US-China Tensions Are Top Geopolitical Risk, BlackRock Says

(Bloomberg) -- The “strategic competition” between the US and China remains the top geopolitical risk facing markets worldwide, according to BlackRock Inc., which described the recent thaw in the relations of the world’s two biggest economies as “fragile.”

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Tensions between Washington and Beijing were labeled as a “high” risk in the BlackRock Investment Institute’s October geopolitical risk dashboard, with an attention score of 1.5, nearly doubled that of a possible major terrorist attack. In contrast, tallies for conflict escalation in the Middle East after the Hamas attacks on Israel and a war between Russia and the North Atlantic Treaty Organization were just -0.65 and 0.37.

“The U.S. and China have settled into a long-run, competitive posture,” geopolitical strategists led by Catherine Kress wrote in the report. “Both sides seek to stabilize the relationship, though any thaw would be fragile.” They specifically flagged China’s actions in the South China Sea and Beijing’s willingness to pressure Taiwan, saying that geopolitical events that historically had a short-lived market and economic impact are nowadays a structural risk.

“The US is providing increased military and economic support to Taiwan,” said the BlackRock strategists. “We do not see military action in the near term but see the risk increasing. An important milestone will be the Taiwan presidential elections in January 2024.”

Over the weekend, state-run Chinese media said that authorities are conducting tax audits and reviewing land use by Foxconn, whose billionaire founder Terry Gou is campaigning to become president of Taiwan.

“The crackdown is surprising because Gou has strong relationships with mainland leaders, and Foxconn has played an important role in establishing China as the world’s largest exporter and manufacturer, ” said Gabriel Wildau, managing director at advisory firm Teneo Holdings LLC in New York. “However, top leaders are probably unhappy that Gou is poised to play spoiler in Taiwan’s presidential campaign. The actions against Foxconn look like they’re intended to send a message to Gou that he should consider the broader political situation rather than indulging his own ambitions.”

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