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Sino–US rivalry, the COVID-19 crisis and financial markets

15 Dec 2020 - 12:00
Ties Dams
Brigitte Dekker
Source: Chinese stock market / Shutterstock
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Fire and haze

If years could be given personalities, 2020 would surely be marked a firebrand. Looming tensions have escalated into ardent crises in several domains – from geopolitics to finance. Not only are there many fires to put out, but their smoky haze is making it near to impossible to keep a clear view on the long term. Whether it be the COVID-19 crisis, the Sino–US trade war or the state of financial markets, high volatility seems to be the status quo for years to come. As crises cannot be dealt with only when they are over, this report aims to look beyond the haze, while the fire is still burning. It does so in three steps:

  • It looks at the most disruptive events of 2020 in geopolitics and finance;
  • It reflects on how these events impact long-term trends, and vice versa;
  • And it translates that into relevant prospects for European institutional investors for the year to come, 2021.

Two events take centre stage: the ongoing conflict between the United States and China; and the COVID-19 pandemic. In their interaction, and their relation to long-term structural trends, lie the contours of the world in 2021 and beyond.

This report argues that – given all the uncertainties – investors should be sure to take the following prospects into account:

  • Geopolitical tensions will come to dominate financial markets, as they already do with global trade;
  • Europe will be challenged to become more strategically autonomous, meaning less exposed to regulatory and market volatility in both the US and China;
  • And China will continue to offer important opportunities for European institutional investors in an increasingly challenging geopolitical context.

This first publication of the China Platform for European Institutional Investors (CPEII) exemplifies the platform’s aims. CPEII is founded on the conviction that China’s geopolitics will fundamentally reshape the world at large and financial markets in particular. It is a response to the growing need of European institutional investors to connect their financial expertise to deep and hands-on insights into China as a global power, the geopolitical disruptions it causes and the strategic opportunities it offers.

Read report.

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The China Platform for European Institutional Investors (jointly initiated with AXA IM) is open to all European financial institutions. Would you like to get involved? Feel free to contact Frans Paul van der Putten, coordinator of the Clingendael China Centre. Subscribe to our newsletter China Finance Focus.