A heightened demand for emerging markets coincides with persistent tensions between the world's two largest economies — fuelled by a mix of economic, geopolitical and ideological factors — making frequent international news headlines.
"The US-China rivalry carries considerable implications for global markets. While uncertainties and challenges abound, opportunities emerge, particularly in the vibrant economies of emerging markets," says deVere Group CEO and founder Nigel Green.
"Our consultants worldwide have noted a marked uptick in interest from international investors seeking diversification, growth potential and lessened exposure to geopolitical tension.
"The economic aspect of the rivalry is crucial. China's ascension as a global economic force, coupled with its pursuit of state-subsidized industrial policies, intellectual property issues and market access restrictions, has stirred tensions with the United States.
"The US criticises China for unfair trade practices, intellectual property theft and asymmetrical market access," he says.
Geopolitical ambitions and tech competition fuel rivalry
Geopolitical ambitions contribute to the growing rivalry as well. China's mounting assertiveness in the South China Sea, its Belt and Road Initiative aiming to augment its global influence through infrastructure projects and its military modernisation have sparked concern among US policymakers.
Technological competition is a significant aspect of the rivalry with both nations seeking dominance in emergent technologies such as 5G, artificial intelligence, quantum computing and advanced manufacturing.
Green notes, "The US has raised concerns over China's strategic tech acquisitions, intellectual property theft and compulsory technology transfer, which has led to initiatives like export controls, investment restrictions and increased scrutiny of Chinese tech firms."
National security considerations are instrumental in this rivalry, as the US perceives China's military advancements, cyber espionage activities and potential threats to its Asia-Pacific allies and partners as challenges to its strategic interests.
Green suggests that the appeal of emerging markets for international investors amid the US-China rivalry lies in diversification. “Investors look to these economies as a way to reduce reliance on the performance of the US and Chinese markets and to diversify risk across a wider range of regions and industries.”
Moreover, the substantial growth potential of emerging markets — attributable to expanding populations, a burgeoning middle class and increased urbanisation — presents investment opportunities in sectors such as technology, infrastructure, healthcare and renewable energy.
Green also highlights the interest of global investors in ‘non-aligned’ economies. "As the US-China rivalry escalates, non-aligned states offer a relative safe haven, sheltered from the direct impact of the tensions. Frontier markets, with stable political environments and lesser exposure to global power struggles, present investors with a measure of stability and reduced risk."
Members of the Association of Southeast Asian Nations (ASEAN) such as Indonesia, Malaysia, Thailand and Vietnam are often regarded as non-aligned or neutral in the US-China rivalry. Certain Middle Eastern countries such as Saudi Arabia, the United Arab Emirates and Qatar, and African nations including Nigeria, Kenya and Ethiopia, along with Central and Eastern European countries like Poland, Hungary and the Czech Republic, also fall into this category.
"Our experience reveals a growing trend among investors towards geopolitical hedging. These dynamic economies provide pathways to navigate the shifting global landscape and tap into potential rewards amid the ongoing and intensifying rivalry," Green adds.