Likely long-term buying opportunities in the Chinese market

On June 12, 2015, the Shanghai Composite Index (SSE) jumped to 5,166 points while its US counterpart Dow Jones Industrial Average (DJIA) rose to 17,898 points at an even more moderate pace.

Three-and-a-half years ago, therefore, it was on the Chinese side that investors were looking for strong growth potential, at least in the value of their quoted shares as the recovery of the US economy backed global growth.

Today, the cards have clearly changed hands since the situation is more or less reversed with the SSE which has fallen to 2,598 points, down 49.71 percent since its top of June 2015, and with the DJIA which despite entering the correction zone in October 2018, however, remains at a historically high level at 24,688 points, up 37.93 percent in the same period.

Against the backdrop, the gradual decline in Chinese economic growth and President Xi Jinping’s ambition to turn his country from the workshop of the world into a consumer economy have contributed to this sharp stock market depreciation of Chinese assets even though the peak of 2015 appears a posteriori as a typical buyer excess.

Considering the long-term potential of China and taking into account the ups and downs of its trade negotiations with the United States, it seems relevant to look now for possible good buying opportunities in the Chinese market, especially in the consumer and energy sectors.

Likely a war between the USA and China within 15 years

For some time on the ground and more and more frequently in words, the main military concern of the United States as seen by its government and its Generals focuses on China.

Indeed, if the immediate threat from a cybernetic and political viewpoint originates from Russia, the real long-term threat against US interests would mainly originate from China, the sole country able to reach world leadership over the next decades.

US President Donald Trump has repeatedly demanded more military funding from his European NATO allies considering that “the United States needs a very strong European pillar (because) in 15 years it is a very strong likelihood that we will be at war with China,” said US General Ben Hodges at the Warsaw Security Forum.

Now retired and a former commander of the US Army in Europe, Hodges believes that the United States will not have the ability to deal with both Europe and Asia at a same time.

In addition to the needed increase in their military capabilities, Europeans must also make sure to restore their sovereignty at home, said Hodges, emphasizing that China owns more and more companies and infrastructure including more than 10% of European ports.

Trump’s trade protectionism will eventually prove a loss-loss game

In the first stage, you believe this can work and that you will reap many benefits from putting the pressure on your business partners, however in a second stage, you realize that you have gravely damaged confidence and future growth opportunities with the same business partners.

This two-stage process sums up what a number of business leaders have explained in recent weeks as US President Donald Trump has strengthened his “America First” trade policy, notably deciding new tariffs for Chinese imports worth hundreds of billions in US dollars (USD).

On the one hand, people close to the Trump administration emphasized POTUS “hard approach” is a means of negotiation with a view to reaching a better balance for US trade; on the other hand, some business people and experts stressed on the fact that China has shown no sign of yielding to Trump’s pressure and that such a resilience could start a negative chain reaction for the global economy and thus for the US economy too.

Donald Trump’s policy is also to said be shortsighted as China will become more and more powerful in the future and more capable of crafting new ways of neutralizing US economic clout for instance by developing deeper, larger trade relations with Europe.