Back on the Road

Apr 13, 2023

It is starting to feel like I am back on Wall Street! This dispatch comes from London, my second offshore trek in 3½ weeks. This time, it is an international investor conference, providing me with the opportunity to push the debate on China, decoupling, and interest rates—with the latter being the unusual role of moderating a fascinating macro discussion between Larry Summers and Charles Goodhart. The icing on the cake was my first dinner at Annabel’s—too tempting to resist.

The London crowd, which included a large sampling of “alternative investors” from the Continent and the Middle East, is clearly wary of America’s increasingly strident anti-China view.  What the US takes as a justifiably tough line against China, the view in London underscores the growing danger of this seemingly unstoppable trajectory. These concerns seemed all the more salient in light of a just-released Pew Research survey that revealed yet another worrisome deterioration of US sentiment toward China. Little wonder why Washington politicians have come together in a rare moment of bipartisan consensus. If anything, that made the London crowd all the more nervous about the mounting risks of a kinetic military confrontation.

Confrontation risk assessment is very much focused on Taiwan, understandable in light of yet another massive display of Chinese military force following yet another meeting between Taiwan President Tsai Ing-wen and yet another Speaker of the US House of Representatives. My trip to London also came against the backdrop of French President Macron’s provocative assessment of his recent trip to Beijing, highlighted by his push for “strategic autonomy” regarding a potential Taiwan crisis. In a Politico interview on the plane ride back, Macron stressed that, “the wors[t] thing to think would be that we Europeans must become followers on this topic [Taiwan] and take our cues from the U.S. agenda and a Chinese overreaction.”

Macron’s independence gambit must have come as a rude awakening to Washington. The solid coalition of a US-led alliance—in Asia as well as in Europe—has been critical to the Biden Administration’s new efforts at US geostrategic power projection. Suddenly, the coalition looks a little less solid. Moreover, unlike many other Europeans (including Macron’s political opponents in France), Xi Jinping, must have been delighted by a French leader warning against becoming “America’s followers.” I have long interpreted Xi’s “unlimited partnership” with Putin as a classic Cold War triangulation gambit against the US-led western alliance. Needless to say, a fragmented alliance now makes any such triangulation strategy all the more effective. Suddenly, the interest rate debate between Summers and Goodhart seemed mundane by comparison.

You can follow me on Twitter @SRoach_econ

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