For Investment Professionals only. No other persons should rely on any information contained in this website.

Fixed On Bonds

Cosy Sino-Russian relationship is going to keep global inflation elevated

Share

Since Russia’s attack on Ukraine, China’s diplomats have been keen to stress their strengthening strategic ties:

“No matter how the international landscape may change, China will continue to strengthen strategic coordination with Russia for win-win cooperation, jointly safeguard the common interests of the two countries and promote the building of a new type of international relations and a community with a shared future for mankind.” A statement released by the Chinese foreign ministry in late April.

In fact they are willing to put their money where their mouth is, with Chinese companies actively bidding for Russian assets being sold by western companies. For example, China’s state run energy companies are said to be in talks with Shell to buy its Russian stakes.

What is this going to mean for future relations between China and the West?

We already know that US relations with China soured some years ago when Trump put in place tariffs on Chinese goods. It’s worth noting this had bi-partisan support at the time and remains in place with seemingly no going back. China-US relations remain under pressure on many fronts other than trade.

Europe has learned the painful way that such a dependence on Russia built up a huge liability. Until recently, Europe was on a similar path with China, look no further than the 16+1 forum – a cooperation between central and eastern European countries and China. Opinions are now clearly souring given the cosiness of China’s relationship with Russia and Beijing’s refusal to condemn the invasion of Ukraine.

What does all this mean for markets?

China has been pivotal in the last 3 decades in driving globalisation, which has in turn kept inflation low.

Source: Bloomberg 30.04.1987 to 28.02.22

Given the swift departure of companies from Russia of late, we suspect those same companies and indeed countries that are heavily dependent on supply chains in China and by extension Taiwan too, will be making plans to shift some of this production back home. Semiconductors are a good example of this. Whilst globalisation has been disinflationary, deglobalisation and a shift away from China are likely to have the opposite effect. This fracturing of supply chains may well keep inflation elevated for years to come.  

Risks

The value of stock market investments will fluctuate and investors may not get back the original amount invested.

Share

Sign up to receive the bond blog straight to your inbox

Recent posts

Important information

For Investment Professionals only. No other persons should rely on any information contained in this document.

Whilst every effort has been made to ensure the accuracy of the information contained within this document, we regret that we cannot accept responsibility for any omissions or errors. The information given and opinions expressed are subject to change and should not be interpreted as investment advice. Reference to any particular stock or investment does not constitute a recommendation to buy or sell the stock / investment.

All data is sourced to Premier Miton unless otherwise stated. Persons who do not have professional experience in matters relating to investments should not rely on the content of this document.

Quote by Chinese Vice Foreign Minister (FM) Le Yucheng, Ministry of Foreign Affairs of the People’s Republic of China on 10.04.22.

Issued by Premier Miton Investors. Premier Portfolio Managers Limited is registered in England no. 01235867. Premier Fund Managers Limited is registered in England no. 02274227. Both companies are authorised and regulated by the Financial Conduct Authority and are members of the ‘Premier Miton Investors’ marketing group and subsidiaries of Premier Miton Group plc (registered in England no. 06306664). Registered office: Eastgate Court, High Street, Guildford, Surrey GU1 3DE.

006650/180522

Feedback

Thank you

Thank you for signing up to receive alerts for new blogs posted on Fixed On Bonds. You will receive an email confirmation.

Important Legal Information

This area of the website is intended for investment advisers and other financial intermediaries whose clients are UK tax residents.

The products offered on this website carry a degree of risk. The value of investments will fluctuate, which will cause fund prices to fall as well as rise and you may not get back your original investment. Specific risks are highlighted on the respective investment pages in this website.

By clicking on the button below you confirm you are an investment adviser or other financial intermediary authorised and regulated by the Financial Conduct Authority (FCA)