What force will shape the world in the next 20 years? The answer is China's drive to financialise, according to Diana Choyleva, founder and chief economist at Enodo Economics.

In this episode of the podcast, Diana speaks to MoneyWeek's Cris Sholto Heaton about how the AI race differs in China versus the West, the transformation of the country's equity market, and the breakdown of globalisation.

You can watch this episode on our YouTube channel or subscribe to it on any podcast platform.

About the podcast

MoneyWeek Talks is a podcast that helps you unlock the secrets to financial success. Editors Kalpana Fitzpatrick and Andrew Van Sickle are joined by influential guests – from CEOs and entrepreneurs to economists and policymakers – to share their top tips on managing money, investing wisely and building wealth.

Subscribe to the MoneyWeek Talks podcast and get ready to make it, keep it and spend it with confidence.

It is hard to imagine a better opportunity for Airbus. Its rival Boeing has been in crisis for years. Its 737 MAX was grounded following two crashes in 2019 and 2020 and then again in 2024. Whistleblowers revealed safety issues. It overhauled its management. Even so, in a brutal 2024, the share price fell from $260 to as low as $155 as the firm racked up annual losses of more than $11 billion. A firm that once seemed impregnable appeared to be spiralling into irreversible decline. In the last few months, Boeing staged a remarkable comeback. In April, it recorded its first lead in deliveries since 2023, shipping 143 aeroplanes for the first quarter of the year, 29 more than Airbus, and its widest quarterly lead since 2018.

For Airbus, the French-based consortium of which Britain is a crucial part, that must have been disappointing. With its great rival in so much trouble, it had the perfect opportunity to take a dominant position in the global market for passenger jets. It should have been seizing that, delivering more and more aeroplanes, and booking long-term orders, until it had 60% or more of the global market. Instead, it got snarled up in production delays of its own. Now it is paying the price. Boeing is back on level terms again and may well be ahead of Airbus for the rest of this year.

It is not all bad news for Airbus. Last month, the A320 family became the best-selling commercial jet of all time, overtaking Boeing's 737, with 12,260 deliveries since it was introduced in 1988. Airbus still has a strong range of fuel-efficient, modern, safe aeroplanes that are popular with airlines around the world. Even so, investors are starting to feel the impact of Boeing's recovery. Its share price is up by 5% over the last six months, while Airbus's is down by almost 20%. Airbus lacks the killer instinct.

It's not going to get any easier over the next few years. Few people are taking it seriously right now, but China is putting huge resources into the commercial aerospace industry. Comac, its national champion, has already launched the C919, a direct competitor to the A320 and the 737, and it is now in service with Air China and China Southern. It's planning the C939, a competitor to the larger A350 and Boeing 777, for long-range routes. Earlier this month, it landed its biggest export deal so far with a major order from Vietnam. Comac is guaranteed a huge domestic market and it can probably do just as well in countries where China has a lot of political and commercial influence.

Airbus won't have another opportunity like this

Russia is trying to get back into the industry too. Last week, it announced it was planning a new jet from Tupolev, a relic of the Soviet era now trying to stage a comeback. Under sanctions, Boeing and Airbus have stopped supplies of parts and new aeroplanes to Russia, so it either has to start making its own, or else would eventually have to start buying from Comac instead. Either way, the days when the industry was a cosy duopoly between Airbus and Boeing are now in the past. It is about to become a three-way, and possibly four-way fight for every order.

Airbus should have been entering that era from a position of dominance. It could have seized on Boeing's woes to take a clear lead in the industry, tying up the major airlines with long-term contracts for new aeroplanes, and locking them into its range so that it would be too expensive for them to contemplate switching to new suppliers. It could have ramped up production and replaced orders Boeing was not able to deliver on. It could have taken the opportunity to launch new models, which would have sewn up the market for years to come. The chance to dominate the industry for a generation or more won't come again.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Charles Jillings, co-fund manager of Utilico Emerging Markets Trust, discusses the outlook for emerging markets and the long-term investment opportunities in infrastructure and utilities.

In this episode of MoneyWeek Talks, Andrew Van Sickle speaks to Charles about how emerging economies are dealing with Donald Trump's tariffs, the after-effects of the war in Iran, and why countries like Brazil and the Philippines are overlooked markets.

About the podcast

MoneyWeek Talks is a podcast that helps you unlock the secrets to financial success. Editors Kalpana Fitzpatrick and Andrew Van Sickle are joined by influential guests – from CEOs and entrepreneurs to economists and policymakers – to share their top tips on managing money, investing wisely and building wealth.

Subscribe to the MoneyWeek Talks podcast and get ready to make it, keep it and spend it with confidence.

Should you invest in China, or is it essentially “uninvestable”? That was the gist of the debate just a few years ago. The West can never quite seem to make its mind up about the Middle Kingdom. Once derided as cheap but tacky, in 2026 China is suddenly cool. Social-media influencers show off their indoor slippers and traditional Chinese medicine, while quipping that they are “learning to be Chinese”.

Polling by Pew Research shows that, while only 28% of Britons aged older than 50 have a favourable opinion of China, that figure doubles to 56% of the demographic aged 18-34. Where older Westerners see a repressive one-party state, the young scroll TikTok and share images of the futuristic “cyberpunk” city of Chongqing (it's worth a visit, if you can handle the brutal humidity).

A warning for those wanting to invest in China

This pendulum swing is nothing new. During the 2000s, China's extraordinary growth (14% in 2007 alone) led to feverish speculation about when exactly it would become the world's largest economy (2027, according to one widely cited projection). The story remained bullish during the early 2010s, as China used a massive infrastructure stimulus package to duck the stagnation plaguing developed economies after the great financial crisis. In the process, the country built the world's largest high-speed rail network, a service whose gleaming modernity makes Britain's trains feel like a donkey and cart by comparison.

But simultaneously, a more negative narrative took hold. The first signs of trouble came in summer 2015 after a parabolic run-up in Chinese shares went into reverse. The CSI 300 index plummeted 44% between June of that year and January 2016. A MoneyWeek cover at the time depicted a dragon roller-coaster hurtling downwards. In many countries, such a plunge would herald the beginning of a devastating recession. Not in China (GDP registered an official growth rate of 6.7% in 2016, a modest fall from the previous year).

In China, where the stock market is traditionally regarded as being little better than a casino, it is state banks, not investors, that decide where credit will be allocated. But it was a warning shot to investors. The most optimistic projections for Chinese growth didn't quite pan out. Today, total GDP is still only 65% of the US level, and a mere 15% of the level in terms of GDP per capita.

Still, grown it has, and at a rate and consistency with little precedent in world history. Yet those gains haven't accrued to those who decided to invest in China. Since the start of 2008, Chinese GDP has risen by 344%. The CSI 300? 1%. You can still make money if you invest in China, of course. Local shares have zoomed 43% higher since September 2023. But as a long-term investment, the case remains unproven. Stock markets rise and fall, but most trend upwards. It is the reason investing has a better reputation than gambling. Yet China's equity graph really does resemble a roller-coaster, with long climbs followed by hair-raising plummets.

China is far from the only emerging market to exhibit a disconnect between GDP growth and equity returns, although its case is especially extreme. The exact causes are much debated.

One important factor is simply that investors adore a good emerging-market growth story. That causes valuations to rocket, front-loading years of earnings growth into current valuations (something that current buyers of expensive Indian shares would do well to bear in mind).

A second reason is that many of the gains from growth tend to be captured off stock markets, particularly by landlords. Just imagine the fairy-tale returns from holding a patch of land in Shenzhen, an impoverished collection of fishing villages that blossomed in two decades into the centre of global technology manufacturing.

China's property bubble has burst

The gains to be had from property weren't lost on the Chinese. Newly wealthy Chinese households had few other investment options. Bank deposits pay miserable returns. Foreign shares are off limits, and the local stock market is volatile. So they went massively for bricks and mortar, buying second and third homes as investments. When built, these assets were often not even rented out, lest tenants detract from the much more important objective of maximising capital gains.

What followed was a property boom for the ages. During three years in the 2010s, China used more cement than America employed in the entire 20th century. The bubble was clearly getting out of hand. In 2020-2021, officials called time by imposing stricter caps on leverage. Property developers went to the wall, most famously including giant Evergrande, which imploded with $300 billion in liabilities. In 2023, Reuters estimated there were 7.2 million unsold homes. National property prices fell 40% between 2021 and 2025. That was devastating for a middle class that holds nearly 70% of its wealth in property. The property-shaped cloud over sentiment has yet to lift. In January and February, retail sales endured their weakest two-month start to any year since 2000 outside the Covid era.

There are plenty of other concerns for those looking to invest in China. The country's fertility rate is running at close to one child per woman, making it one of the world's most rapidly ageing societies. And a 2021 crackdown on tech firms (now largely reversed) was a reminder that all businesses ultimately operate at the pleasure of the Communist Party.

How China learnt from Japan's mistakes

Since the property bust, many economists have noted parallels between China and Japan. During the 1980s Japan was regarded as the world's most technologically advanced nation. Following the crash in the 1990s, its corporations slowly began to slip behind, failing to capitalise on the rise of the internet. But it looks as if China will avoid Japan's fate.

Tokyo spent the 1990s pouring money into zombie firms; in 2021, Beijing pulled credit from property and redirected it with military zeal towards the “New Productive Forces”, official jargon for things such as electric vehicles, rare earths, batteries, green technology and AI. Chinese companies are now conquering new global markets with terrifying efficiency. One in seven cars sold in the UK this year was Chinese, up from 1.3% just five years ago. Britain's top-selling car is currently the Jaecoo 7, a brand that almost nobody had heard of until recently.

China's critics have long pointed to what might euphemistically be called the country's relaxed attitude towards other nations' intellectual property. But China's days as a mere imitator of Western inventions are ending. As economics commentator Noah Smith notes on Substack, Chinese firms now know how to do things that Western companies simply can't replicate. Nowhere else has such a dense clustering of electronics and tooling engineers. Chinese firms are opening factories in other countries, and those factories are proving more productive than the foreign competition. Soon, the Germans will be copying the Chinese.

Better ideas are only one part of the equation. The other is lavish levels of state support, especially in the form of never-ending credit lines. Chinese factories are producing too much. The country's global export dominance – the trade surplus reached $1.2 trillion last year – is a symptom of the fact that there aren't enough domestic buyers to soak up a glut of batteries, solar panels and especially cars. China's manufacturers have turned to world markets not out of strength so much as desperation; razor-thin profit margins mean they are fighting to keep the lights on. China's industrial strength and its chronic deflation are thus two sides of the same industrial-policy coin. You might argue, as Smith does, that China is simply making a huge capital-incinerating mistake. But you might also argue, as Jeremy Warner does in The Telegraph, that given the choice between wasting capital on excess industrial capacity and wasting it on unsustainable welfare, as the West does, China is making the better strategic choice. Chinese industrial policy makes a lot more sense “if your objective is that of enfeebling the US... while insulating China against the sort of supply-chain vulnerabilities we see buffeting Western economies”.

Should you invest in China?

Will Chinese shares prove a good investment over the next ten to 20 years? Given the historical record of equity returns, the jury is still very much out. What does seem less likely today than even a few years ago is a repeat of the Russian experience, where foreign investments were effectively zeroed out following Vladimir Putin's invasion of Ukraine.

In 2022, the parallels with Chinese assets in the event of a Taiwan conflict seemed obvious. But the world has changed. It is far from clear that Donald Trump's America would stand in the way of a Chinese invasion across the Taiwan strait, and even harder to believe that the UK, acting in solidarity with the US, would cut off trade with China, the world's second-largest economy, as aggressively as we have sanctioned Russia, a comparative minnow.

Taking a one- to three-year view, the Middle Kingdom looks a reasonable bet. Firstly, because China's newfound coolness might just be a foretaste of a “vibe shift” about to occur in the market. Markets have always traded on narrative as much as cold, hard facts about Ebitda, and over the past decade, the rise of social media has only amplified this trend (how else can we explain car-maker Tesla's current price-to-earnings ratio of 324 times earnings?). Secondly, unlike Tesla's stock and its ilk, China has genuine value appeal. The MSCI China index trades on a very reasonable 11 times forward earnings, which should cap downside risks if anything goes wrong.

Punting the whole pension on Shanghai would be imprudent, but a trade that ticks both the momentum and value boxes deserves to be taken seriously. In 2026 the meme winds are blowing in favour of China. Given the entry price, it seems foolish not to lean into it.

The best ways to invest in China now

Before investing in China, it's worth auditing your current exposure. Enthusiastic buyers of emerging-market funds may well discover that they already have quite enough Chinese shares. As much as a quarter of many emerging-market trackers and funds are allocated to China. And for those nervous about conflict in the Taiwan strait, note that soaring semiconductor valuations have recently seen Taiwan's share of the emerging-market sector balloon, in some cases to another fifth or more of many funds.

By contrast, investors with a bias towards developed markets may be underweight China. China accounts for a mere 2.9% of the MSCI ACWI index (ranking behind the economic juggernaut that is Mark Carney's Canada). Compare that with China's 17% share of global GDP. There are sensible arguments for why Chinese markets shouldn't take up that much of a typical equity portfolio, but a 2.9% allocation is much too low for a country that is seizing the high ground in so many of the industries of the future.

The three leading active China trusts are Fidelity China Special Situations (LSE: FCSS), JPMorgan China Growth & Income (LSE: JCGI) and Baillie Gifford China Growth (LSE: BGCG). The funds have more similarities than differences, with each having put in a similar performance over the past 12 months, and a rising tech tide driving gains of about 25%. JPMorgan pays out a 4.7% dividend.

There is a solid case for active management in China, where Western investors will want to load up on tech and consumer shares, while steering clear of state-owned banks and low-quality firms. Fidelity has the best long-run record, but its slight tilt towards small and medium-sized firms may not be the best play at a time of relentless domestic deflation. Baillie Gifford, which has more of a growth bias, fits the bill better for those seeking a tactical momentum play.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

What is stopping the UK from investing? It's a mixture of three main factors, according to Henry MacLeod, co-head of digital distribution at BlackRock.

In this episode of MoneyWeek Talks, Kalpana Fitzpatrick speaks to Henry about the state of investing in the UK, how we can debunk myths about risk, and whether AI can help you become a better investor.

Watch the full episode on our YouTube channel or on any podcast platform.

About the podcast

MoneyWeek Talks is a podcast that helps you unlock the secrets to financial success. Editors Kalpana Fitzpatrick and Andrew Van Sickle are joined by influential guests – from CEOs and entrepreneurs to economists and policymakers – to share their top tips on managing money, investing wisely and building wealth.

Subscribe to the MoneyWeek Talks podcast and get ready to make it, keep it and spend it with confidence.

Europe has lagged behind the US for years now, but what would it take for the continent to recover?

Daniel Avigad, manager of the TM Lansdowne European Special Situations fund, speaks to MoneyWeek's Andrew Van Sickle about opportunities in European equities, solving the continent's growth problem, and the consequences of populism.

You can watch the episode on our YouTube channel or subscribe to MoneyWeek Talks on any podcast platform.

About the podcast

MoneyWeek Talks is a podcast that helps you unlock the secrets to financial success. Editors Kalpana Fitzpatrick and Andrew Van Sickle are joined by influential guests – from CEOs and entrepreneurs to economists and policymakers – to share their top tips on managing money, investing wisely and building wealth.

Subscribe to the MoneyWeek Talks podcast and get ready to make it, keep it and spend it with confidence.

Matthew Partridge: What prompted your book?

Ram Charan: I have been working in China for more than 20 years with American, European and Chinese companies; in some cases I was on boards as a director. The wake-up call was when I noticed that one US firm, which had a dominant position in the Chinese market, saw its market share begin to decline. Next, its unit costs went up and then the Chinese Communist Party basically forced them to sell their business to the Chinese.

This caused me to realise what China is trying to do – produce 90% of the global output in a sector, using a combination of subsidies, currency manipulation, and artificially cheap land and capital, and then using this to gain a cost advantage over the rest of the world. This strategy has already been applied to achieve a stranglehold over ten sectors in the past five years. This in turn creates a trade surplus, which is propelling China's military. It's a very sophisticated economic model, which essentially runs China as a conglomerate like General Electric.

The public may love it because it produces an endless supply of cheap goods. But in the longer run it means that non-Chinese companies cannot compete with China. And if war breaks out, this could become an existential issue.

MP: How likely is war between China and the US?

Ram Charan: We are already at war. The US House of Representatives Select Committee on China said it explicitly in October 2025: this is a war of mutual destruction; economic, technological, existential. The trigger will not be a single event. Cumulative economic strangulation will reach a breaking point. Xi has built something more powerful than an invasion: asymmetric chokehold capability. China can now shut down whole industries in America and Europe at will by controlling rare earths, battery components, semiconductor materials and advanced chemicals.

When Beijing announced requirements for export licences in October 2025, Donald Trump responded with 100% tariffs. The countdown has started. The real trigger is industrial collapse. When CEOs in the US realise they can't build anything without Chinese inputs, including defence systems, the political pressure for confrontation becomes unstoppable. Taiwan is the flashpoint everyone watches. But the invisible trigger is America losing the capacity to respond militarily because China controls the supply chains for defence manufacturing itself. China is stockpiling wheat, oil, commodities, and building the world's largest navy – 370 ships versus America's 290. It is expanding its nuclear arsenal to 1,000 warheads by 2030, and aligning with Russia and North Korea in a trilateral axis that can strike the US mainland in 30 minutes.

Xi Jinping is lighting proxy fires in Ukraine and the Middle East through local actors to stretch US military resources. Xi would prefer America to concede without firing a shot, but he is prepared to fight if the US does not yield. Unless America rebuilds industrial capacity fast enough to break China's chokehold, conflict is certain within the decade.

Matthew Partridge: What should the US do to combat the threat?

Ram Charan: Both the US public and firms must understand they are not competing with individual Chinese companies, but with the nation. And they can't compete alone. There must be more collaboration among both countries and firms. I have suggested that Trump create a Department of Manufacturing and Technology, whose full-time job is to co-ordinate, integrate and plan in a similar way to how the Pentagon organises the defence sector to fend off an equally powerful opponent.

Matthew Partridge: Didn't industrial policy fail when the UK tried it in the 1960s and 1970s? Witness British Leyland.

Ram Charan: British Leyland failed because bureaucrats picked products and ran factories. What I am advocating is government staying strategic, not operational. The Chips Act is an example. Government subsidises semiconductor making. Intel, TSMC, Samsung decide what to build and how to run operations. Government creates conditions for private companies to compete against state-subsidised Chinese opponents.

However, in addition to subsidies and support you will need enforcement of basic trade rules. Stop the dumping. Counter the currency manipulation that gives China a 20%, unbeatable pricing advantage. You also need to change US CEOs' psychology. They still think “cheaper currency, cheaper labour” is how you win. Move up the value chain. Import technology and equipment, not consumption goods. Scale up medium-sized manufacturers with AI and automation.

This is about national security. China has destroyed key US industries, including furniture, apparel, solar, rare-earth metals and ship components. The next targets are AI, biopharma, aerospace, advanced semiconductors, and chemicals. If those fall, America cannot defend itself. This is not industrial policy as socialism. This is industrial policy as survival.

Matthew Partridge: How can you ask other developed countries to work together under US leadership given that Trump has imposed high tariffs on them? Isn't that going to make them less likely to cooperate?

Ram Charan: I think people misunderstand Trump's approach. While it's true he has imposed tariffs, and this has created a lot of confusion, he has done this to rebalance trade between the US and the rest of the world, eliminating the large US trade deficit with most countries. Once this is achieved, his aim is to reduce these tariffs by as much as possible. Already small countries like Oman face barriers of as little as 2%. The idea is to bring countries to the table to discuss the issue, not protectionism for protectionism's sake. US tariffs will decline as the other sides reduce their barriers to US goods.

Matthew Partridge: You say that you are confident about the US because of the openness of its system and because of its big research infrastructure. But Trump has undermined this advantage with immigration controls and cuts to research budgets. Many of Trump's policies seem counterproductive.

Ram Charan: I agree that they are counterproductive. And that's honestly something I don't understand. Maybe it's due to his own ideological belief, but attacking universities is not consistent with his aim to reindustrialise the US.

Matthew Partridge: Moving from countries to companies, is it fair to say that investment in China is a double-edged sword? Many firms are being forced to give up their intellectual property (IP) in exchange for cheap labour and access to Chinese consumers.

Ram Charan: Yes, it is a double-edged sword. Not only will they steal your IP, but once a Chinese company shows signs of winning significant market share, Beijing will back it to the hilt, and give it a huge amount of resources to expand further, so it starts to drive you out of the market. The next thing, you notice you are making losses and decide to leave, or you get a call “inviting” you to sell up – as Starbucks and many others have done. Beijing's attitude, particularly in industries it has explicitly targeted, is that “until we get our own capability, you are our guest”– but once China starts to build its own domestic capacity, the Westerners are either asked to leave or driven out.

Some of the smarter companies started to work this out about ten years ago, and reconsidered their global strategy, including discreetly building up their operations in other countries, such as India. As a result, they are now doing very well, with their Chinese rivals still lagging behind due to the fact that they have not accumulated the necessary expertise that they would have gained from having a Western firm in their midst.

Matthew Partridge: What does India needs to do to become an attractive alternative to China for Western companies?

Ram Charan: In order to attract Western firms fleeing China, India needs to put its house in order. This includes smashing bureaucracy to make it easier for them to operate. India also needs to have better training in manufacturing, because manufacturing requires quality and reliability, and Indian firms have to learn to match customer specifications.

That said, India has some companies that are number one in the world. This includes Bajaj and TVS, which have done a great job of producing quality scooters, as well as other two-wheelers. So India needs to build on this to climb the value chain into products like semiconductors.

Matthew Partridge: Are there any other companies that stand to benefit from Western companies relocating from China?

Ram Charan: Every developed country will benefit from re-shoring to reduce dependence on China. Among developing countries, the other big winners will be Vietnam, Mexico and Indonesia. However, for companies, the solution is not substitution but diversification to break coercive power.

After all, Mexico and Vietnam are also proxies for Chinese production – Mexico's trade with China exploded after Trump's tariffs as Chinese companies set up Mexican operations to bypass US trade barriers. You must audit the entire supply chain. Where do the components come from? Who owns the factory? Where does the capital flow? Companies waiting for a single “China alternative” will wait forever.

Ram Charan has spent 30 years advising Fortune 500 CEOs on China. His latest book, China's 90% Model: China Has America by the Throat – Here's How to Fight Back and Win, is published by IdeaPress Publishing.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Zohran Mamdani: A socialist takes New York

“We cannot have a socialist” running “the greatest capitalist city in the world”, observed one Wall Street financier just before November’s mayoral election. Get used to it, said The New Yorker. On New Year’s Day, Zohran Mamdani will become the first avowedly socialist mayor of New York, and its first Muslim leader to boot, following a meteoric rise. A year ago, most had never heard of the youthful Assembly member from Queens. But Mamdani’s rising star – on a platform of soaking the rich to fund rent freezes, free bus travel and universal child care – has proved unstoppable.

Donald Trump, who once called Mamdani a “100% Communist lunatic” and threatened to deport him, changed his tune when he met him, staging a surreally chummy press conference with his charismatic fellow populist. “As well as coming from nowhere” to win New York, Mamdani has “succeeded in setting” America’s domestic economic agenda in 2025, making the issue of “affordability” the watchword of his slick TikTok campaign. Born in Uganda, Mamdani, 34, arrived in New York aged seven. His unremarkable CV since might suggest he’ll struggle to run a city with “the economy of a medium-sized nation”, says The Economist. And his hands are tied: the state legislature seems unlikely to pass his full $9 billion package of tax hikes. But the city’s fate ultimately depends on whether Mamdani shows “a pragmatic streak”, says The Wall Street Journal – or views “his mission” as “creating a socialist lab experiment”.

Javier Milei: El Loco stands at a crossroads

Argentina’s chainsaw-waving “libertarian firebrand” Javier Milei narrowly escaped financial meltdown this year – helped by a $20 billion lifeline from the Trump administration to avert a currency crisis and “Make Argentina Great Again” – before pulling off a surprising landslide in the country’s midterm elections, says Bloomberg.

Nicknamed “El Loco” (The Madman) as a teenage goalkeeper, Milei has often seemed determined “to perpetuate this reputation with his egotistical boasts and brutal attacks on critics”, notes The Washington Post – not to mention “his crazy hair, cloned dogs and claims of expertise at tantric sex”. Yet since coming to power in 2023, the results of his far-reaching free-market reforms have been impressive, says The Economist. Inflation is down from 211% to around 30%, the poverty rate has fallen and “the budget has been wrestled under control”. Milei is now moving towards a floating peso and removing most capital controls. The process has been painful, but voters have kept faith with his vow “to jolt” Argentina “out of more than a century of statism and stagnation”. Markets, in turn, have celebrated, judging the prospect of Milei’s re-election next year now more likely. “Rev up the chainsaw!”

Much could yet go wrong. Milei is now at a crossroads, Carlos Malamud, a Latin America specialist at Madrid’s Real Instituto Elcano, told the Financial Times. “He has everything he needs, if he gets it right… to lead a deep transformation of Argentina.” But if “arrogance gets the better of him again”, all bets are off.

Sanae Takaichi: Japan’s Iron Lady

The new Japanese premier, who made history in October when she became the country’s first female PM, has proved a gift for headline writers. Known for her love of hard rock and motorbikes – and citing Margaret Thatcher as an inspiration – Sanae Takaichi has gone “from Iron Maiden to the Iron Lady”, says Sky News. But she has taken a battering at the hands of bond markets. Since taking power, and shocking investors with a “low quality” fiscal expansion of $135 billion – “including such gems as rice vouchers and subsidies for fossil fuels” – yields on Japanese debt have “spiked wildly across the maturity curve”, says The Telegraph. The risk that this could escalate into a major crisis in Japan’s historically sedate $12 trillion bond market “has sent tremors” through the markets.

When it comes to dealing with Donald Trump, she appears to have learned from her mentor, the late Shinzo Abe, that “flattery, deference” and golf-related “gold-plated gifts” were the way to go. “Takaichi’s smorgasbord of giveaways” may make a “mockery of Thatcherism”, but she does share some traits with her heroine. “Like the late Iron Lady, she has little patience for other career women,” says The Telegraph. She belongs to Nippon Kaigi, “a nationalist nostalgia movement that fights feminism and harks back to the Samurai ideal of women as the anchor of home and family”. Still, unless she is careful with bond-market vigilantes, Takaichi runs the risk of comparison with another UK Conservative prime minister – Liz Truss.

Liang Wenfeng: The hedgie who shook the world

The entrepreneur behind DeepSeek began 2025 with a shot that rang around the world, says Fortune. Billions of dollars were wiped off the value of Silicon Valley’s AI titans in January when the unknown Chinese start-up revealed its prowess at developing cutting-edge AI at a fraction of the cost – raising doubts, that have lingered all year, about the gargantuan sums being spent in the West. “Whether by chance or design”, the launch of DeepSeek’s R1 coincided with Donald Trump’s inauguration, says Time, creating “a powerful narrative” that China had “matched America’s best with just a fraction of the computing power”. It was hardly the best start in Washington to a year of tight trade negotiations.

Liang Wenfeng, 40, who hails from a village in southern China, isn’t a computer whizz so much as a financier. After graduating from Zhejiang University, he co-founded the quantitative hedge fund High-Flyer in 2016 – originally using AI as a trading strategy to predict market trends and help make investment decisions. In 2021, says the Financial Times, Liang began buying thousands of Nvidia chips as “an AI side project”. At the time, local business partners viewed this as “a quirky hobby”. But when he started DeepSeek in 2023 – and began challenging local rivals ByteDance and Alibaba – they sat up. DeepSeek has spent its short corporate life having to work around successive US bans on the export of vital chips to China. The upshot, says the South China Morning Post, is that Liang has become one of the most forceful drivers of China’s push for technological self-sufficiency.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

“History is just one f**king thing after another,” declares a vulgar schoolboy in Alan Bennett’s play The History Boys. Surveying the past 25 years can feel the same way. From Iraq to the euro crisis and from Brexit to bitcoin, a great deal has happened over the quarter-century that MoneyWeek has graced newsstands. But not all news stories are created equal.

Hazarding a slightly more elegant periodisation than Bennett’s character, I would argue that the great turning point of the past quarter-century was the financial crisis that began in 2007. For the UK in particular, recent history can be neatly sliced into two periods: the years before and after the great crash.

London loses its crown

In the early 2000s, London could credibly claim to be the centre of global finance. It topped Z/Yen’s inaugural Global Financial Centres index (GFCI) in 2007.

America might be the superpower, the argument went, but London was the world’s capital. Britain’s economy was like the tennis at Wimbledon, a venue for global heavyweights to clash, helped by the English language and an excellent time zone.

The past is indeed a foreign country. Where once the “Sir Humphreys” in Whitehall talked of surpassing New York, today they tremble at unflattering comparisons to Greece. The London stock exchange fears irrelevance. Nvidia alone, valued at $5 trillion, dwarfs the combined value of all London’s blue chips. Deal volume has never regained its 2006 peak of $51 billion (it was just $248 million in the first nine months of this year).

While the technology megabucks fly on Wall Street, one of London’s most notable listings this year has been Princes Group, a purveyor of tinned tuna. It is a perfectly respectable business, but there is a certain desperation in efforts by officials to tout this solid, dull flotation as heralding some great renaissance.

Most tellingly, UK living standards have flatlined since 2007. “[Had the] pre-2007 productivity trend continued, British workers would be 16% more productive today,” says Aadya Bahl on an LSE blog. The significance of 2008 is much more evident in Britain than in America, where growth eventually recovered. The S&P 500 index of US stocks has rocketed nearly 900% since its 2009 low (compared with 153% for the FTSE 100). The UK had placed all of its chips on the wealth generated by the City.

When that bet imploded, the country struggled to carve out a new role for itself. Ever-Tiggerish, Americans bounced back from the banking disaster, reinventing themselves as shale-oil prospectors and smooth-talking tech venture capitalists; Britain has more resembled a middle-aged man bouncing between odd jobs after an involuntary redundancy.

Far too easy money

Gordon Brown’s hubristic claim to have abolished “boom and bust” was widely panned as the Great Recession got underway. But in this, the chancellor-turned-PM was only mirroring the wider economic establishment, where the notion of a “Great Moderation” (built on the supposed inflation-fighting genius of central bankers) was all the rage.

Central banks treated us to further financial wizardry after the subprime meltdown by unleashing ultra-low interest rates and the money-printing of quantitative easing (QE). More tranches were added whenever markets started to feel queasy. By the peak in 2021, the Bank of England’s QE portfolio had swollen to £895 billion, or 40% of UK GDP. Contrary to the worst fears, inflation did not immediately rocket. What happened was more insidious.

With credit all but free, risky behaviour went unchecked for years. On Wall Street, the era of ultra-low rates led to some truly daft companies and unworkable business models. The most notorious was WeWork, a poorly run office landlord that somehow convinced venture capitalists it was a ground-breaking tech innovator. Investors threw tens of billions at the idea before it filed for bankruptcy in 2023.

The impact on governments’ behaviour was even worse. Easy money anaesthetised bond markets, removing pressure on states to get spending in order. Although not openly admitted, this was by design. The hope was that cheap borrowing costs would prompt governments to borrow and spend more, thus ending the world economy’s post-crisis slump.

Governments binge on debt

It took a pandemic for the balance of global savings and borrowing to shift decisively. Anyone wondering why interest rates and inflation have spiked so violently of late need look no further than the world’s finance ministries. With furlough schemes, governments got out the credit card, treating tens of millions of workers to a year off. Then came the energy shock after Russia’s invasion of Ukraine in 2022, combined with a pressing need to find more money for defence and an ageing population.

The result has been an explosion in public borrowing. In 2000, UK public debt stood at 37.7%. Today it is 103%, with the Office for Budget Responsibility warning that on the current trajectory it will hit 270% of GDP by 2070. It’s a similar story in most of the developed world.

The mirror image of worsening government credit has been surging gold prices. The yellow metal started the year 2000 at $289 an ounce (oz). Today it trades at $4,035/oz. That 1,294% gain arguably makes it the trade of the century so far, far outstripping the S&P 500’s 365% return over the same period. MoneyWeek is a great fan of the yellow metal, but even we must admit that at current levels, vertigo is setting in.

Bitcoin fanatics will argue that theirs is the trade of the millennium. MoneyWeek has been cautious about embracing the highly volatile cryptocurrency. Claims that bitcoin is “digital gold” are suspect. Bitcoin tends to behave more like a risky asset, rising and falling together with frothy tech stocks, than it does a hedge.

Yet our scepticism is proving hard to maintain. Since its first boom in 2017, the digital currency has gone on to return over 500%. Modish “meme” coins can do even better. Investing is about growing and preserving pre-existing wealth, rather than making a fortune from nothing. Yet pick the right meme coin and you can become wealthy overnight. Still, a lottery ticket can also do that for you.

So much for peak oil

Gordon Brown’s talk of ending boom and bust is far from the only dubious prediction over the past 25 years. During the 2000s, looming “peak oil” was a persistent worry due to the depletion of existing reserves. Credible estimates predicted that production would peak sometime around the late 2000s, before plummeting. Oil prices did in fact rocket at the end of the decade, rising from $30 a barrel in April 2004 (when MoneyWeek suggested readers buy) to more than $140 a barrel in 2008 (shortly before it told readers to sell).

Yet peak oil was not to be. All of that talk of coming shortages only prompted capitalists to go out and find more. In the 2010s, Texan cowboys flooded world markets with shale. Today, peak production is thought to be likely to occur in the early 2030s.

Peak oil was overdone, but the warning that energy was set to become more scarce has proved accurate. As cheaper production sources were exhausted, more marginal reserves such as shale require a higher price point to be economical. At $64 a barrel, Brent crude prices trade at a level regarded as cheap by current standards. But that is still much higher than its $29 a barrel of November 2000.

Emerging markets diverge

MoneyWeek was launched just as emerging markets (EMs) were gathering steam. The first decade of the 2000s was a golden era for developing economies, as China entered the World Trade Organisation, and Asia and Russia recovered from financial crises. From January 2001 to the end of 2009, EM equities gained 200%, compared with a measly 4% in developed markets. The rise of EMs has remained a vital theme, but one that proved messier than expected.

For one thing, growth has had a frustrating tendency to fail to translate into equity gains. The EM index has returned a paltry 28% since the start of 2010. Leadership of the complex has narrowed as Brazil, Russia and South Africa variously stagnated.

Yet defying repeated predictions of an imminent “China crisis”, China has kept on growing, although the recent property bust is proving the most serious test yet. Many developing economies become trapped at the “middle-income” level, defined as GDP per capita of between $1,000 and $13,800. With GDP per head of $13,300 as of last year, China finds itself on the cusp of joining the world’s high-income economies.

Since Covid, the world’s second-largest economy has emerged as a global leader in electric cars and AI. This has not made for very exciting investment returns (the CSI 300 index is still 13% off the level it reached at the height of an investing mania in 2015). But as geopolitical facts go, none is more fundamental to the future than the Middle Kingdom’s growing power.

Don’t buy at the top

Other popular narratives today may also ultimately prove wide of the mark. Tech leaders in Silicon Valley are currently warning that automation could lead to a jobless future, while simultaneously worrying that low birth rates will starve the economy of working-age people. The future, they incoherently claim, is one of both mass unemployment and a chronic labour shortage. Both problems can’t be true at once.

What about Britain? Trying to be optimistic, one might argue that pessimism has reached such an extreme level that it won’t be very hard for growth to surprise on the upside. The FTSE 100 has returned a decent 75% over the last five years.

Yet its performance this century has been dire. Up 52% since MoneyWeek launched, the blue-chip index has given investors a measly annualised return of 1.75% over 25 years (generous dividends on top do soften the pain of sluggish capital growth, though). Measure from the 2003 low, and the index has returned 165%.

No country knows more about investing misery than Japan, one of MoneyWeek’s long-standing favourites. Last year, the Nikkei index regained its 1989 peak; it took 34 gruelling years. The Topix share index has returned 275% since 2013, when Shinzo Abe launched economic reforms, but getting there has involved a long and painful wait.

The investment industry is fond of reminding us that over the long-term stocks tend to deliver an attractive rate of return. Yet that is an average. As grinding returns in the UK and Japan have shown, if you buy near the top, your portfolio’s recovery time risks being counted in decades. Those currently going all-in on the US tech frenzy have been warned.

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In the late 1990s, a young Stella Li landed in Rotterdam from China with $30,000, a container load of lithium-ion batteries and an order from head office: “sell them to survive”. She clinched a deal with Nokia, then the number one mobile-phone maker. Never one for false modesty, she told the Financial Times: “I opened the door and moved BYD to another level.”

Nearly 30 years on, the company has moved far past its roots as a battery maker to become one of the world’s most powerful manufacturers of electric vehicles. Globe-trotting Li remains so firmly at the heart of its international expansion that colleagues have dubbed it “The Stella Show”. Yet the stakes, while much higher, are just as existential. BYD sales grew by 40% last year, but it is having to grapple with both rising Western protectionism and a darkening domestic outlook in China in the teeth of cut-throat competition. It’s going to be “very difficult for BYD to continue to grow the way it’s been growing”, says analyst Tu Le of Sino Auto Insights.

“A diminutive woman with almost frenetic energy,” Li, 55, “zips across the globe furiously, rarely making it back to her current home in Los Angeles”, says Fortune. In a typical day, BYD’s “crucial ambassador and strategist” might wake up in Istanbul, fly to a meeting in Vienna and then spend the night in Germany. The carmaker now exports to roughly 95 markets, but Europe is particularly crucial to its global push. In markets such as Britain – which this year became BYD’s biggest outside China – the company has become “Elon Musk’s worst nightmare”.

At its heart, BYD – which was founded in Shenzhen in 1995 by Wang Chuanfu – has always been a partnership. While Li led marketing and expansion, Wang, 59, was the engineer behind the group’s rapid technological advancements and manufacturing prowess. He never wavered from his dream of building electric cars, even when it looked like a long shot. The pair met soon after Li had graduated from Shanghai’s prestigious Fudan University and the relationship developed romantically as well as commercially.

BYD stands for “Build Your Dreams”, but back in the early days when Li was pestering mobile-phone executives in Atlanta suburbs with her box of battery samples, she used to joke that it stood for “Bring Your Dollars”, says Bloomberg Businessweek. Her great strength then was persistence. It took her two years to win a contract from Motorola. But by 2002, when BYD went public in Hong Kong and Shenzhen, the company was on a roll. Many investors were furious when Wang bought a majority stake in a failing state-owned carmaker a year later – appalled that BYD “was wading into a market it knew nothing about”. At the time, Wang didn’t even know how to drive, but was convinced that electric cars were “a natural extension” of the battery business.

The first clunky models did nothing to dissuade the critics, but Wang continued to pour cash into product development.

Stella Li's deal with Warren Buffett

The deal that put BYD on the map was Berkshire Hathaway’s landmark $232 million investment in 2008, says the FT. Li was introduced to Warren Buffett and Charlie Munger by her friend Li Lu, a billionaire hedge-fund manager. In the nearly two decades that Berkshire stuck with BYD until completing its exit this year, it reportedly netted a return of about $7 billion. In that time, BYD has achieved what Tesla, Ford and the rest of the car industry haven’t, says Businessweek: “build an affordable electric car for the masses and make money doing it”. Jean-Francois Baril, chair of Nokia’s owner HMD Global, who has known Li for more than two decades, credits her with “bridging the East and the West”, says the FT. She’ll need all that skill to keep BYD on the road in the years ahead.

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After World War II, America and its allies put in place a set of alliances, institutions and power structures to rebuild war-ravaged countries, create geopolitical stability and generate global economic growth. This post-war order has endured – with one important change – for much of the following eight decades.

The fall of the Berlin Wall and the dissolution of the Soviet Union seemingly marked the end of any alternative to Western capitalism and liberal democracy as the main global economic system. However, in recent years, it has become increasingly obvious that the ties holding this US-dominated system together are fraying and are likely to break.

We are heading into a new world that is likely to be more unstable. In a symbol of this change, on 5 September this year, US president Donald Trump signed an executive order renaming the Department of Defence as the Department of War. This restores the name that it carried from 1789 until 1947 and points to the rising risks of conflict in the years ahead.

So how should investors position themselves for what comes next? What areas that are currently under-represented in most portfolios should they consider for diversification and protection?

Rivalry and conflict between the US and China

The main question is how the shift from a single superpower to two contending nations – the US and China – will affect global supply, demand and the efficiencies of comparative advantage. Free trade has generated huge gains since the end of the Second World War, and even more so since the end of the Cold War. This is now clearly under threat.

With the end of the post-war order comes the new “Great Game”. This name was originally given to the struggle between Britain and Russia for influence in Central Asia (Afghanistan and Persia). This time, the strategic rivalry and political conflict is between the US and China. Paradoxically, it is America that is now pursuing a more inward-looking strategy under Trump’s Make America Great Again (MAGA) banner, while China aims to build economic and political alliances through its Belt and Road (BRI) and Global Development Initiative (GDI) projects.

While America strives to bring its manufacturing base back onshore, Europe is now having to divert budgets from social welfare to rearmament. Both are now in stiff competition with China to electrify the planet and build digital infrastructures. This will inevitably lead to global competition for resources across energy, metals and critical minerals.

This is leading the two superpowers to weaponise their core strategic advantages. For America, this is the US dollar, still the world’s global reserve currency. For China, it is a stranglehold on rare earth elements and critical minerals.

China needs an alternative to the dollar

Freezing and confiscation of assets and denial of access to global payments systems is forcing non-US aligned countries to look for an alternative store of wealth and means of exchange. Herein lies the potential significance of the Brics+, the informal name for the original group of five key emerging-market powers – Brazil, Russia, India, China, South Africa – plus other countries that have begun joining them for summits and policy coordination. Some see this group as a counterpart to the G7 group of developed economies. Initiatives by the Brics+ members so far include work on a development bank, central-bank cooperation and an international payment messaging system.

Any alternative to the dollar looks increasingly likely to be a form of tokenised, asset-backed digital currency. This explains why many central banks closely aligned with the Brics+ nations have been large buyers of gold and other precious metals.

If the creation of a new currency system seems far-fetched, it is worth a quick review of the genesis of the post-war order: the Bretton Woods Agreement of 1944. China is a great student of history, and this agreement provides an template for how new world orders are created. While World War II was still raging, more than 700 delegates from 44 countries met at Bretton Woods in New Hampshire in the US to work on a new global monetary system. The goal was to create a globally efficient foreign exchange market, prevent competitive currency devaluations and promote global economic growth.

John Maynard Keynes, one of the principal economists at the meeting, proposed creating a new international reserve currency called the “bancor” and setting up a global central bank called the “Clearing Union”. However, these proposals were eventually watered down by the US Treasury in favour of a more prominent role for the US dollar, whereby the dollar would be pegged to the price of gold, and other participating currencies would be pegged to the dollar. The agreement was fully implemented in 1958, pegging the US dollar to gold at $35 per ounce.

This system functioned until the early 1970s when it became evident that US gold reserves were not adequate to sustain the peg. This caused a run on gold, forcing first a temporary suspension of the dollar’s convertibility into gold followed by complete collapse of the agreement in 1973. US president Richard Nixon also imposed a 10% tariff on all dutiable imports to force its major trading partners to adjust their currencies upwards and trade barriers downwards. Does this sound familiar?

China has already taken the strategic initiative to convene the Brics+ group of nations. It has established the Shanghai Gold Exchange – and associated physical storage – and now holds a significant percentage of its reserves in gold. It has shown little desire to replace the dollar with its own currency – internalisation of the renminbi would erode the ability to operate capital controls – but it and its allies need an alternative to the dollar.

Given China’s embrace of technology and advanced domestic digital-currency adoption, it does not feel far-fetched to envisage it launching a Bretton Woods-style gold-backed digital currency for those unable or unwilling to access the US dollar system. Crypto tokenisation is the vehicle, not the asset.

China's control of strategic resources

China’s strongest bargaining chip lies in its control of rare-earth elements (which are used in magnets, electrification, lasers and optical devices, catalysts and emission controls and radar/guidance systems), as well as critical minerals, that have broader energy, industrial and defence applications.

China has this control because, while the West focused on the comparative advantage of outsourcing its production to countries with lowest costs, China focused on building an end-to-end supply chain comprised of exploration, mining, refining and industrial manufacturing. With its looser environmental controls, it has come to dominate the global supply of these critical minerals.

In the tit-for-tat game of tariffs and sanctions, China is able to leverage its position in the one area where the US is completely vulnerable. So just as China and its allies have no alternative but to develop a competitor to the US dollar as a store of wealth and means of exchange, the US and Europe now see they have no choice but to develop alternative sources for mining and processing capacity to break this reliance. Exacerbating the situation, America’s prioritisation of its own MAGA agenda over historical alliances has left Europe and other previously US-aligned countries to build their own rather than collective resources.

If investors believe the post-war order is irretrievably compromised, they should consider investments that give exposure to these themes. Gold and precious metals for hard assets. Tokenisation and chips to enable digitalisation. Energy and power generation, rare earth elements and critical minerals, which will be in demand as both sides try to secure supply chains. And US and European defence stocks as the West joins in the new arms race.

Investors have many ways to access these ideas, including individual stocks, thematic exchange-traded funds (ETFs) or exchange-traded commodities (ETCs) that hold physical metals. Listed commodity futures and options are also becoming increasingly accessible, as major exchanges such as the Chicago Mercantile Exchange (CME) roll out mini and even micro contracts, which are 1/10 or 1/100 of the size of standard contracts and require less up-front capital. Such instruments are only suitable for experienced investors, but they offer a way to quickly add hedges or speculative positions to a portfolio – something that will become more valuable in a fast-changing world.

James Proudlock is managing director of OptionsDesk.

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I repeatedly come back to this subject because I think it is one of the most important yet overlooked issues in global finance. The geopolitical ramifications are enormous. Something that the Trump administration appears to understand in a way that previous administrations didn’t is this: it doesn’t matter if you issue the global reserve currency; if you don’t make anything, when the tide goes out, you are going to be caught swimming naked.

During Covid, the dangers of excessive dependence on China and its supply chains for critical or strategic products became apparent. It became clear again during the Ukraine war. Russia managed to manufacture munitions much faster than Nato.

Reshoring US industry is not something that can be done overnight. It is going to take years, if not decades – almost as long as it took to unwind in the first place. But the Trump administration is at least trying to kick-start the process with tariffs, a weaker dollar and, more subtly, the managed decline of the US dollar as global reserve currency.

As a result, neutral gold’s role as a global reserve asset is returning to prominence. History’s “golden” rule will soon apply again: he who has the gold makes the rules.

My argument is that China has considerably more than the 2,300 tonnes it says it does. That figure constitutes the world’s fifth-largest reserve of the yellow metal. The central banks of the US, Germany, Italy and France are the top four holders of gold reserves, with respective 8,133, 3,350, 2,451 and 2,437 tonnes.

How much gold does China have?

The People’s Bank of China (PBOC) is China’s main custodian, but other state entities, such as the China Investment Corporation (the sovereign wealth fund), the State Administration of Foreign Exchange and the Army, also own gold. In fact, having other state bodies hold gold is one of the means by which China is able to understate its reserves.

I’m going to use a slightly more conservative methodology, which means I will arrive at a lower estimate. Even so, the numbers will shock you. Remember that China is the world’s largest importer of gold, the largest consumer and the largest producer (in 2008 its output eclipsed South Africa’s). I am going to use round numbers, as they are more digestible, and when there is a spread (between 500 and 1,000 tonnes, say), I will take the middle number: 750.

It is impossible to know just how much gold China has imported, because so many transactions are private ones, particularly those that go through London, Switzerland or Dubai. Gold transactions in Hong Kong are more transparent.

However, most, although not all, of the gold that goes to China goes through the Shanghai Gold Exchange (SGE), which opened in 2007. Withdrawals from the SGE between 2007 and mid-2025 total 29,500-30,000 tonnes, based on aggregated data from the Shanghai Gold Exchange (SGE) and World Gold Council (WGC) reports. I’m going to overlook gold that made its way to China prior to 2007, although it’s quite easy to make the argument that this amounts to several thousand tonnes.

The SGE is just a flow metric, it should be noted. It does not represent total consumption. Some of the gold passing through will have been double-counted, either as a result of reselling and recycling, or because of China’s booming money-laundering business and the circular trade with Hong Kong. Estimates for double-counting range from 10%-30%. Let’s take the middle 20% figure (6,000 tonnes), and that leaves us with 23,250 tonnes of SGE gold.

As for the undisclosed gold, consider that the PBOC likes 400-ounce bars, as traded in London. These do not trade on the SGE, which uses smaller kilogram bars and 3kg and 12.5kg ingots. (400oz is about 11.3kg.)

So London imports will not go through the SGE, unless re-smelted, and are therefore counted in addition to the numbers above. Analysts mostly concur that while reported imports via London, Switzerland and Dubai total between 3,500 and 4,500 tonnes, another 3,000 tonnes (mostly post-2009, accelerating since 2022) have gone unreported. Add the 3,000 tonnes to the 23,250 of SGE gold and our total is now 26,250 tonnes.

Gold mining in China

Around 55% of Chinese gold production is state-owned, and we know from geological records that this century, China has mined roughly 7,500 tonnes.

Between 70% and 80% of Chinese production is sold through the Shanghai Gold Exchange, so we have already counted that. The other 20%-30% goes to the state. Using estimates from the mid-range, 25% of those 7,500 tonnes (1,875 tonnes) has gone to the state. The rest has been sold through the SGE. Add 1,875 tonnes to the total, and we reach a figure of 28,125 tonnes.

By the way, I have not included overseas Chinese gold production, of which there is a lot. Some of this gold is sold on international markets and never actually reaches China. But what does reach China is sold through the SGE and has therefore already been counted. Finally, we have to add in gold held in China, whether as bullion or jewellery, prior to 2000. The WGC estimates a figure of 2,500 tonnes in privately held jewellery. Added to domestic mining and official reserves, you get a figure of around 4,000 tonnes. This brings our grand total to 32,125 tonnes.

Demand for gold

Previously, I have argued that 50% of that gold would go to the state. That would mean roughly 16,000 tonnes – almost twice as much as the US’s reported 8,100 tonnes! Let me propose another methodology.

It stems from my conversation with Konstantin Kisin in the Triggernometry podcast a fortnight ago. Last year, investors and central banks comprised a respective 25% and 23% of overall demand for gold; the figures for jewellery and industry are 47% and 6%.

These figures of course change from year to year, with demand from investors and central banks being the big variables. But if we assume demand from China roughly matches global demand, that would mean that of the 32,125 tonnes, roughly 15,100 tonnes is jewellery; 8,030 is now bullion held by investors; 1,930 tonnes went into manufacturing; and the Chinese government has 7,400 tonnes.

This assumes Chinese gold has been allocated over the last 25 years according to the global habits of last year, which is almost certainly a bogus assumption. China is such a big manufacturer that demand from the Chinese industry may well be higher than 6%.

It’s also easy to argue that because the Chinese people like gold so much, and the state has been encouraging them to invest since 2007, that both Chinese jewellery and investment demand is higher than 47% and 25% respectively.

Similarly, because of dedollarisation, demand from the PBOC could be higher than 23%. In any case, I have been transparent about my methodology.

You can make up your own minds. The upshot is that China’s stated reserves of 2,300 tonnes are a gross underestimate.

In a way, it’s actually better for investors if China has less gold, because it means they have more buying to do, and that should help drive prices higher. Meanwhile, the Middle Kingdom’s stated 2,300 tonnes only account for 7% of its $3.4 trillion of overall reserves. To get above 70% and match the allocation ratios of the US, Germany, France and Italy, at $4,200/oz gold, it would need something like 18,000 tonnes. That’s a lot of buying yet to come, in other words.

If you take my assumption from previous years (that 50% of the gold that has gone to China via imports or production went to the state), then China has 16,000 tonnes of gold. That is twice America’s reported holdings of 8,133 tonnes.

This comes just as gold, at current prices, accounts for 30% of global foreign-exchange holdings, according to Deutsche Bank. The US dollar, meanwhile, makes up 40%. The euro’s proportion lies below 20%. This is quite the move: gold’s share was just 20% at the beginning of the year.

At $5,800 – a 33% rise from today’s price of $4,340 – gold overtakes the US dollar to become central banks’ largest holding. That assumes banks don’t buy any more, of course, when they will. A recent survey by the WGC found that 43% of central banks plan to increase their holdings over the next year, while 95% of reserve managers expected global central-bank holdings to rise over the next 12 months.

I was looking for parity between the dollar and gold in terms of reserve holdings at some stage in the next decade. We could see it within the next six months on current trajectories.

Why is China keeping its gold a secret?

And gold isn’t money, according to former Federal Reserve chairman Ben Bernanke. So why does China understate its reserves? China is still in accumulation mode. While it is buying, it wants the price low.

It certainly doesn’t want to cause it to spike.

If China were suddenly to say that it actually has 7,400 or 16,000 tonnes, rather than 2,300, it would send the gold price rocketing. More significantly, it risks sending the dollar into a plunge. China has $3.4 trillion-worth of dollars. It wants to preserve their value, presumably.

In short, coming clean on gold holdings would create enormous financial upheaval. It has that card, ready to play, should it ever need to, should it ever get into conflict with the US, for example. Money is the first thing that gets weaponised in war.

But for now it doesn’t need to. China is surely happy growing as it is, making things and selling them to the rest of the world, thus ensuring that the rest of the world becomes dependent on it. Why rock the boat? It’s on to a good thing after all.

“We must not shine too brightly,” as Deng Xiaoping is once supposed to have said. I understand that what he actually said amounted to “keep a low profile”, or “don’t draw attention to yourself”. Same difference. China doesn’t want to rock the boat, particularly while it’s still accumulating gold.

This is quite a shift that is taking place, and it is happening quickly. The upshot? You really want to own gold, overbought or not.

Dominic Frisby writes the investment newsletter The Flying Frisby (theflyingfrisby.com). His latest book is The Secret History of Gold: Myth, Money, Politics & Power, published by Penguin Business and available from all good bookshops.

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The trust is an actively-managed investment vehicle providing investors with broad access to China’s growth opportunities, from established technology leaders to entrepreneurial private businesses yet to list. Chinese equities have advanced strongly this year despite US-China trade tensions and a subdued property market. Low initial valuations and improving sentiment towards sectors driven by innovation (following DeepSeek’s breakthrough AI model) have also helped.

We focus on identifying companies with scalable growth potential, a sustainable competitive advantage and strong execution by managers. These often align with beneficiaries of long-term structural growth trends, such as China’s expanding domestic consumption and rapid technological innovation.

A particular emphasis is also placed on smaller, under-researched firms, offering attractive opportunities in mispriced stocks with healthy prospects. Here are three businesses the trust currently invests in.

China's growth opportunities

Hesai Group (Nasdaq: HSAI) is the world’s leading automotive LiDAR [light detection and ranging] provider, uniquely positioned at the heart of the fast-growing autonomous mobility revolution. As LiDAR becomes an essential component in advanced driver assistance systems (ADAS), Hesai’s ability to deliver superior technology at competitive prices sets it apart. As the market expands, Hesai is set to benefit from strong demand in increasingly sophisticated ADAS, which should help lead to substantial volume growth. While the vehicle industry will drive growth for many years ahead, there is also strong potential in other forms of mobility and robotics in the longer term. In addition, significant scope for margin expansion exists as volumes ramp up.

Xtep International (Hong Kong: 1368) has established itself as a leading Chinese sportswear brand specialising in the fast-growing running segment. Benefiting from the trend towards trading down in sportswear, Xtep is well positioned, combining affordability with a relevant brand.

Its sponsorship of marathon events and recognition for its shoes’ performance strengthen the brand’s credibility, while the strong growth of its premium Saucony brand broadens the product mix and supports the expansion of margins.

In the meantime, the company is trading at compelling valuations, while a solid dividend yield underpins attractive total shareholder returns. With strong branding and exposure to one of China’s most resilient consumer categories, I see Xtep as a structural winner in the domestic sportswear market.

Full Truck Alliance (NYSE: YMM) operates as China’s dominant digital freight-matching platform, leveraging powerful network effects to match shippers with truckers more efficiently than traditional offline brokers. Its scale creates a strong “moat” (an enduring competitive advantage), with network effects set to extend the group’s lead thanks to greater efficiencies and lower costs.

As penetration deepens and take rates (the percentage of a transaction for facilitating a sale) rise, Full Truck Alliance (FTA) is well positioned to deliver sustained growth in revenues from commissions, underscored by a record of resilient earnings with robust recent quarterly results. Having first invested in FTA as a private company, I’ve retained my long-standing conviction in its business model and strong execution. Since its public listing in June 2021, it’s remained a key portfolio holding, offering durable growth potential as China’s logistics industry continues its structural shift online.

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For a brief moment in January, Chinese tech start-up DeepSeek looked like it had re-written the global rulebook on artificial intelligence (AI) and the stock market.

The established narrative is that the US dominates technology. Lists of the most popular stocks for retail investors frequently include Magnificent Seven giants like Nvidia and Tesla.

But on 27 January, Nvidia’s market cap fell by almost $600 billion – its largest ever single-day decline – as Chinese AI start-up DeepSeek sent shockwaves through the global stock market.

Its flagship chatbot, DeepSeek-R1, could reportedly outperform most Western models, like ChatGPT, despite costing just $6 million to train (a fraction of the $100 million-plus that ChatGPT reportedly costs) and without relying on Nvidia’s most cutting-edge chips. That seemingly took the foundations out from Nvidia’s entire investment case.

Within a month, though, Nvidia’s stock had recovered most of the ground it initially lost, and while its share price declined towards April’s Liberation Day tariff announcement, it has since gone on to reach new heights, becoming the world’s first $4 trillion company in the process.

You could be forgiven for thinking that DeepSeek was just a flash in the pan given how quickly the US stock market has moved on from it.

But DeepSeek’s adoption in China has carried on apace, and the company could offer fresh tailwinds for the country’s much-maligned technology stocks.

What happened to the DeepSeek effect?

There were numerous reasons why the markets seemed to shrug off the initial explosive impact of DeepSeek’s arrival on the AI scene.

“People started questioning the viability and the reliability of the information that we had received over that weekend back in January,” says Bola Onifade, portfolio manager at JP Morgan-owned Nutmeg.

DeepSeek appears to have ‘distilled’ its model from OpenAI, the company behind ChatGPT. The process of distillation essentially replicates much of the performance of a large AI model in a smaller model, reducing its own costs, but not the total costs required to produce a model from scratch. In other words, Nvidia was still getting paid.

Reports also emerged that DeepSeek may not have been totally honest about its non-reliance on Nvidia chips. Officially, it wasn’t allowed access to the most advanced versions thanks to US export controls on strategically critical tech to China. The US commerce department started investigating claims that DeepSeek had managed to acquire controlled Nvidia chips before January was through; in February, Reuters reported that officials in Singapore had charged three men with fraud for allegedly procuring advanced Nvidia chips for DeepSeek.

It appears, even, that DeepSeek is heavily reliant on Nvidia’s technology. On 14 August, the FT reported that the launch of the company’s latest model, R2, had been delayed by DeepSeek’s attempt to train it using Huawei’s Ascend processor, China’s homegrown alternative to Nvidia’s chips.

The Jevons paradox: why DeepSeek boosted AI expectations

The main reason the market moved on from DeepSeek’s initial impact is that it realised that DeepSeek’s claims, even if true, were a bullish sign for the AI market, not a threat.

“There is definitely a positive angle for AI,” says Onifade. The faster, cheaper AI promised by DeepSeek enables faster adoption by companies further on in AI’s value chain, such as software companies or other industries.

“That’s a good story,” says Onifade. “There was a bit of scepticism, and then a bit of ‘actually, this might be good news for the entire AI complex.’”

This is a phenomenon that economists call the Jevons paradox, which contends that more efficient use (and therefore pricing) of a resource leads to greater consumption of it. Microsoft’s CEO Satya Nadella referred to it directly on X (formerly Twitter), stating that “As AI gets more efficient and accessible, we will see its use skyrocket, turning it into a commodity we just can't get enough of” while sharing a link to the paradox’s Wikipedia page.

DeepSeek’s impact in China

DeepSeek hasn’t directly made good on this promise in the US as of yet, largely because its usage has been limited over security concerns. That isn’t to say that plenty of Western companies aren’t busy learning about how AI can be built on the cheap.

But in China, it has been adopted at pace in both the public and the private sectors. Goldman Sachs predicted in February that AI adoption would start to boost Chinese productivity from next year, and deliver a 20- to 30-basis point boost to GDP by 2030.

“Big tech companies like Alibaba (NYSE:BABA) and Baidu (NASDAQ:BIDU), they’ve rolled out and integrated [DeepSeek],” says Onifade.

These companies, she says, are “in some ways farther along the integration journey".

“If you believe in the productivity gains that will be brought about by AI, I think you have to believe that companies that are at the forefront of adopting the technology will experience those gains, and deliver it in returns to investors," she adds.

All this is leading to rapid technological acceleration in the country.

“China tech is quickly ramping up its technology and not sitting on a treadmill,” said Dan Ives, head of global technology research at Wedbush Securities. “Tech stalwarts Huawei, Alibaba, Baidu, Tencent (HK:0700), Xiaomi (HK:1810) and others are aggressively looking to accelerate its AI technology ambitions.”

Should you invest in Chinese tech stocks?

Investing in Chinese tech stocks is in many respects akin to entering a completely different ecosystem from that to which Western investors have grown accustomed.

China is the only world region where Amazon, Microsoft and Google are not the top three cloud vendors. In China, those spots go to Alibaba, Tencent and China Telecom (HK:0728), with Huawei taking fourth spot, according to data from Synergy Research Group.

One of the advantages of buying Chinese tech companies is that they are relatively undervalued compared to their US counterparts.

While Magnificent Seven stocks mostly trade at multiples of 30 times projected earnings or higher, Alibaba currently has a forward P/E ratio of 14.2, and Baidu’s is just 12.

However, the rationale for this undervaluation is that investing in Chinese stocks carries risks.

“You’re dealing with a very heavyweight government,” says Onidafe. That has its advantages – for example, the massive amount of resource the Chinese government is putting behind initiatives like ‘Eastern Data and Western Computing’, which seeks to build a huge data centre network in the west of the country.

But it can, and has, played out badly for Chinese tech stocks. The ‘tech crackdown’ that followed the government’s blocking of Ant Group’s IPO in 2020 is a poignant case in point.

“Investors have sticky memories – they recall these events,” says Onifade.

But at the current moment, she adds, the government is supportive of its tech industry. “This is a positive time to look at China again and think about what portfolio allocation should be over the coming years, with the embrace of some of the tech names in China.”

How to invest in Chinese tech stocks

Buying into China’s tech ecosystem is not as straightforward as investing in US big tech, as China is slightly more closed to international investors. Some Chinese tech companies, like Baidu and Alibaba, have American Depository Shares (ADS) listed on US stock exchanges like the NASDAQ – these can be bought and sold in the same way as US tech stocks, though you will need to check exchange rates when assessing companies’ fundamentals.

Others, such as Tencent and Xiaomi, are available as Pink OTC stocks which are often viewed as riskier, given the lower regulatory requirements for companies to list. Alternatively, if your provider allows you to, you may be able to buy these companies’ Hong Kong-listed shares.

An easier route to invest in Chinese tech stocks could be to invest in funds that offer exposure. At a basic level, this could be via an index fund like MSCI China, which as of 31 July has an 8.4% weighting towards the IT sector – not including companies like Tencent or Alibaba, its two top constituents which account for a combined 27% of the index and are classified as consumer services and consumer discretionary, respectively.

Investors seeking a more targeted approach could select a fund like Fidelity International’s China Innovation Fund, which targets Chinese tech companies offering growth and quality at reasonable valuations. Top ten holdings as of 31 July include Tencent, Alibaba and Xiaomi.