Will Europe be crushed between the US and China?
The comment of the analyst Carlo Pelanda
The big US banks are expanding their business in China by signing joint venture agreements with local ones where the former are granted a majority stake.
In 2020, the five largest US banks (Citigroup, Goldman, JP Morgan, BofA and Morgan Stanley) increased their financial exposure to China by around 10% to nearly $ 80 billion. The new movement leads them towards the direct management of savings in a Chinese financial market that current estimates value around 50 trillion dollars.
Some analysts comment on this phenomenon as a sign that finance does not follow geopolitics, that is, the America-China conflict.
But the writer believes it is unlikely that the large US financial groups will take a position in China without consulting their government and that the Chinese one will grant them growing and privileged spaces without a precise strategy, incidentally in addition to the public motivation to want to modernize asset management.
There is something underneath. The feeling was already strong during the Trump administration: on the one hand it blocked China with language of war, on the other it showed the intention to do business with Beijing, for example the Phase 1 agreement whose confidential protocol perhaps contained the financial penetration agreement.
The Biden administration has systematized the position towards Beijing, defining the areas of containment, competition and cooperation. But these areas do not yet have a specific perimeter and it is understood that there is an ongoing negotiation: the scenario is open. However, there are already reasons for concern for the EU.
In general, the US mega-investment of $ 6 trillion points to "system superiority". In particular, the scale that US banks will be able to reach will not be achievable by European ones.
In summary, the European business environment, in the ten-year scenario, risks being third and distant from the US and Chinese ones and becoming possible prey to the American one. The writer has always preached the growing Euro-American integration, but also that a balanced convergence can only take place between two systems of equal strength. And, making quick calculations, the vaunted Ngeu loaded with 750 billion euros plus some related national projects, which bring the investment to about one billion, is certainly not enough to equalize the trend towards US "system superiority".
European governments should start thinking about it, as well as our own banking system.
Article published on milanofinanza.it
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/mondo/europa-cina-america/ on Sun, 06 Jun 2021 05:40:22 +0000.