“In the early 2000s, mainland China was perhaps 5-10% of the Asian capital markets, and China appeared likely to grow in a symbiotic way with the US,” said the CIO from Asia. “That path is now gone, and the possible scenarios are not nearly as hopeful as back then,” continued one of the region’s leading investors. “But knowing that the future is not as bright is different from knowing how it will unfold,” he said. “So, for that, we break the future into a number of possibilities, then watch for signs that tilt the odds toward one or the other.”
“China is highly indebted and leveraged, so Xi is attempting to open up because he needs to attract foreign capital,” added the same Asian CIO. “He’s playing a confidence game, and it is vital for his survival that he win it,” he said. “In less than 20yrs China has come to represent 70% of Asia’s capital markets.” With such dominance, any investment decision in the region has become a call on whether you want to be long China. “Xi is looking to attract $5trln of foreign capital to plug holes, levering it 10x-15x through the state banking system.” Read more…..
Chart of the Day
The tit-for-tat tariff war has hurt many companies both in China and the U.S. With additional tariffs on $250 billion worth of Chinese goods in place and tariffs on more than $300 billion on the table, some Chinese companies are looking to avoid tariffs by moving their manufacturing hubs to the U.S.