Summary
In this paper we explore the evolution of China's technological progress and its likely path ahead.
Key points
Investing in Chinese tech leaders by selecting ‘scaling champions’ is a viable approach, considering the high barriers to entry created by their cost efficiency.
A strategic shift towards stimulating consumer demand is crucial to fighting deflation and sustaining China’s technological ascendancy. A failure to escape deflation may weaken the investment case for Chinese technology.
Currently, Asia commands the lion’s share in the production of sophisticated information technology hardware. Any attempt to relocate these supply chains to the United States would result in diminished profit margins, along with rising costs for consumers. Companies with higher pricing power and gross margins should better absorb the cost of reshoring, thus mitigating the risks associated with America First policies.
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