Tag: China
Bi-Weekly Geopolitical Report – Mineral Commodities in the World’s New Geopolitical Blocs (June 6, 2022)
by Patrick Fearon-Hernandez, CFA | PDF
For many years, we’ve discussed how the United States has been backing away from its historical role as global hegemon, setting the stage for deglobalization and a fracturing of the world into separate geopolitical and economic blocs. In our Bi-Weekly Geopolitical Report from May 9, 2022, we provided a detailed, comprehensive forecast of which countries are likely to end up in either the U.S.-led or China-led bloc, which countries will lean toward one or the other, and which ones will try to be neutral. As a follow-up to that analysis, this report looks at the distribution of key mineral resources among those camps and what the different endowments might mean for geopolitics, the global economy, and financial markets in the future.
With China and Russia becoming ever more threatening from a military and geopolitical standpoint, and with the coronavirus pandemic demonstrating the vulnerability of supply chains even in peacetime, investors have become more sensitive to the security of commodity supplies and the way nations might try to monopolize or weaponize them. As such, we conclude with a discussion of the ramifications for investors.
Don’t miss the accompanying Geopolitical Podcast, available on our website and most podcast platforms: Apple | Spotify | Google
Bi-Weekly Geopolitical Podcast – #9 “Parsing the World’s New Geopolitical Blocs” (Posted 5/9/22)
Bi-Weekly Geopolitical Report – Parsing the World’s New Geopolitical Blocs (May 9, 2022)
by Patrick Fearon-Hernandez, CFA | PDF
For more than a decade, we at Confluence have been tracking and writing about the waning commitment of the U.S. to its role as global hegemon. We’ve shown how U.S. retrenchment and protectionism have helped erode globalization. Factors like deregulation, falling transportation costs, improved technology, and easing geopolitical tensions following the end of the Cold War may have promoted political and economic integration for decades. Now, however, governments across the globe are erecting barriers to trade, investment, and migration, leaving authoritarian strongmen emboldened to assert themselves. The latest example of that has been Russian President Putin’s invasion of Ukraine.
Amid these developments, we’ve argued the world will fracture into at least two main political and economic blocs: a U.S.-led bloc consisting mostly of liberal democracies and a China-led bloc of mostly authoritarian states. This report discusses which nations are likely to join each bloc, which will merely lean toward one bloc or the other, and which may try to stay neutral. Based on our predicted makeup of each bloc, we describe their differing political, economic, and financial characteristics. As always, the analysis also includes ramifications for investors.
Don’t miss the accompanying Geopolitical Podcast, now available on our website and most podcast platforms: Apple | Spotify | Google
Bi-Weekly Geopolitical Podcast – #2 “Two Power Plays in Kazakhstan” (Posted 1/31/22)
Bi-Weekly Geopolitical Report – Two Power Plays in Kazakhstan (January 31, 2022)
by Patrick Fearon-Hernandez, CFA, and Bill O’Grady | PDF
Don’t miss the accompanying Geopolitical Podcast, now available on our website and most podcast platforms: Apple | Spotify | Google
Over the past month, unrest has developed in Kazakhstan. The unrest began as protests against rising fuel prices, but it soon blossomed into broader, more widespread, and violent civil disorder that had the appearance of an inter-elite conflict. Although Central Asia doesn’t usually garner the world’s attention, instability in the region could affect larger countries, such as China, Russia, and India. The volatility in Kazakhstan was also something of a surprise as the country has tended to be stable during its period of independence since the fall of the Soviet Union.
Despite being often overlooked by the Western media, Kazakhstan is an important country. It’s a major oil producer and the world’s dominant supplier of uranium. Oil prices, already elevated, rose further on fears that the Kazakh disorder would lead to additional supply disruptions. Uranium and associated equities also rose in price on the reports. In this report, we begin with some background on Kazakhstan, including a short history and a discussion of the region’s role in Russia’s imperial behavior. We next delve into the reasons for the January unrest and the way it played out for Kazakh and Russian leaders. As always, we conclude with market ramifications.
Bi-Weekly Geopolitical Podcast – #1 “What Would a U.S.-China War Look Like?” (Posted 1/18/22)
Bi-Weekly Geopolitical Report – What Would a U.S.-China War Look Like? (January 18, 2022)
by Patrick Fearon-Hernandez, CFA | PDF
(Note: As we shift to a bi-weekly publication schedule for this report in 2022, we introduce the accompanying Geopolitical Podcast, now available on our website and most podcast platforms: Apple | Spotify | Google)
We’ve written extensively about the worsening geopolitical tensions between the United States and China, which have already affected investors. For example, the Trump administration’s tariffs on Chinese imports have skewed economic developments in each country. Businesses in each country have suffered, while others have benefitted.
Looking ahead, the risks are even bigger. It’s important to stress that a U.S.-China war is not inevitable. On each side, the top leadership probably wants to avoid war. However, as each country flexes its muscles and pushes back against the other, there is a growing risk of miscalculation or mistake that leads to shooting and bloodshed. Even if the conflict became “World War III,” it would not necessarily look the same as World War II. A conflict between today’s two greatest powers would exemplify a new, unique form of modern warfare in terms of the domains in which it would be fought, the weapons utilized, the tactics and strategies employed, the alliances facing each other, and the goals pursued by each side. This report describes the likely lead-up to such a war and how it might be fought. As always, we wrap up with a discussion of the likely ramifications for investors.
Weekly Geopolitical Report – Here Comes China! (October 25, 2021)
by Thomas Wash | PDF
Following President Donald Trump’s withdrawal from the Transpacific Partnership (TPP) in January 2017, it was believed that the agreement would die a quiet death. However, with the leadership of Japan and Australia, the agreement found new life and the remaining members decided to move forward with the deal. Although the new agreement removed 22 clauses from the original pact, it remains largely intact. Now rebranded as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the deal has been in place since December 2018. Following its signing, it has been able to attract new applicants from the United Kingdom, Taiwan, and China. There is also growing interest from South Korea and Thailand.
Serving as the current chair of the pact, Japan has openly advocated for the inclusion of Taiwan. If admitted, this would be the first time Taiwan has joined a multilateral trade agreement independent of China. Such a move would be a direct rebuke of the One China Principle, which states that Taiwan is an inalienable part of the People’s Republic of China that will eventually be reunified. In response, China has come out against Taiwan’s inclusion in CPTPP. In this report, we argue that Taiwan may have influenced China’s decision to formally apply to CPTPP, and we discuss what Chinese membership in the group could mean for the global economy. We begin with a discussion on the history of Taiwan and the One China Policy, which holds that there is only one Chinese government, and its capital is Beijing. Next, we will discuss the motivations for CPTPP and why it is important. Finally, we will discuss Taiwan’s and China’s chances of being admitted into the group. As usual, we will conclude with market ramifications.