Our Arizona-based law firm strives to provide our national and international clients as well as the local business community with an ongoing stream of helpful information, not only through our work but also through social media. The Harrison Law LinkedIn page regularly features thoughtful leadership articles, opinion pieces, and reports which we have hand-picked from some of leading news channels and business pundits. From time to time, this blog will point out and summarize a relevant example, giving you fresh perspectives on issues affecting your life, work, and business.
The first article we’d like to bring to your attention is entitled, “Investing in the Age of US-China Rivalry.” This article, originally posted to Financial News Now, is the work of Carl Delfield, Cabot Wealth’s Chief Emerging Markets Analyst and Managing Director of Alquimista. Delfield provides a detailed overview of the history of trading relations and the growing economic rivalry between the U.S. and China, going on to make suggestions for investors who wish to make wise decisions regarding the future of this rivalry — a rivalry that has evolved yet again in light of the global COVID-19 pandemic.
It is useful to remember that when the United States and China first came together at the trading table some 235 years ago, China was an economic giant, while the United States was still what Delfield describes as a “frontier market.” The balance began to turn in the mid-1800s as U.S. manufacturing power came to the fore. By the end of the 19th Century, the United States had pushed past China as the world’s largest economy.
Commerce dictated U.S. foreign policy throughout the late 19th and early 20th Centuries, Delfield points to actions such as the purchase of Alaska and Hawaii, the development of a transcontinental railroad, and the completion of the Panama Canal as major, commerce-driven efforts to facilitate trade with Asia. In the 1970s, however, the economic balance began to swing back into China’s favor. While China was opening itself to world trade, allowing its GDP to blossom, the U.S. was growing more and more reactive, permitting security to override commerce in its international relations. As a result, China has surpassed America as the leading global manufacturer in certain sectors.
Delfield notes that one of China’s greatest economic strengths is its command of the rare earths market, accounting for 85 percent of the world’s production of these critical materials. This advantage, along with the undermining of the American stock market and efforts to displace the U.S. dollar as the universal reserve currency of choice, all fuel China’s quest for economic dominance on both the regional and world stage.
One particular investment appears to stand out in China’s current strategies: gold. China currently holds $93.4 billion in gold at current market prices. 94 of its 1,945 total tons were added in the first eight months of 2019 alone. This historically valuable metal may enable China to free itself from dependence on the U.S. dollar, giving it significant extra stability and leverage in the face of trade wars.
A smart response that U.S. investors can make, according to Delfield, is to share China’s strategy for investing in gold and precious metals as a part of their portfolio. Based on analyses from many well-known financial planners, and after examining the legal ramifications for individual and commercial clients investing in this area, my position has always been that potential businesses/investors should shy away from direct purchase and trading of precious metals. This area is known for its volatility, irrational decision-making by investors, and a perfect environment for the occasional charlatan. Instead, a business/investor should look at companies that work within the precious metals industry, including activities such as mining, processing, or providing the equipment necessary for both.
You can read the article in its entirety here. In our next blog post, we will highlight and summarize an article from the Economist on the subject of rethinking the relationship between environmental policies and businesses, consumers, and financial markets. You can read it HERE. Click HERE for the third installment of our LinkedIn Spotlight Series. The final installment of the most recent post of this series can be found HERE.
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This website and article have been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal or financial advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.
