I have been surprised by the level of interest in my treatment of the “China investment” subject in recent weeks. I kicked things off at the beginning of August with this piece, presenting the background around the tensions between U.S. investment in Chinese equity vs. Chinese fixed income. I followed up with this piece making the case that the Chinese perception of U.S. global economic intentions (primarily around our use of the dollar as the world’s reserve currency to facilitate large twin deficits) is at the heart of Chinese beliefs and agendas with their own currency.
None of this has been for the purpose of mere armchair theorizing or navel-gazing. While high level takeaways in the discussion of China’s place on the global economic stage can be interesting and even provocative, our agenda is investment-specific. We may or may not have an investment thesis to act upon around Chinese financial markets. And we certainly believe the entire discussion is highly relevant for all investors in terms of how the geopolitical and monetary components play themselves out.
This week I bring in some reinforcements. Louis Gave of Gavekal Research, one of the foremost economists in the world when it comes to China, Hong Kong, the Pacific Rim, and global fiscal dynamics joins me for a podcast/video discussion on this entire subject. His own views help shine a light on what the fundamental question is we must answer. I will leave you in suspense as to what that is.
Once again, all free people can conclude different things about these subjects. But choosing to ignore the entire topic is not an option. History is being made right before our eyes, and our portfolios are asking us to understand it. To that end we work.
Links mentioned in this episode: