| Why Betting Against China Is a Losing Strategy The American investment establishment is about to learn a painful lesson in humility. After decades of treating U.S. markets as the only game worth playing, institutional investors are waking up to an uncomfortable reality: they've been playing yesterday's game while tomorrow's winners were building their strength elsewhere. Louis-Vincent Gave of Gavekal Group isn't mincing words when he declares the "long American century" over. This isn't anti-American sentiment or contrarian posturing for its own sake. It's a cold-eyed assessment of where global capital flows are heading, and American investors ignore it at their peril. The numbers tell the story. Pension funds and institutional investors have gorged themselves on U.S. assets for years, riding the wave of seemingly endless dollar strength and equity outperformance. But now they're dangerously overweight, and the very illiquidity that made private equity and venture capital so attractive during the boom years has become a trap. When you need to rebalance but can't sell your private holdings, you're forced to dump whatever trades publicly. This isn't strategic portfolio management; it's financial triage. The dollar's dominance as the global reserve currency has been the bedrock of American financial supremacy, but even bedrock can erode. The question isn't whether the dollar will disappear overnight, but whether more or less of the world's trade will flow through it. The answer should worry every American investor: less. China's expanding trade relationships with the Global South represent a fundamental shift in economic gravity, and gravity doesn't negotiate. Consider the evidence. Chinese electric vehicles are conquering markets from Southeast Asia to South America. Chinese earthmovers are building infrastructure across Africa. Chinese nuclear power plants are lighting up cities from Pakistan to Argentina. Most tellingly, Chinese military jets are proving their worth in actual combat, with Pakistan's J-10C fighters outperforming India's expensive Western alternatives in recent skirmishes. Iran, Egypt, and Indonesia are now lining up to buy Chinese jets, not American ones. This isn't just about trade statistics. It's about the future of technological and economic leadership. When China enters a market, as Gave bluntly observes, "the profit walks out." This isn't because Chinese companies are inherently unprofitable, but because they're willing to accept lower margins in exchange for market dominance. American companies, beholden to quarterly earnings reports and shareholder returns, simply can't compete with this patient capital approach. The artificial intelligence race perfectly illustrates this dynamic. DeepSeek's emergence earlier this year sent shockwaves through Silicon Valley not because it was marginally better than existing AI models, but because it demonstrated that technological leadership is no longer America's birthright. When barriers to entry crumble and Chinese competitors flood the market, traditional profit margins evaporate. The finance sector might benefit in the short term from AI-driven cost reductions, but the broader technology sector faces a reckoning. American policymakers and investors have spent years fixating on the Taiwan question, treating it as some kind of geopolitical Sword of Damocles hanging over global markets. This obsession reveals a fundamental misunderstanding of Chinese strategy. Beijing doesn't need to invade Taiwan any more than it needed to invade Hong Kong. Patient political influence, economic integration, and demographic change can achieve the same results without the costs and risks of military action. The further you get from Taiwan, the more worried people become about invasion. The closer you get, the more obvious it becomes that China can win without fighting. The real estate crisis that dominated headlines for years has become yesterday's problem. China is seven years into its property downcycle, and the banking sector's strong performance over the past two years suggests the worst is behind them. While American investors were avoiding Chinese assets due to property sector fears, Chinese banks were quietly repairing their balance sheets and positioning for the next cycle. This brings us to the central paradox of contemporary investing: the assets that feel safest are often the most dangerous, while the ones that feel dangerous often offer the best opportunities. American investors' comfort with U.S. assets reflects familiarity, not fundamental value. Chinese assets, meanwhile, offer the rare combination of strong fundamentals, attractive valuations, improving regulatory clarity, building momentum, and contrarian positioning that value investors dream about. The iShares MSCI China ETF's 21% gain this year, compared to the S&P 500's 6% rise, isn't a fluke. It's a preview of what happens when patient capital meets compelling opportunities. American investors who dismiss this outperformance as temporary or unsustainable are making the same mistake that British investors made when they insisted that American markets were just a passing fad in the early 20th century. The geopolitical implications extend far beyond portfolio returns. If China can establish the Hong Kong dollar as its preferred currency for international trade, it gains the benefits of currency internationalization without the risks of renminbi appreciation. This isn't just clever financial engineering; it's strategic economic statecraft that American policymakers seem incapable of matching. The uncomfortable truth is that American exceptionalism in financial markets was always temporary, not permanent. The combination of geographic advantages, demographic trends, technological innovation, and political stability that drove American outperformance for decades is no longer unique to America. Other countries have learned to play the same game, often better and certainly more patiently. This doesn't mean American markets will collapse or that the dollar will disappear. But it does mean that the era of automatic American outperformance is ending. Investors who recognize this shift early will prosper. Those who cling to outdated assumptions about American financial dominance will watch their portfolios gradually fall behind. The choice facing American investors isn't between patriotism and profit. It's between adapting to new realities and pretending that old ones still apply. In a world where economic power is shifting eastward, betting exclusively on western assets isn't just financially risky; it's strategically naive. The long American century may be over, but the long global century is just beginning. Smart investors will position themselves accordingly. | 