How multinational companies can bridge the gaps in a fragmented global economy

The world is currently navigating a period of profound economic transition. A rapidly shifting global landscape has disrupted previously reliable supply chains.

This has introduced new complexities for international business. It has also contributed to an International Monetary Fund forecast for global economic growth of just 3.1% in 2026, below the historical average of 3.7%. The World Trade Organization projects that the growth rate of trade in goods will fall to 1.9% in 2026, the lowest in a decade.

At the same time, artificial intelligence (AI) is reshaping labour markets and creating new challenges around the distribution of technological capabilities and economic opportunities. Meanwhile, the climate crisis exacerbates economic pressures.

When journalist Thomas Friedman published The World Is Flat in 2005, the title captured the momentum of globalization at that time. But two decades later, compounding challenges have fragmented markets. In this environment, multinational corporations serve a crucial function by maintaining cross-border economic collaboration.

In a fragmented global economy, multinational companies help to bypass operational frictions to maintain international connectivity. Companies maximize resource efficiency through continuous innovation, while entrepreneurs direct capital, technology and talent to markets generating the most value.

Such cross-border investment directly funds growth, providing capital, employment and tax revenue to host nations. Crucially, multinational companies distribute innovation to new markets, ensuring that technological progress benefits the broader population.

Ultimately, transnational operations establish stable, pragmatic commercial relationships that can outlast political volatility.

To adapt to this new era of global fragmentation, multinational corporations are shifting from exporting finished goods to developing local industrial capacity.

Today, TCL derives two-thirds of its revenue from international markets. We began building this global footprint in 1999 by acquiring a manufacturing facility in Vietnam to establish local production there. Now, our "Globalization 3.0" strategy establishes independent regional hubs across five continents. Partnering with local stakeholders and governments, each hub integrates local supply chains, brand marketing, retail operations, customer service and product design.

In North America, for example, TCL operates an R&D centre in Silicon Valley, California to align product development with regional technical requirements. Manufacturing bases in Tijuana and Juarez, Mexico, create 3,400 local jobs. Through regional R&D, production and marketing, TCL maintains a top-three market share for television shipments in North America.

This structural localization is occurring in other industries too. Volkswagen Group, for example, established PowerCo to construct electric vehicle battery gigafactories across Europe and North America. By regionalizing production, Volkswagen secures its supply chains and transfers technical skills to local markets rather than relying on a single global export hub.

For TCL, international expansion involved severe challenges. In our early efforts, our globalization strategy brought us to the verge of collapse. Surviving these crises clarified a fundamental reality: globalization and localization are structurally interdependent. True global scale requires deep local integration.

The primary challenge for business is no longer inventing new technologies, but scaling them for mass adoption. In this way, innovation drives enterprise growth.

But rapid advancements in AI, new energy, biotechnology and quantum computing require widespread deployment to generate value. To achieve this, enterprises require four specific capabilities:

In Latin America, companies like Nestlé have localized significant portions of their production networks. By building parallel regional supply chains, they can scale operational innovation to overcome infrastructure constraints and deliver products more efficiently.

When global supply chains fragment, operating costs inevitably rise. This can fuel inflation, increasing the cost of everyday goods – consequences that disproportionately weigh on lower-income populations and risk widening global inequality.

Addressing these pressures requires an economic architecture that balances efficiency with equity. But it's also important to remember that sluggish global economic growth is fundamentally a problem of unrealized demand.

Developing nations often possess massive potential demand, but shortfalls in physical infrastructure, industrial bases and technical capacity can prevent that potential from translating into economic activity. Capital investment from multinationals helps to bridge this gap.

When foreign direct investment flows into a region, it builds the necessary infrastructure to activate local economies.

Multinational investors, supported by World Bank Group guarantees, are funding solar power infrastructure in Egypt, for example. This cross-border capital directly converts potential energy demand into cheaper local electricity, providing the baseline infrastructure required for further industrial growth.

To facilitate such investment, regulatory stability is needed. When policies help to streamline trade regulations and establish predictable business environments, multinational companies have the opportunity to deploy long-term capital, build regional industrial capacity and train local workforces.

In a fragmented global economy, cross-border commercial investment remains one of the most effective mechanisms for driving equitable growth – and for scaling the innovative ideas the world needs most.

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