This week, we touch on a wide array of subjects, from economics to elections. First, we discuss the movement of global investment away from China. Then we move to an examination of the various threats to global economic growth, despite optimistic forecasts. We then examine the dynamics of Indonesia’s upcoming presidential election, which would have implications for the entire region. We end this week with an examination of American isolationism and how that could affect the war in Ukraine.

Global Investment Shifts Away from China

Wall Street Snubs China for India in a Historic Markets Shift

Srinivasan Sivabalan, Chiranjivi Chakraborty, and Subhadip Sircar, Bloomberg

For First Time in Two Decades, U.S. Buys More From Mexico Than China

Ana Swanson and Simon Romero, The New York Times

Are Chinese stocks a value trade or a value trap?

Robin Harding, Financial Times

A notable shift in global investment trends is underway, with a marked move away from China towards emerging options like India and Mexico. India has swiftly emerged as the primary investment destination for the next decade, drawing funds redirected from China’s sluggish economy and sparking a surge in investment activity. Consequently, India’s stock market has soared, briefly surpassing Hong Kong to claim the title of the world’s fourth-largest equity market. Meanwhile, the Hang Seng index in Hong Kong has traded at 1977 levels, intensifying skepticism among investors, with over 40% deeming Chinese equities as “uninvestable.” This highlights India’s ascent as an attractive long-term investment prospect with significant growth potential. Simultaneously, Mexico has outpaced China as a source of imports for the United States, marking a significant shift away from China and the diversification of economic relationships. This shift reflects consumer and business preferences for alternatives to China amidst escalating geopolitical tensions and a declining economic status.

Economic Threats Weaken Rosy Outlook for 2024

Nassim Taleb Says US Faces a ‘Death Spiral’ of Swelling Debt

Sonali Basak, Bloomberg

Don’t Count on a Soft Landing for the Global Economy 

Kenneth Rogoff, Project Syndicate

Bank of England policymaker warns of ‘downside risks’ for UK economy

Sam Fleming & Chris Giles, Financial Times

While experts cautiously paint a positive economic picture for 2024, underlying vulnerabilities suggest potential trouble ahead. While the US economy remains surprisingly resilient, concerns are rising due to a ballooning deficit and pressures are mounting on the government to control spending while interest rates remain high. The global economy faces trouble from falling demand from China, which is struggling with deflating and an unfolding property crisis, as well as lackluster growth expectations for Europe. The UK, in particular, is grappling with weak consumer spending and a potentially slowing economy under the weight of its high interest rates. Experts warn that, without a cut in interest rates soon, the UK may see damage done to the real economy from the fight against inflation. If these underlying issues remain unaddressed, the ‘soft landing’ in 2024 that many are hoping for may be an illusion.

Implications of Indonesia’s Elections

Indonesia’s growth strategy in focus ahead of presidential vote

Nana Shibata and Erwida Maulia, Nikkei Asia

U.S. and China loom in background of Indonesia’s presidential race

Virdika Rizky Utama, Nikkei Asia

The upcoming presidential election in Indonesia holds significant implications for the nation’s foreign policy and regional dynamics, potentially influencing economic relationships. Candidate Anies Baswedan is viewed as US-inclined due to his education in the United States while Prabowo Subianto has navigated complex relations with both the US and China. Notably, Ganjar Pranowo’s close ties with the Chinese Communist Party suggest a potential alignment with Beijing’s interests. While foreign policy might not be important for most voters, the candidates’ connections to the US and China could sway decision-making, with both superpowers closely watching the election for its impact on Southeast Asia’s economy and regional dynamics.

Alongside geopolitical considerations, the presidential race also revolves around ambitious economic growth targets set by candidates amidst Indonesia’s stagnant GDP growth around 5%. Prabowo emphasizes energy self-sufficiency and proposes measures like biodiesel and biogasoline production to achieve his lofty 8% growth target, while Ganjar focuses on digital economy and combating corruption to sustain 7% growth. Anies prioritizes labor-intensive industries and income disparity reduction to reach his target of 5.5% to 6.5% growth. However, economic uncertainties loom large, with challenges such as lower commodity prices and weak global demand casting doubt on reaching these goals. Amidst forecasts projecting around 4.5% GDP growth, the candidates’ economic strategies and their ability to navigate these challenges remain pivotal factors in Indonesia’s future trajectory.

How Isolationism Erodes Hegemony

American Greatness and Decline

Joseph S. Nye, Jr., Project Syndicate

Why NATO Needs Ukraine

Alina Polyakova & James Goldgeier, Foreign Affairs

Americans have a long history of worrying about losing their position in the geopolitical order. While in some ways the country is relatively in a weaker position today that it was after the second World War, given that it was the only major power unscathed by the conflict, the US boasts six essential advantages: oceanic buffers, energy self-sufficiency, dollar power, population growth, technological progress, and cultural influence. In fact, internal threats are a greater danger to the US losing its status. Populist leaders align themselves with foreign autocrats while promising to end US participation in key international organizations. As Joseph S. Nye, Jr. puts it, American hegemony is predicated on participation on the world stage, and the US has a vital part to play in places like Ukraine, where – if Ukraine wins – further Russian aggression could be prevented. They argue, since NATO has yet to give Ukraine a clear path to membership, the West (including Washington) is inadvertently tilting the war in Russia’s favor. If Russia wins, the Kremlin and other authoritarian regimes will only be emboldened to take territory by force. If the US doesn’t don its mantle as the leader of the free world, that world will become much more violent.