China: A Pseudo Cold War Hots Up

Published on: September 28th, 2021

Biden’s continuation of hardline policies surprised China, dashing hopes that healthy competition and diplomacy could force Chinese compliance and cooperation. Under President Xi’s Common Prosperity dogma, China is beginning to follow a more overt domestic agenda, leading us inexorably towards a pseudo Cold War. The implications for geopolitics and markets will be profound.


  • WJ
    Willie J.
    28 September 2021 @ 20:25
    Exceptional piece as always - thanks Julian.
  • JS
    John S.
    29 September 2021 @ 01:09
    Excellent analysis - thanks Jules
  • JL
    J L.
    29 September 2021 @ 07:44
    Would appreciate an update on the SPX trade. Having gone nowhere in 9 days is it time to cut it with minor damange? cheers
    • HM
      Harry M. | Real Vision
      30 September 2021 @ 13:06
      JL, I asked JB and the team, and the advice was to give it a bit more time through quarter end and review mid-week next week with a stop pulled down below 4500 now (use your judgement regarding where to put the stop). We still expect a relatively quick resolution, but can afford to give it a few more days.
    • HM
      Harry M. | Real Vision
      30 September 2021 @ 11:44
      Last time I discussed with JB the answer was to keep it, cos it was all perfectly consistent with further weakness. But let me go and check today.
  • CS
    Chuck S.
    29 September 2021 @ 17:18
    I wish I could remember the name of the article that argued AUKUS was an Australian concept, not something the US foisted on them as Julian suggests. The author claimed AUKUS was their answer to the following question: How can Australia expand the 5-Eyes intelligence alliance (in gathering and sharing intelligence) to secure their vital shipping lanes and keep an increasingly aggressive China at bay? According to the article, US nuclear sub technology had already been shared with the UK and this agreement expanded it to Australia.
    • HM
      Harry M. | Real Vision
      30 September 2021 @ 11:42
      This is at least partially true. However, you have to ask why Australia needs to protect its shipping from China when most of the stuff they shipped used to go to .... China. China is increasingly aggressive, but its assertiveness is more economic than military - for now! Foisted might overstating it. The Australians have discovered that China is infiltrating Australian institutions, and this naturally alarms them. Many Australians see a threat from China. However, if Australia didn't come along voluntarily with some aspect of this, its worth noting the US commentators like Mearsheimer who break it down into a "with us or against us choice". This is key, at least for investors. We are all being asked to pick a side, including investors. If your US company has substantial investments in China, you should be worried. HSBC is in a very tough place.
  • sL
    scott L.
    30 September 2021 @ 00:05
    Makes one thing crystal clear - why the crack down in China on Crypto? Answer: If you were a member of China's wealthier class, given these changes/actions and messaging from the central party, wouldn't you want to get your capital (and potentially selves) out ASAP? Outlawing crypto makes it much easier to prevent this exodus.... Am I missing something, or does that ring true? Thoughts?
    • HM
      Harry M. | Real Vision
      30 September 2021 @ 11:37
      Definitely a factor and I think its probably much underestimated. There are some reports that Chinese bureaucrats and businessmen represent the biggest demand for crypto, using it to transfer money out of the country with relatively few finger prints. For guys moving money which is potentially dirty, do so without getting caught is much more important than avoiding any frictional losses. Some have suggested they wouldnt care if they experienced 50% losses rather than the gains they have experienced. But its also worth considering the cost of electricity. Chinese electricity is heavily subsidized. So this is actually arbitraging that subsidy. Hence the aggression in shutting down "mining".
  • JG
    Johan G.
    1 October 2021 @ 15:03
    Thanks Julian, In my opinion this could be the biggest story of the next ten years, the decoupling of China and the west. Low volatility does not sound very likely! Geopolitics dominating over finance would be a big conceptual change for anyone who has been an investor over the last decades. This will also play into the inflation narrative with supply chain disruptions continuing over the longer term, and potentialy making 'temporary inflationary impulses' not so temporary. It could easily overwhelm the long term demographic deflationary pressure for extended periods.