China is now both a major headwind AND tailwind for global investors

China represents both major headwinds and tailwinds for global investors for the remaining first half of 2023, affirms the CEO and founder of one of the world’s largest independent financial advisory organisations.

The analysis from deVere Group’s Nigel Green comes after China’s foreign minister called on countries to “stop fuelling the fire” in Ukraine ahead of the first anniversary of the war on Friday, and as US President Joe Biden made a surprise visit to Kyiv this week.

It also follows US officials addressing the heightening tensions with China on Sunday after Secretary of State Antony Blinken met with Beijing’s top diplomat, Wang Yi, in Germany to discuss what it calls China’s high-altitude spy balloon and the nation’s approach to sending “lethal aid” to Russia.

Nigel Green says: “Whilst inflation remains an issue, China is now front and centre in investors’ minds.

“Currently, China represents both the major headwinds and tailwinds for global investors for the remaining first half of 2023 at least.”

The headwinds

“On the back of Biden’s trip, amongst other factors, China is accusing the US and Western allies of escalating tensions in Ukraine,” explains the deVere CEO.  

“Meanwhile, US Secretary of State Antony Blinken has said Chinese firms were already providing ‘non-lethal support’ to Russia and new information suggested Beijing could provide ‘lethal support’ – which has been strongly denied by China.

“There are also real concerns amongst US allies about a possible military conflict between China and Taiwan, over which Beijing claims sovereignty.”

He continues: “In addition, there are broader worries about the decoupling of China and the US.

“There remains a deep economic interdependence between the United States and China, which has been growing for decades. But this appears to be slowing. We see this in the slowdown of commerce and investment, knowledge-sharing, and smaller global value chains, amongst other issues.

“The deceleration appears to have gained momentum amid the United States’ push to ‘contain’ China in terms of the strategic competition between the two. Also, President Xi Jinping recently reasserted China’s focus away from rapid growth and toward national self-sufficiency.

“All of these headwinds create uncertainty for investors around the world.”

The Tailwinds

“China’s faster-than-anticipated reopening after Covid-19 restrictions is going to deliver a major boost to the economy of China, which is the world’s second-largest, and global growth.

“The rebound will be delivered by significantly bolstering domestic Chinese demand which, in turn, will help regional economies given that neighbouring countries export more to China than many in the West.

“The reopening will positively impact commodity demand and prices, which will help many net exporters.

“Global growth will also be fuelled by renewed demand for international travel – and the associated economic benefit of it – to and from China.”

Nigel Green concludes: “As Beijing seeks to position itself as a force for peace between Russia and Ukraine, and as the economic superpower reopens following years of Covid restrictions, China is being watched with interest from global investors.”