The rivalry between the
world's two leading powers
is becoming ever more intense.
As China's economy and
geopolitical might keep growing,
the US is responding vigorously to the challenge.
Their struggle is playing out in many spheres
including trade, finance, military capabilities
and influence over other countries.
The latest battleground is technology,
with the US seeking to restrict China's access
to sophisticated semiconductors and other vital components.
We see this as the start of a lasting technology trade war
between the US and China, or "the G2 powers."
So, what does this latest decoupling mean
for the G2 economies, the wider Asia region
and for your investment portfolio?
Long before the new US tech restrictions,
China was striving for greater self-reliance.
We now expect China to double down on its efforts
to become a world leader in semiconductors.
The Chinese government has already invested
more than $150 billion in the chip sector
and we expect more to come as hi-tech competition
with the US intensifies.
Such innovation won't be easy, though,
especially in an environment
of reduced international cooperation.
At the same time,
the US hopes to boost domestic production of semiconductors,
while also constraining its allies not to supply China
with key equipment.
But the US is risking retaliation from China
including supply chain disruptions if it squeezes too hard.
Ongoing polarization creates risks
for many companies and sectors,
as chipmakers unable to sell certain products
to China are now finding.
We also believe that this rivalry
creates potential opportunities on both sides of the divide.
Our approach therefore stresses
globally diversified exposure,
including to key US and Chinese technology producers.
But on a much wider economic front than semiconductors,
we envisage continuing efforts to diversify
and reinforce supply chains on both sides
with potential beneficiaries outside both China and the US.
These are the trading partners of both powers
in Southeast Asia, as well as India and Mexico.
Further G2 polarization is coming.
How is your portfolio positioned?