Tag: China
Bi-Weekly Geopolitical Report – Update on US and China Defense Spending (August 11, 2025)
by Patrick Fearon-Hernandez, CFA | PDF
In our Mid-Year Geopolitical Outlook, we reminded investors that President Trump’s import tariffs aren’t the only issue between the United States and China, despite the media frenzy surrounding them so far this year. We warned that even as the trade dispute persists, China is continuing to press for geopolitical advantage by beefing up its armed forces, pushing an all-of-nation effort to surpass the US in science and technology, and launching a diplomatic charm offensive to exploit the US’s weaker image as it cuts foreign aid, reduces its support for allies, and erects across-the-board trade barriers.
In this report, we focus on the US-China military rivalry from the perspective of “defense economics,” i.e., the impact of a country’s overall economic strength on its military effort and the impact of its military effort on the economy. Even though China is now facing significant, structural economic headwinds, we show that its high defense spending and relative fiscal flexibility will probably make it more challenging for the US to defend its position as the global hegemon. As always, we wrap up with the implications for investors.
Don’t miss our accompanying podcasts, available on our website and most podcast platforms: Apple | Spotify
Confluence of Ideas – #43 “The Mid-Year Geopolitical Outlook 2025” (Posted 7/18/25)
Bi-Weekly Geopolitical Report – Mid-Year Geopolitical Outlook: Searching for the Endgames (July 14, 2025)
by the Confluence Macroeconomic Team | PDF
As the first half of 2025 draws to a close, we typically update our geopolitical outlook for the remainder of the year. This report is less a series of predictions as it is a list of potential geopolitical issues that we believe will dominate the international landscape for the rest of 2025. The report is not designed to be exhaustive. Rather, it focuses on the “big picture” conditions that we think will affect policy and markets going forward. Our issues are listed in order of importance.
Issue #1: US-China Tensions Remain
Issue #2: Russian-Ukraine War Continues
Issue #3: Fallout From Israel-Iran War
Issue #4: US Mulls Capital Controls
Issue #5: Prospects for Lasting Economic Change in Europe
Issue #6: AI Investing Gets Second Wind
The podcast episode for this particular edition will be posted under the Confluence of Ideas series later in the week.
Bi-Weekly Geopolitical Podcast – #66 “Update on the US-China Military Balance of Power” (Posted 5/16/25)
Bi-Weekly Geopolitical Report – Update on the US-China Military Balance of Power (May 12, 2025)
by Daniel Ortwerth, CFA | PDF
In early 2021, we published a series of reports assessing the overall balance of power between the United States and China in military, economic, and diplomatic terms. In early 2023, we provided an update to our analysis. The current report is the next in what we intend to be a biennial series on the subject. Looking comprehensively at both countries’ power and sources of power, we assess that, while the US retains the greater military capacity to influence the world and protect its interests, China continues to close the gap, perhaps at an accelerating pace. For example, China continues to expand its lead in the number of combat-capable ships in its navy, it has gained valuable operational experience, and it can deploy enormous forces to the South China Sea, the East China Sea, and the Taiwan Strait. China’s coastal military forces are now strong enough to potentially deter the US from intervening in a crisis around Taiwan.
In this report, we provide an update to the numerical comparison and our analysis of China’s military development over the last two years. We emphasize critical areas such as China’s continuing buildup of its strategic nuclear arsenal and how that could spur a destabilizing new global arms race. We conclude with the implications for investors.
Don’t miss our accompanying podcasts, available on our website and most podcast platforms: Apple | Spotify
Bi-Weekly Geopolitical Report – The US Geopolitical and Economic Bloc as an Investment Region (August 5, 2024)
by Patrick Fearon-Hernandez, CFA | PDF
More than a decade ago, we at Confluence began describing how United States voters have become more reluctant to shoulder the costs of global hegemony. We’ve shown how increased populist isolationism in the US and other Western nations helped embolden Chinese General Secretary Xi, Russian President Putin, and other revisionist authoritarians to become more assertive in their efforts to undermine the US-led world order. As the resulting geopolitical tensions prompted leaders around the world to seek military, economic, and cultural allies to preserve their security and prosperity, we noted a clear fracturing of the world into relatively separate geopolitical and economic groups or “blocs.” We think this global fracturing is bound to have big implications for investors.
To better understand the new blocs and gauge how they might impact investors, we developed an objective, quantitative method to predict which bloc a country would adhere to in the coming years. We first published our findings in our Bi-Weekly Geopolitical Report from May 9, 2022. In our report today, we update the analysis. We will also do a deep dive into the attractiveness of the US bloc as an investment region, the prospects for the bloc staying together after the US elections in November, and the implications for investment strategy.
Note: There will be no accompanying podcast for this report.
Bi-Weekly Geopolitical Podcast – #51 “Meet Ferdinand Marcos Jr., President of the Philippines” (Posted 7/22/24)
Bi-Weekly Geopolitical Report – Meet Ferdinand Marcos Jr., President of the Philippines (July 22, 2024)
by Daniel Ortwerth, CFA | PDF
Seven short weeks ago, we published a report on the brewing tensions between China and the Philippines in the South China Sea, focusing on their dispute over the Second Thomas Shoal. Despite the tight time interval since that report, the brisk pace of continuing developments in the area and the ever-present risk of escalation bid us to return to the subject. This time we direct our attention to a key individual who sits at the focal point of the crisis: Ferdinand Marcos Jr., the president of the Philippines.
This report begins with a quick review of the geopolitical context that makes the Philippines-China dispute so important. We then outline the life and career of President Marcos Jr., and we review the relevant elements of the broader Philippine political landscape. Within that context, we will explain the key traits and actions of President Marcos Jr. as they relate to the present geopolitical concern, followed by an assessment of his likely course of action. Finally, we update the investment implications from the previous report.