Editor's note: Since 2025, the US dollar and US stocks have weakened, leading to a shift of capital towards safe-haven assets such as gold and bonds. Meanwhile, the Hong Kong and A-share markets have continued to strengthen, increasing the discussion surrounding "the rise of the East and the decline of the West."
【Anchor】Hello everyone, welcome to DDN Business Insider. I am Yunfei Zhang. Since 2025, the US dollar and US stocks have weakened, leading to a shift of capital towards safe-haven assets such as gold and bonds. Meanwhile, the Hong Kong and A-share markets have continued to strengthen, increasing the discussion surrounding "the rise of the East and the decline of the West." To analyze this topic, we have invited Dong Shaopeng, a senior researcher from Chongyang Institute for Financial Studies, Renmin University of China and an expert in Chinese stock market policies; Li Dashao, former chief economist of a securities firm; and Yu Shilin, Executive Director of private wealth department at Futu Securities. Hello everyone.
First, Mr. Dong, could you briefly explain what the concept of "the rise of the East and the decline of the West" means? What do "East" and "West" refer to in this context?
"The rise of the East and the decline of the West" is not merely a geographical concept; it is a concept from political geography. It refers to the Western seven countries, which were once advanced manufacturing nations, experiencing insufficient economic growth and increasing internal contradictions. Their market structures and advantages in foreign trade are weakening, and the overall trend of economic growth is also declining. The "East" refers to countries such as China, India, and South Africa, which exhibit stronger economic growth momentum, clearer structural advantages, and increasing technological innovation capabilities. Therefore, in terms of incremental change, we see a rise in the East and a decline in the West. However, we do not deny that in terms of existing power, the West remains stronger than the East. It is precisely because of the changes in growth that we are witnessing a significant shift in the world order.
【Anchor】Alright. Mr. Li, do you see "the rise of the East and the decline of the West" as a long-term trend? Besides being reflected in the capital market, will it also manifest in other areas?
I believe that the rise of the East and the decline of the West represents a long-term trend; it is not short-term. This will also broadly reflect changes in the assets of both China and the United States. Firstly, the US dollar may shift from strength to weakness. The trend of global capital flowing into the United States may also slow down, while the Chinese yuan could strengthen. The allocation of foreign capital towards Chinese assets, yuan assets, and China's core assets may shift from underweight to neutral weighting. I think this process has only just begun.
【Anchor】Mr. Dong, you mentioned that "the rise of the East and the decline of the West" is a political geography concept. Beyond the capital market changes we are seeing, is this phenomenon also observable in other areas?
Certainly. In the realm of national governance, international trade, and cultural influence, the impact and influence of Western countries are also diminishing. Global South nations are witnessing a fissure in the trade chain constructed around US hegemony and the economic hegemony of the Western seven countries. The West's model of outsourcing manufacturing to developing nations while retaining consumption markets in the West is no longer sustainable. Therefore, the political economy and values reflected in their influence are reversing, marking a comprehensive shift in the rise of the East and the decline of the West.
Regarding the emergence of "the rise of the East and the decline of the West," especially the increased attention to this topic since the beginning of this year, some analyses suggest that the changes are related to the uncertainties surrounding US import tariff policies since Trump's administration.
【Anchor】Mr. Li, what do you believe are the reasons behind the changes leading to "the rise of the East and the decline of the West"? To what extent does the uncertainty in US tariff policy have a significant impact?
The rise of the East and the decline of the West is indeed related to import tariff policies, but it is not the primary factor. Import tariff policies do create disturbances in the process, as the uncertainties in US policies have become very pronounced. Conversely, the certainty surrounding China's policies stand out in comparison. Particularly, our government's work report has clearly set a 5% growth target and a 4% deficit target, supported by proactive fiscal policies and moderately loose monetary policies to stabilize the real estate and stock markets. Within this overarching policy framework, China's policy predictability contrasts sharply with growing uncertainties in the US.
【Anchor】Alright. Mr. Yu, how do you view the direct or indirect effects of import tariff policies on the phenomenon of "the rise of the East and the decline of the West"?
Before Trump took office, the Hong Kong stock market had already partially priced in the conflicts arising from US-China trade. In simple terms, the market had already reflected that fact. Therefore, the impact of Trump's tariffs, whether positive or negative, is relatively minor for the rise of the East. However, for the decline of the West, I think it is significant. Because of the fissures that have emerged in the trade relations between Trump and Western allies due to the tariff wars. Research from various academic institutions suggests that if tariffs on Canada or Mexico are truly implemented, it might lead to a regional recession in the Americas. This scenario was not priced into the market back in the fourth quarter of 2024, but it is now emerging. So, I believe it is an important factor for the decline of the West. Mainly, these trade policies, including increasing tariffs in various categories, ultimately have a detrimental impact on the US economy, and this impact may be far greater than expected. The market is gradually pricing in these risks.
【Anchor】Yes. Apart from external factors, we observe that the "rise of the East" is closely linked to the rise of Chinese technology stocks. What is your view on the role of the rise of Chinese technology stocks in this "rise of the East and decline of the West"?
The impact of technology on the rise of the East and the decline of the West is also very evident. As a major market economy, China is learning from technology, enhancing research and development breakthroughs, and uniquely combining technology with industrial innovation. The entire industrial chain is transitioning from low-end to mid-to-high-end, which is an unstoppable historical process. Whether it is Huawei's electric vehicles or the latest applications of models like DeepSeek or robotics, they demonstrate that the latecomer advantages are gradually strengthening. Thus, from a technological perspective, the rise of the East and the decline of the West is indeed a significant trend.
【Anchor】Yes. In the context of "the rise of the East and the decline of the West," we currently see that the capital market trends in Hong Kong are more aligned with the "rise" trend. As an international financial center backed by the motherland and connected to the world, what role should Hong Kong play amidst these changes between the "East" and the "West"?
First, I believe that Hong Kong should play a role in the global pricing of Chinese assets. This would allow for an elevation in the valuation of Chinese assets and facilitate upgraded financing channels, ensuring seamless cross-border capital flows. This is the first role. Secondly, Hong Kong should act as a connecting hub that builds links between China and the broader global economy in areas such as finance, legal frameworks, taxation, and talent mobility. This can create opportunities for economic and people-to-people exchanges. I think these are the main aspects of Hong Kong's role between the East and the West.
As for the challenges, I believe they stem from the traditional economic structure of Hong Kong. The first challenge is tariffs. As we know, increased tariffs will pose challenges to Hong Kong's or China's export and re-export trade. The second challenge is in the financial sector; as a financial center, Hong Kong needs to engage in financial exchanges with the US and other major economies, which are governed by certain rules. Changes or restrictions in these rules can have a significant impact on Hong Kong. The third challenge involves liquidity and competition for liquidity, mainly in the financial markets, including the stock and bond markets. The focus here is on how to attract more funds to invest in Chinese assets or facilitate investment and financing of Chinese assets in Hong Kong.
Finally, there's the challenge of attracting global talent to Hong Kong, whether in finance or technology. This is crucial for developing a better talent pool that can bolster the central economy and potentially address some of Hong Kong's structural economic issues, including the vacancy rates in commercial buildings.
【Anchor】Yes. Lastly, in light of the "rise of the East and the decline of the West," what advice do you have for investors?
For investors, in the context of the rise of the East and the decline of the West, it is crucial to focus on China's core premium assets. With the overarching trend and fortune being led by the rising East, the rise of China as a great power signifies that the ownership of China's core assets among domestic investors is shifting to competition among global investors. We are only at the beginning of this process.
The global perspective on China is transforming from viewing it as "non-investable" or subscribing to the "China collapse theory" to one that prioritizes "buying all Chinese assets." This transition is just beginning. Previously, there was an extreme under-allocation of investments in China, but this is now shifting towards standard allocation. More importantly, currently, only hedge funds are entering, while many allocation-focused funds are still lagging behind. In the future, a significant amount of such funds will increasingly emphasize the allocation of China's core assets, and this process is only just beginning. It is even possible that we will see a shift from under-allocation to standard or even over-allocation in the future; this process is already on its way.
【Anchor】For investors, Mr. Yu, how should they make investment decisions in the face of this "rise of the East and decline of the West" scenario?
I believe there are several aspects to consider. First, in the short term, it is important to go with the trend. We have observed that the current market environment, particularly in Hong Kong and A-shares, shows a comparative advantage. Therefore, aligning investments with this trend should be a major direction for allocations this year.
Second, when focusing on Chinese assets, we must balance our allocations according to our risk tolerance and investment goals. A portion of the investment could be in growth stocks, perhaps including those related to AI or large consumer markets, while simultaneously allocating some to high-yield dividend stocks. This provides a decent cash flow and a level of conservativeness for security.
Third, we should pay attention to national policies and related industry data to identify sectors that may be poised for recovery or turnaround opportunities.
Additionally, it is advisable to closely monitor company performance and valuations. Although the Hang Seng Tech Index (HSTECH) may currently have high valuations, within the Hang Seng Index, there are still undervalued companies that we should pay attention to. In the short term, while the valuation of tech stocks may have reached a plateau, we can look for investment opportunities in stocks within the Hang Seng Index that have relatively lower valuations.
Moreover, when investing in these related stocks, it is crucial to pay attention to stop-loss and take-profit levels. Finally, it is essential to have a medium-term asset allocation plan. This plan should not only cover Hong Kong stocks but also include global assets, such as US stocks, US dollar bonds, or corporate bonds denominated in US dollars, to create a balanced asset portfolio that ensures a steadier and more stable investment strategy.
【Anchor】OK, thank you. That's all for this episode. Remember to follow us on YouTube or download our APP. I'm Yunfei Zhang, thanks for watching, and see you next time.
Anchor: Laura Cheung | Edited: Kelly Yang, Laura Cheung | Translate: Kato Ip | Proofread: Chris Liu
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