A couple of weeks ago you read Gavekal Research’s piece, Investing for a New Cold War. Today on the Evergreen Exchange, listen to Evergreen CEO Tyler Hay interview Gavekal founder Louis Gave on this topic and more, complete with thought-provoking debate and lively banter.
The conversation between Tyler and Louis provides clarity on an issue that has dominated the news during Trump’s presidency: will China surpass the U.S. as the world’s greatest economic superpower?
Louis built his career in Hong Kong and was once even called one of the “smartest men in Asia” by Bloomberg. If you have a WSJ subscription, read his most recent interview with Barron’s here.
Listeners can skip through the sections indicated below if they wish to revisit points or only hear certain topics.
Is this the new face of war?
The current tensions with China are not the beginning of WWIII, but rather a new cold war.
Chinese people’s view of the U.S. was one of positive admiration until recent rhetoric portrayed the U.S.’s overarching goal as stifling China’s economic growth.
Trump has shifted his focus sharply toward trade tensions to detract attention from more concrete unfulfilled campaign promises—literally concrete ones, such as the border wall.
The tech sector wanted better intellectual property rights enforcement; they were not prepared to be the battleground.
More Chinese young adults are attending college than their American counterparts, and there are approximately 10x as many pursuing degrees in S.T.E.M. (science, technology, engineering, mathematics) fields.
China fell into communism after 125 years of social unrest, as a protection against cultural instability. Now it has become apparent that Japan is a profoundly socialistic country on which capitalism was imposed, while China is a profoundly capitalistic country on which socialism was imposed. We are experiencing the correction of that misalignment.
There is no way to know what a potential deal with China would look like, as it will be completely dependent on who Trump runs against in the 2020 election. If it’s Biden, Trump would seek to demonstrate superior foreign negotiation skill. If it’s Bernie, he’d seek a deal that reinvigorates loyalty with the working class. The trade war is a tool for his reelection campaign.
We must decide whether or not we believe that central banks create wealth. Does encouraging one to spend tomorrow’s money today promote sustainable growth?
Increasingly, countries who trade with China are basing their currency against the renminbi, negating the trade of U.S. dollars. It is possible that we are seeing the peak of the dollar.
*chart referenced at 46:50
DISCLOSURE: This material has been prepared or is distributed solely for informational purposes only and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Any opinions, recommendations, and assumptions included in this presentation are based upon current market conditions, reflect our judgment as of the date of this presentation, and are subject to change. Past performance is no guarantee of future results. All investments involve risk including the loss of principal. All material presented is compiled from sources believed to be reliable, but accuracy cannot be guaranteed and Evergreen makes no representation as to its accuracy or completeness. Securities highlighted or discussed in this communication are mentioned for illustrative purposes only and are not a recommendation for these securities. Evergreen actively manages client portfolios and securities discussed in this communication may or may not be held in such portfolios at any given time. Louis Gave’s has an equity ownership in Evergreen. Louis’ views and opinions are his own, and are not necessarily the views of Evergreen.