Chinese authorities have encouraged the use of the yuan around the world, while the US dollar dominates global transactions.
BEIJING – A Chinese economist’s opening speech at a major event on an asset manager’s investment strategy last week focused on international politics rather than growth prospects.
“We are living in a cognitive revolution, so today my speech will not be broadcasting an economic report,” said Liu Yuhui, director of a financial research department at a government think tank, the Chinese Academy of Sciences. social Sciences.
That’s according to a CNBC translation of his Mandarin speech on Friday at the ChinaAMC asset manager’s investment strategy conference. Founded in 1998, ChinaAMC is one of the largest mutual fund managers in the country and claims 1.54 trillion yuan ($ 240.63 billion) in assets under management.
Liu’s presentation was presented by the organizers as a discussion of macroeconomic issues for the second half of the year. But the slides in the presentation were titled “The Bipolar World Under the US Dollar Super-Expansion Cycle – The ‘Cognitive Revolution’ of the Chinese Capital Market.” ”
The event came about two weeks after the ruling Chinese Communist Party just celebrated its 100th anniversary on July 1, when President Xi Jinping again called for China’s “great rejuvenation”.
Liu, also chief economist at Tianfeng Securities, echoed this line, speaking confidently of China’s ability to meet its goal of becoming a “great nation.” He said once a century, opportunities would emerge from a “struggle for supremacy” between the United States and China.
The United States is the world’s largest economy, while China is the second, and is rapidly catching up in size. The two countries have found themselves embroiled in growing tensions in recent years, starting with trade and expanding into finance and technology.
Helping China, Liu said, is the United States’ commitment to a dollar printing policy since the coronavirus pandemic that shifted the financial balance. For Liu, this US policy reflects an irreversible and significant change that has direct consequences for China’s macroeconomic policy objective of controlling inflation at the national level.
However, Liu left no doubt about China’s ability to maintain growth. Again echoing confidence in Beijing, he said China’s resolve will enable the country to resist the effects of US policies, weakening the US economy and strengthening China’s.
In Liu’s view, the United States is implementing the concept of “modern monetary theory” (MMT), according to which governments with their own hard currencies can print money to support the national economy without too much trouble. worry about budget deficits.
One of the best-known proponents of modern monetary theory is Stephanie Kelton, formerly chief economist for the Democrats on the US Senate Budget Committee and senior economic adviser to Bernie Sanders’ 2016 presidential campaign.
The United States, under the Trump administration and then the Biden administration, has kept interest rates low and released billions of dollars into the economy to support growth in the wake of the pandemic.
The stimulus package has drawn criticism for its scale. At the Berkshire Hathaway conglomerate’s annual meeting in May, Charlie Munger, longtime business partner of US billionaire Warren Buffett, said that modern monetary theory might be “more achievable than everyone thought. But I know that if you keep doing it without any limits, it will end in disaster. “
For Liu, staying in compliance with Chinese government guidelines will be even more critical for domestic investments in light of developments such as the controversial speech by Alibaba founder Jack Ma last fall and the subsequent suspension of the company. IPO of Ant Group.
Since Chinese policy will focus on ensuring national security and reducing carbon emissions, he said mainland Chinese stocks with the highest likelihood of big gains would be from energy sectors. news, seeds, optics and semiconductors, among others.
As for digital currencies, against which the Chinese authorities have stepped up their crackdown this year, Liu also presented them in geopolitical terms.
“In my opinion,” he said, “this is just the way the United States tempt Chinese capital.”