by Patrick Fearon-Hernandez, CFA | PDF

Looking forward to the coming years and decades, today’s long-term investors face a stark question: will they be investing in a China-dominated world molded by authoritarian leaders in Beijing?  Or, will they be investing in a more familiar, Western-dominated environment reflecting the historic leadership of the U.S. and incorporating the values of freedom, private property, and justice, as handed down from British common law?  Here at Confluence, we have long discussed the global public goods of security and a reserve currency that the U.S. has provided in its traditional role as global hegemon, and we’ve shown that U.S. citizens have become tired of providing those goods.  We’ve argued that the most likely future is one in which the U.S. relinquishes its global dominance, producing an unstable and dangerous transition period from which some new hegemon—perhaps China—will eventually arise.

But the end of U.S. hegemony and its replacement by China are not yet set in stone.  High-level “China hawks” in the Trump administration have launched an audacious effort to convince the American people and America’s foreign allies that they must push back against China and its effort to assume the throne of global leadership.  At the dawn of the Cold War, the architects of U.S. “containment policy” faced a similar challenge as they built the case for thwarting Soviet expansionism.  The question now is whether the new tough-on-China argument will resonate to the same extent.

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