Independent Strategy

Caught in the crossfire

The state also was the key player in all the Asian emerging markets that graduated from middle-income to rich economy status in the last 30 years. It is the historical blueprint for exactly what China is doing today: using a state-driven system to boost its technology beyond the frontiers of its historical and present competence. The US, which in many ways set the precedent, may not like being rivalled on the world stage, but it can’t stop it happening. US steps to ‘rebalance’ global trade to slow this change are a direct threat to the Asian EMs’ export growth models. We would be short developed Asia currencies (Korean won, Taiwanese and Singaporean dollars) against the renminbi. They should also lag versus the US dollar. We remain overweight Chinese equities, which will benefit from this transition.

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