Opportunities from the battle between the US and China, says economist


Chinese authorities have promoted the use of the yuan worldwide while the US dollar dominates global transactions.

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BEIJING – When it comes to investment prospects, a Chinese economist predicts that a “struggle for supremacy” between the US and China will open up unique opportunities in the century.

This groundbreaking window comes from upheavals on both sides, said Liu Yuhui, director of a financial research division at a state think tank, China Academy of Social Sciences.

China is on its way to becoming a great nation, he said, while the US has had dollar printing policies that have altered the financial balance since the coronavirus pandemic.

This emerges from a CNBC translation of his speech in Mandarin entitled “The Bipolar World Under the US Dollar Super-Expansion Cycle – The ‘Cognitive Revolution’ of the Chinese Capital Market”.

Liu, also chief economist at Tianfeng Securities, spoke at asset manager ChinaAMC’s investment strategy conference on Friday. Established in 1998, ChinaAMC is one of the largest mutual fund managers in the country, with assets under management of 1.54 trillion yuan ($ 240.63 billion).

In Liu’s view, the US is implementing the concept of “modern monetary theory” (MMT), which states that governments can use their own strong currency to print money to support the domestic economy without worrying too much about budget deficits .

One of the best-known exponents of modern monetary theory is Stephanie Kelton, formerly Chief Economist for Democrats on the Senate Budget Committee and senior economic advisor to Bernie Sanders’ 2016 presidential campaign.

The U.S., under the Trump administration and later the Biden administration, kept interest rates low and released trillions of dollars into the economy to support post-pandemic growth.

The economic stimulus plan has been criticized for its size. At the annual meeting of conglomerate Berkshire Hathaway in May, US billionaire Warren Buffett’s longtime business associate Charlie Munger said that modern monetary theory “may be more possible than everyone thought.”

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In China, the ruling Chinese Communist Party celebrated its 100th anniversary on July 1st when President Xi Jinping again called for the “great rejuvenation” of China.

For Liu, the government’s stance means that policy is focused on ensuring national security and reducing carbon emissions. He stressed that political correctness will be even more important to investment in the face of developments like the controversial speech by Alibaba founder Jack Ma last fall and the subsequent suspension of the Ant Group IPO.

Mainland stocks with the highest likelihood of big gains will be in the new energy, seed, optics and semiconductor industries, among others, Liu said.

As for digital currencies, which the Chinese authorities have tightened their crackdown on this year, Liu has also looked at them geopolitically.

“From my point of view,” he said, “this is just the US way of tempting Chinese capital.”