Global Risk Analysis
2021

PHP Global Risk Analysis Project
PHP Research Institute(Summary)© 2021 PHP Institute, Inc. All rights reserved.
Neither this summary nor excerpts thereof may be reprinted, copied, or retranslated
without the express permission of the PHP Institute, Inc. Citations must specify thesummary as a source.
The views expressed herein are those of the project as a group and do not necessarily
represent the views of any organization which project members are affiliated.
PHP Global Risk Analysis Project, PHP Research Institute

PHP Institute, Inc.
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E-mail: think2@php.co.jp

English Summary of the“2021 PHP Global Risk Analysis” Report

Introduction
This English-language summary presents the essence of the “2021 PHP Global Risk
Analysis” report, published in Japanese at the end of 2020 by PHP Sōken (PHP ResearchInstitute), the policy think tank of the PHP Institute, Inc.
The “PHP Global Risk Analysis” reports represent the output of focused investigations by
experts in fields from geopolitics and regional studies to international finance, the global
economy, and cyber security issues. The 2021 edition is the tenth annual report in theseries. This year’s full report, published in Japanese, may be downloaded from thefollowing URL:
https://thinktank.php.co.jp/global-risks-2021/
The Japanese-language report comprises a “Global Overview” describing the global
context for the wide range of risks we face today, followed by detailed analyses of 10
global risks that will require particular attention from Japan in 2021. These areaccompanied by rundowns of their likely impacts on the nation and a section on thepolicy implications for Japan. This English-language version is a complete translation of
the “Global Overview” and the key analysis points for each of the 10 risks.
The risks are not presented in order of their importance, but have been arranged so as
to highlight the connections among them, as well as to make it easier for readers to
grasp the overarching structure of global risk in 2021.
Ever since this report was first published in 2012, it has focused on the connections
between politics and economics. The COVID-19 pandemic that swept the globe in 2020
has made this perspective, taking both the political and economic spheres into account,
all the more important. In 2021 we will see the launch of the new administration of US
President Joe Biden championing a fresh focus on international cooperation, and hopesare high that there will be more predictability on the American foreign policy front.
Thorny challenges remain, though, including the fraught US-China relationship, the“green shift” in finance and investment, and the need to conquer the coronavirus. In allof these areas we can expect authoritarian politics to continue exerting considerablesway.
It is our hope that the tenth “PHP Global Risk Analysis” report summary will provide
valuable insights to readers who are keeping careful watch on the threats andopportunities that arise in this era of uncertainty.
January 2021
PHP Global Risk Analysis Project, PHP Research InstituteGlobal Overview
A Post-COVID-19, Post-Trump World at a Crossroads●●

The coronavirus crisis is exposing politics, economies, and societies to enormous
stress.
➢ The world has seen historically unprecedented restrictions on various activities,
leading both supply and demand to dry up almost instantly. Without an end to
the COVID-19 pandemic many national economies will fall into crisis conditions,triggering deep confusion in political and societal spheres. Newly emerged anddeveloping economies that have suffered particularly severe damage could besources of geopolitical instability.
The pandemic is accelerating great-power competition and trends toward “ourcountry first” nationalist thinking, set firmly in motion by the administration of US
President Donald Trump.
➢ During the four years of the Trump administration, developed nations have seen
China’s provocations in a range of fields and people’s unease with globalizationand international openness become undeniable fixtures impacting the policy
landscape. There will be no returning to the world as it was before Trump.
➢ The administration of President Joe Biden will focus on repairing US alliances
and international systems, but will be pressed to spend most of its energy on
grappling with the pandemic, employment, and other domestic issues. Deep
divisions in American society will hobble the Biden White House, and the newpresident will find himself tested in terms of his ability to restore domestic
stability in American society while shaping the international order.
➢ Climate change, meanwhile, continues to emerge as a challenge requiring
international cooperation to tackle. We will see new confrontations arise on the
global stage as states gauge the positive and negative impacts on their energy
and other interests, and these issues will take front stage in international
industrial and diplomatic rivalries alike.

●

Economic security is rising as a key concern.
➢ As the pandemic severs supply chains, it causes acute recognition of the fragilityof interdependence thereby exposed.
➢ We are seeing an exacerbated sense of insecurity in connection withdependence on other nations. There will be considerable adjustments to supplychain relationships engendering dependence on certain nations; combined withthe trend toward protectionism that has arisen in recent years, this will enhancethe drive to increase self-sufficiency.
➢ Nations will move to implement economic security policies that bolster the
resilience of their economies and pursue independence in the industrial andtechnological fields that have strong impacts on traditional national security.
Corporate activity will become a central facet of the strategic competition
between states.
➢ In the COVID-19 pandemic, the scope of “strategic goods” is expanding toinclude medical and other related supplies. We can expect to see deep-reachingchanges in strategic goods and strategic industries as part of the structuralshifts to post-coronavirus industries and societies, as exemplified by green anddigital technologies.

A New Normal in the International Order●

The Biden administration will stick to the course of strategic distancing between
America and China.
➢ Mutual distrust will become entrenched between the West and China overquestions of responsibility for the spread of coronavirus infections andmeasures to prevent them. The Hong Kong issue will also underpin Westernviews of China as fundamentally different from them. The “mask diplomacy” and“wolf warrior diplomacy” that Beijing rolled out during the pandemic will
trigger powerful backlashes, and competition between China and other powers
will increasingly take on the nature of a struggle between competing systems ofgovernment.
➢ The Biden administration will seek for ways to work together with China on
issues like the environment, nuclear nonproliferation, and COVID-19. At thesame time, though, the rivalry between these superpowers will touch on somecore areas, starting with trade and high-tech industry and including the Uighur
minority in western China, Hong Kong, Taiwan, and finance. Washington will
strive to avoid unneeded escalation and find a path to a “managed
confrontation” approach allowing issues to be handled on a practical working
level.
➢ The Biden White House will work to coordinate its policies vis-à-vis China withJapan, Europe, and other allies and friendly powers. China, meanwhile, will
strike back via attempts to forge a new economic sphere, as seen in theachievement of the Regional Comprehensive Economic Partnership (RCEP) andChina’s signaling of its willingness to join the Trans-Pacific Partnership (TPP).

●

●

●

As Washington returns to a hardline stance against Russia, we are certain to see
a rapprochement between Beijing and Moscow. The outcome of India’s clashes
with China over their national border will determine the course of geopolitics
going forward.
The divide in digital platforms will increase between the liberal, democratic world
and the authoritarian world.
➢ We will see heightened struggles between the United States, Europe, and China
over issues of government access to citizens’ data and personal information
protections.
➢ Russia will exploit the openness of developed nations to continue its
information operations that skirt the boundary between the cyber and realworld realms.
The structure of the Sino-American rivalry will impact different global regions andfunctional realms in a disproportionate manner.
➢ Fierce competition between China and the United States will become the normin various regions, especially the Indo-Pacific. China will expand its capacity todefine systems in areas like shipping routes, information and communications
infrastructure, and payment systems. The United States is unlikely to give way
in fields where it stands to lose its dominance.
➢ Many nations in Southeast Asia and other regions will strive to avoid declaring
clear allegiance to the Chinese or American side. Some, including South Korea,
will seek to stake out neutral positions.
➢ In the Middle East, the end of the Trump administration, which provided robust
support to both Saudi Arabia and Israel, will bring about a shift in the power
balance. Moves will intensify among the region’s powers to redefine spheres ofinfluence, and Middle Eastern actors will gain experience in cyberwarfare.
➢ The Biden administration’s insistence on human rights issues in its foreign
policy will trigger backlash from authoritarian regimes, and could even place
the United States at a disadvantage in its strategic competition with China.
Following Japanese Prime Minister Shinzo Abe’s stepping down in 2020, this year
German Chancellor Angela Merkel is set to leave office. Given the Biden
administration’s likely focus on domestic issues, it remains uncertain whether wewill see a recovery of the leading liberal democracies’ leadership capabilities on theworld stage.
➢ In 2021 Britain, battered by the double blows of Brexit confusion and COVID-19,
serves as host to the Group of Seven summit. Italy, another nation facing severe
pandemic headwinds, is the G20 host. Japan, meanwhile, is scheduled to host thepostponed 2020 Olympics and Paralympics in Tokyo. Events to watch in 2021
include elections for Iran’s presidency and the Hong Kong Legislative Council.

Growing Societal Contradictions Throw the Zeitgeist
Out of Balance●

The appropriate form of the social contract is increasingly being reconsidered.
➢ Leading liberal democracies grappling with the coronavirus crisis are struggling
to determine how to strike a balance among liberty, safety, and economic
wellbeing. Many developed nations have seen the limits to their governancecapacity exposed by lasting states of emergency.
➢ Authoritarian regimes and governments in immature democracies will continue
to tighten their grip on power in the name of the safety of their people. Thesestates will extend their surveillance of and restrictions on activities by citizens
to suppress opposition. China-made surveillance technologies will see
increasingly wide use throughout the non-liberal-democratic world.
➢ Given the choice between freedoms or safety, or between economic vitality orsafety, the balance will increasingly tilt toward the latter choice. As
governments carry out large-scale interventions to prop up economic activities●

and support those at risk of poverty, the role of the state will expand
dramatically, making a renegotiation of the social contract inescapable.
➢ The success or failure of socioeconomic models that are redesigned for the postCOVID-19 era will determine which states or governmental systems come out
ahead in future comparisons.
➢ As popular discontent with increasing authoritarianism, unemployment, racial
discrimination, and other problems goes beyond the breaking point,
governments across the globe will see an escalation in objections to their rule.
Knowhow about effective means of popular resistance will rapidly cross borders
via social media and other channels.
We will see shifts in the relationships between nations and online platforms.
➢ The major platform operators are increasingly vital components of societal
infrastructure, but they have the potential to encroach upon the functions of thestate and freedoms of individuals. We have entered a period of adjustment in
the relationships between these operators and national governments, as seen in
US Congressional debate on the need to break up major players like the GAFA
giants.

➢ A “China model” has taken shape that unifies these online platforms with the●state. Whether liberal democracies can forge their own model for a digitalsociety will be an increasingly vital question.
Extreme inequality and environmental degradation will continue driving
reconsiderations of capitalism.
➢ Pandemic lockdowns and other restrictions on people’s activities impact the
weak in society most of all, thereby widening wealth gaps. The automation andmechanization being pursued to reduce contact-based infection could trigger
further rises in unemployment.
➢ Calls for a “green recovery” and similar moves toward a more sustainable
society as we emerge from the pandemic will gain momentum.
➢ There will be increasing opportunities to rethink our approach to capitalism, as
seen in ESG investment trends, the US Business Roundtable’s recent call for
multi-stakeholder capitalism, and the World Economic Forum’s Great Resetinitiative.
➢ Neoliberalist thinking, with its emphasis on the primacy of private-sector
vitality and the market function, will continue to lose support as more emphasis
is placed on the government’s role in the economic sphere. Calls will mount forindustrial policy that invests in society as a whole, as described by scholars like
Karl Aiginger and Dani Rodrik, and for a redefinition of government investment,
as urged by the economist Mariana Mazzucato.
➢ Increasing numbers of people will argue that eradicating excessive wealthdisparities and tackling global warming cannot be accomplished within social
systems predicated on capitalism. Among them will be those stressing the needfor “degrowth” or reevaluating Marxist thought.

Global Risks 2021
1. New Strategic Competition Touched Off by Climate Change● Global moves toward cooperation, and new confrontation, in the name of “climate
justice”● Rising risk of relying on China for rare metals and electronic components inconnection with the uptake of sustainable energy and electric vehicles
2. Crisis Threatening Economic Have-Nots with the Exit from Pandemic
Responses● “Weakest links” in the societal chain concealed by a focus on fiscal and financial
measures in the COVID-19 response● As socioeconomic winners extricate themselves from the coronavirus shock, an end
to measures to prop up economies threatens the losers with deeper crisis● China takes its early recovery from the pandemic as an opportunity for aggressive
new economic measures
3. “Heat Waves” of Rioting and Terrorism Provoked by the Pandemic● Proliferation of “resistance knowhow” supports ceaseless unrest among youths
worldwide● Frequent terrorist incidents in Europe and a new phase of Islamic State terror withincreasing force in Africa
4. Cyberattacks Becoming Part of Nations’ Strategic Arsenals● Security measures poorly adapted to threats result in more serious damage● Increase in destructive cyberattacks that halt functions at key facilities● Cyberoperations (fraud) affect the management of the Tokyo Olympics andParalympics
5. “The Enemy Within” Reduces the Impact of Biden’s Cooperative Diplomacy● New Biden administration focused mainly on domestic rebuilding● Sharp political fractures limit America’s ability to engage internationally● Rivalry becomes the norm in US-China relations; corporations continue beingpressed to choose sides
6. Xi Jinping’s Increasingly Emperorlike Position Aggravates Conflict●●

Rising opposition to the excessive concentration of power in Xi’s hands
Chinese hardline stance bolsters “New Cold War” between China and the UnitedStates7. “New Cold War” Gives North Korea New Vigor as South Korea Sees Turmoil,
Japan’s Presence Recedes● North Korea restarts provocative actions on a limited basis under the Chinese aegis● Pinned between China and the United States, South Korea finds itself increasingly
split● Japan loses its footprint on the Korean peninsula
8. Thai Regime Shaken by Loss of Stabilizers● Taboos shattered as criticism of Thai monarchy erupts● Strife arises between human-rights focus of Biden’s foreign policy and authoritarianregimes spreading across Southeast Asia
9. Loss of “Trump Pressure” Creates Power Vacuum in the Middle East,
Heightening Conflict Risks● Aggressive actions toward Iran by United States, Israel in the last days of Trump’s
tenure make nuclear agreement negotiations harder to restart● Turkey expands influence in Middle East, eastern Mediterranean, Africa, heightening
risk of standoffs, clashes with regional powers
10. Europe Rudderless with Loss of Leadership Following Merkel’s Exit
● Europe increasingly distrustful of China due to coronavirus, Hong Kong, Taiwan, andChinese extension of the Belt and Road Initiative● German-French axis in Europe set to weaken following Merkel’s resignation● Brexit chaos may trigger breakup of the United Kingdom

Project Members
Taisuke Abiru
Senior Research Fellow
The Sasakawa Peace Foundation
Masafumi Iida
Head
America, Europe, and Russia Division,
National Institute for Defense Studies

Toshio Nawa
Executive Director/Senior Security
AnalystCyber Defense Institute, Inc.
Noriaki Oba
Energy Analyst
Fellow, Japan Data Science Consortium Co.
Ltd.

Satoshi Ikeuchi
Professor
Research Center for Advanced Scienceand Technology, The University of Tokyo

Izuru Sugawara
Analyst of International Politics
CEO, Global Risk Advisory LLC

Kuniharu Kakihara
Lieutenant General
Commandant, Air Command and Staff
College

Koichi Tajima
Division Manager
Research Division, Japan Credit Rating
Agency Ltd.

Masafumi Kaneko
Executive Officer/Senior Research Fellow
PHP Institute, Inc.

Toshiyuki Yasui, PhD, PMP
Guest Professor
Graduate School of System Design andManagement, Keio University

Haruyoshi Mabuchi, CFA
President
Bouquet de Fleurettes
Seiya Nakajima
Visiting Professor
Fukui Prefectural University

Keiko Yoshioka
Senior Staff Writer
The ASAHI SHIMBUN