Extract from our "China and the De Facto Asian Economic Union" research paper, published on the 8th of May 2023. Register for a free trial* to access the full paper.
The global economy is approaching a major watershed: for the first time in modern history, the three economic blocs – the US, Europe, and Asia – now have similar economic heft, in terms of constant dollar GDP, with Asia being the economic bloc that is on track to surpassing both EU27 and the US in size in the next five years. Against this backdrop, the heightened geopolitical tensions in the world ought not come as a surprise. Investors should pay more attention to Asia as a de facto economic union and the role that China plays in nurturing this already efficient industrial ecosystem.
- China is already one of the biggest sources of foreign direct investment (FDI) flows in the world now; much of these flows are going to other Asian countries.
- Intra-Asia trade is already intense, almost as intense as that within the EU and more than twice as intense as that within NAFTA. Economic sanctions against China will likely lead to a more robust Asia, as most of the divested industrial capacity will likely leave China but stay in Asia.
- With the de facto Asian economic union working as a protective shield for China against economic sanctions from outside Asia, the only country that can stop China’s economic rise is China itself, in our view.
The full report contains the following sections:
- China is one of the biggest sources of FDI in the world, and in Asia
- Intensifying intra-Asia trade
- The US’ trade sanctions could push trade from China to Asia
- Cheap shipping within Asia
- Risks of China undermining its own economic rise
- Bottom line
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This communication is issued by Eurizon SLJ Capital Limited (“ESLJ”), a private limited company registered in England (company number: 09775525) having its registered office at 90 Queen Street, London EC4N 1SA, United Kingdom. ESLJ is authorised and regulated by the Financial Conduct Authority (FRN: 736926). This communication is treated as a marketing communication intended for professional investors only and is provided only for information purposes. It has not been prepared in accordance with legal and regulatory requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. It does not constitute research on investment matters and should not be construed as containing any recommendation, advice or suggestion, implicit or explicit, with respect to any investment strategy or financial instruments, or the issuers of any financial instruments, or a solicitation, offer or financial promotion relating to any securities or investments. ESLJ and its affiliates do not assume any liability whatsoever for the contents of this communication, save to the extent agreed in any written contract entered into between ESLJ and the recipient, and do not make any representation or warranty as to the accuracy or completeness of any information contained in this communication. Views are accurate as at the time of publication. Opinions expressed by individuals are their own and do not necessarily reflect those of ESLJ or any of its affiliates. The value of any investment may change and an investor may not get back the original amount invested. Past performance is not an indicator of future performance. This communication may not be reproduced, redistributed or copied in whole or in part for any purpose. It may not be distributed in any jurisdiction where its distribution may be restricted by law and persons into whose possession this communication comes should inform themselves about, and observe, any such restrictions.
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