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**Blain: China Vs The USA - Does It Have To Be War?**

Blain: China Vs The USA - Does It Have To Be War?

_Authored by Bill Blain via MorningPorridge.com,_ (https://morningporridge.com/blog/blains-morning-porridge/china-vs-the-usa-does-it-have-to-be-war/)

_“One can’t afford to be emotional about China. One needs to be realistic.”_

**_China will remain the driver of global growth as the West continues to slide. The economy is reopening swiftly, raising increased fears of de-dollarisation. It’s easy to get emotional, but the reality is its happening, get used to it, and figure out the outcomes. They may surprise you.._**

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**The global economy constantly evolves.** The IMF’s latest global growth outlook released yesterday predicts China will contribute 22.6% of global growth through to 2028, while the US will be a laggardly 11.3%, behind India at 12.9%. Europe comes in too far down to even merit a mention in the press release, but the UK, France and Germany get to 5.5% – less than Indonesia, Russia and Brazil. (The rest of Europe is a rounding error.) It’s a clear sign the global economy is headed East and away from the Western Block. Not surprising – that’s where middle class consumer numbers are growing fastest!

The IMF outlook will be questioned by some, but the trend is undeniable. Meanwhile, this morning’s Chinese economic growth numbers were strong-ish, confirming consumers have embarked on a post Covid spending binge – up 10% (from a lockdown base last year) – but aren’t buying property. The market reacted badly to a slower than expected resumption in industrial production. Mixed economic numbers? How very Western of them… (And, yes, China also has banking problems and worries about debt..)

**If there is one big theme in the current market it is the question: do these numbers highlight how we stand at the end of the dollar era?**

It’s convenient to price everything in dollars – but it’s particularly positive for the nation that “owns” that currency. Markets have survived switches in the de-facto global currency many times, but not always the leading nation, (witness the bankruptcies of Spain and France in the 17th and 18th centuries). If de-dollarisation is really happening it raises a host of investment consequences regarding the implications of goods priced in other coin for the USA, plus potentially a Spanish like debt/inflation crisis! Western economic growth, domestic and international trade and geopolitics will be impacted. ( _No Sh\*t Sherlock award to myself for that blindingly obvious observation_…)

**There are substantial propaganda-driven “sub-themes” to how a post US-led global economy develops.** Many of these make arguments to fit narratives of China emerging as the leading financial power replacing the US which involve a whole lot of angst and conflict. For instance, China’s Belt and Road Initiative is either a perfectly sensible (but poorly executed) policy to build its’ future markets, or it’s a strategy to isolate the west and secure China’s supply chain. Is conflict inevitable or can trade triumph? We chose to read China’s new alliance of Poor/Global South nations that have come out against US hegemony re Ukraine as an attempt to encircle and diminish the West, not as genuine concern by these nations on the unreliability of the West – in which they have a point.

**As always there is middle ground.** At the core of the de-dollarisation debate is the role of China and the US as the dominant players. Which will be Rome and which is Carthage? Does it have to be resolved via conflict? 1989 suggests not.

I’ve read some great and some awful commentary on what de-dollarisation and the emergence of China means. Variously these mix up a whole slew of future outcomes.

- To some it’s the end of the US age of empire and/or the beginning of a new cold war which will divide the planet. To win, China must destroy the West… ( _There goes my investment in Baillie Gifford’s China fund…_)

- To others it’s simply a weaker dollar policy which will stimulate the US and Western economies to reindustrialise and onshore their economies, leading to new global trade accommodations which will feature more debate about demographics than missile tech.

- It spells a new period of global growth as Asia becomes the pre-eminent centre of wealth creation, and nothing much changes except the axis has moved… The US and the West will adapt.

The theme of a new cold war is dominant among the politically infected classes in the West. To them the USA has allowed itself to be usurped and overtaken by a seemingly more competent China which has aquired its lead illegally. ( _All is fair in love, geopolitics and cricket._) The case s…

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