can be used, and how Frost & Sullivan can help companies choose the right strategies to improve their non-market position.
How can you develop a strategy that is effective in both the market and non-market sectors, since that is the only way to achieve profitability in today’s fragmented world? I’d like to share a few key insights. First, political factors and stakeholder considerations are everywhere, especially in a fragmented world. Executives need to distinguish between the market environment and non-market environment. Finally, executives should adopt a comprehensive, coherent, and strategic approach that connects both areas. Don’t just focus on the market—also consider the non-market aspects. Only then can you succeed in a highly fragmented world. Thank you very much.
Companies need to create a strategy that covers both market and non-market dimensions. In today’s fragmented world, this is the only way to achieve profitability. Here are some key takeaways: First, political factors and stakeholders are always present, especially in a fragmented global landscape. Second, business leaders must differentiate between market and non-market environments. Third, leaders should adopt a holistic and strategic approach that connects both areas. Don’t focus solely on the market—also consider non-market aspects. Only in this way can companies thrive in a fragmented world. Thank you!
