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Taiwan Crisis Perceived Nearer Risk
- Investors and multinational corporations increasingly see a Taiwan Strait crisis as a nearer risk, shifting from a distant concern to active discussion.
- While contingency planning is ongoing, few firms have yet made hard operational changes due to this risk.
Binary vs Incremental Risk Perspectives
- The risk approach to China varies between financial investors and real economy actors like MNCs, with the latter facing more binary risks tied to supply chain location.
- Supply chain decisions are costly and binary, contrasting with portfolio adjustments by investors that can be incremental and faster.
Trade Data Masks Supply Chain Risks
- Bilateral US-China trade data rising in dollar terms can mask underlying flat or declining volumes due to inflation and inventory stockpiling.
- Firms are hoarding inventory to hedge against supply chain disruptions, inflating trade statistics but reflecting risk concerns.