By Michael Dubois, Head of Corporate at VG Global Holdings  

International news over the last few years have been overshadowed by tensions between the West and China amid trade tariffs, tech rivalry, information secrecy, and even spying allegations. The consequences for the global markets are significant, with both the USA and China determined to reduce the dependence on each other through various long-established supply chains. Although this has resulted in high inflation and rising interest rates, there have been lots of opportunity for gain by various emerging nations and tech giants who are able to navigate the global marketplace and stay on the right side of the power battle, and there are certain factors which any investor needs to start to think about in terms of future investments.

Firstly, India is starting to emerge as a serious powerhouse in the economic global marketplace, with the means to be able to compete with China in low-cost, large-scale manufacturing, as well as the fact that its large, young population and a growing middle class sector, will also create opportunities for multinationals who are now seeing less business in China. Indian stocks have rallied almost 10% this year and the prospect of more investor money flowing into the bond market also got a boost when JPMorgan announced plans to include India in a key government bond index next year.  India’s central bank forecasts that the economy will expand 6.5% over the next fiscal year, while China is expected to only grow around 5% in the same time period.

Then there is the ever-growing, relentless and endless battle for supremacy in the semiconductor chip manufacturing sector, and more widely, the tech industry, as the China-West clash creates winners and losers on both sides. While U.S. subsidies for domestic semiconductor manufacturing have boosted Intel’s shares, the performance of big U.S. tech stocks and global share indices are always vulnerable to any signs of Chinese retaliation, and, for example, Apple’s stock price slid by more than 6% over two days in early September amid reports that Beijing would ban government workers from using iPhones.

In addition, China is the world’s dominant buyer of luxury goods, which means that Western fashion houses have also been ensnared in politics, as China’s top anti-corruption watchdog has vowed to eliminate what it calls the hedonism of Western elites, and Chinese banks have even told staff not to wear European luxury items at work. Luxury sector shares surged as China loosened COVID-19 restrictions in early 2023, but, since then, with China’s economy in the doldrums and tensions with the West ratcheting up, they have slumped. However, if the economy recovers, it could create a downturn for Western fashion retailers, and could in turn promote other fashion companies from previously minor regions in the sector.

In general, investors who have poured  money into China may now start to think about selling up, as a faltering economy and the property market turmoil may result in the bearish China investment case extending beyond politics. In addition, the prospect of continued tariffs and the hassle of navigating U.S. restrictions on investing in Chinese technology, will not help, and with China’s global stocks now underperforming, investors are split on how to approach this market. Some may wish to pull out, although others see this as an opportunity.

Finally, Washington policy is now on finding and nurturing new economic allies, what has been referred to as “friendshoring,” as a means to replacing China’s role in supply chains with other, friendlier nations. So far, Vietnam and Mexico have already emerged as major beneficiaries of the U.S. supply chain shift, India is close behind, and Mongolia is seeking U.S. investment in mining rare earths, materials used in high-tech products such as smartphones, while the Philippines is also courting U.S. infrastructure investment. As Anna Rosenberg, Head of Geopolitics at the Amundi Investment Institute, recently said, “Sino-U.S. tensions, provide a ‘new lens’ through which to analyse emerging markets’ growth prospects”.

The global marketplace is undergoing a major shift, and investors now need to take this into account.


The author does not own any stock, option or similar derivative position in any of the companies mentioned, and has no plans to initiate any such positions within the next 72 hours. This article only reflect the author’s own opinions. The author is not receiving compensation for it  and has no business relationship with any company whose stock is mentioned in this article.