Trump turns trade dispute into an investment fight as Cold War battle with Beijing heats up

Its main $50bn (£39bn) pension fund, known as the I-Fund, is currently indexed to the MSCI EAFE, which invests in companies from Europe, Australia and Japan. However, it was proposed that the I-Fund would switch to the All Country World Index, which – following the part inclusion of Chinese shares in MSCI’s indices last year – now invests in companies listed in Shanghai and Shenzhen.

Some doubt that we have entered a new Cold War between China and the US because the economic links between the two countries are too significant. However, this argument is clearly absurd. It is exactly these links that are now being unpicked by Washington’s China hawks, with both sides seeing the battle as existential.

Even if the Democrats win in November’s presidential election, moves against the Chinese military are likely to stay, as alleged human rights abuses by Beijing remain a key priority for many in the party.

The Trump administration is now clearly targeting all financial links between the US and China. A move that Washington hawks believe will allow outsourced jobs to be brought home – and China be starved of investment to limit its rise.

As Donald Trump said on Saturday: “This pandemic has underscored the crucial importance of building up America’s economic independence, reshoring our critical supply chains and protecting America’s scientific and technological advances.” It looks like the battle with Beijing is only just getting started.

 

Garry White is chief investment commentator at wealth management company Charles Stanley

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