Tina Byles Williams is CEO and founder of FIS Group, a US asset manager. She speaks with Global Finance about US-China trade conflict, and the winners and losers in the new world order.
Global Finance: Are we headed for recession?
Tina Byles Williams: We are watching the course of the US dollar, oil prices and the growth of the US relative to the rest of the world. The challenge for investors is that there is so much idiosyncratic risk. China is clearly slowing down.
GF: Who wins and who loses as China slows?
Byles Williams: What is different in this slowdown is China’s floating currency. In prior periods, China’s strategy was demand stimulation. Now, quite a bit of the work can be done through depreciation of the renminbi. Exports have increased. Compare a strategy of insulating China through currency depreciation as opposed to demand stimulation: The former is somewhat destructive for those exporting into China; the latter is much more supportive of emerging markets.
GF: What are your thoughts on US-China trade?
Byles Williams: It is talk with a big stick, and arrival with a white flag. The problem is that the fissure is more than trade. It is strategic, with US hard-liners trying to revise the global integration model between the US and China. Who wins: the hard-liners focused on China as a strategic rival, or the business community? On the Chinese side, they are happy to give concessions for breathing room to continue their economic course.
GF: What are CEOs thinking about in terms of the trade wars?
Byles Williams: If the current level of integration with China is reduced, how does that impact my business and where else do I locate my supply chain? Strip away the rhetoric: A trade war is not a trade war; it is cyber-espionage; it is technology transfers. There is a military component. Think of China’s demand for semiconductors. Artificial intelligence; open-source coding: Are they vulnerable as China attempts to gain US technology?
GF: What are some impacts of China’s global investment push?
Byles Williams: China has been slowly gathering its regional network of economic relationships. I come from Jamaica, where the highway system, which was terrible, has been rebuilt by the Chinese. The result alters perceptions, including those of farmers. There is a subtle change in the sense of allegiance. There is clearly an interest to build an alternative hegemony.
GF: As an investor, what markets have appeal?
Byles Williams: While India is perpetually expensive as a market, we are strategically bullish. In Thailand, it turns out the military junta is pretty good at managing the economy. On the other hand, Korea will be challenged by China’s slowdown—though corporate reform there is meaningful. We have been long Russia for quite a while, despite Russia’s tough geopolitics. The management of the central bank has been excellent.
GF: How do you view the impact of rising populism?
Byles Williams: One thing populism leads to is inflation. It is about restricting the free flow of goods and putting in place policies that will support the populist leaders. Most defined-contribution retirement plans are invested in target-date funds, with asset-allocation models that move from stocks to bonds based on underlying assumptions about inflation. With high inflation and low growth, those models will be trashed. What happens to trillions of dollars in target-date and target-risk funds? They get hammered.