BlackRock: "The World's Biggest Risk Is Not Iran or Ukraine but US-China Conflict"

The world's largest asset management firm, BlackRock, identified the U.S.-China conflict as the biggest geopolitical risk factor, rather than the armed conflict between Israel and the Palestinian militant group Hamas or the invasion of Ukraine.

According to Bloomberg News on the 23rd (local time), BlackRock Investment Institute maintained the risk of strategic competition between the U.S. and China at the 'highest' level in its October Geopolitical Risk Report. It also rated the market attention score for the U.S.-China conflict at 1.5 points, which is twice the risk of major terrorist attacks.

It regarded the U.S.-China conflict as a greater risk factor to the global market than the Israel-Palestine conflict and Russia's invasion of Ukraine. The possibility of the Israel-Palestine conflict escalating into a fifth Middle East war or the deepened conflict between Russia and the North Atlantic Treaty Organization (NATO) after the Ukraine invasion was rated low at 0.37 points. Market attention to North Korea was similar to that of the Middle East war but was somewhat more reflected in asset prices.

Catherine Cress, who led the report's preparation, forecasted that "the strategic competition between the U.S. and China will be prolonged," adding, "Both sides want to seek stability in the relationship, but the thawing mood is precarious and can break at any time."

This is a completely opposite analysis amid discussions on whether to hold a U.S.-China summit at the Asia-Pacific Economic Cooperation (APEC) summit scheduled next month in San Francisco, U.S. The U.S.-China relationship, which reached its worst point after the U.S. shot down a Chinese reconnaissance balloon in February this year, has opened communication channels as Secretary of State Antony Blinken, Treasury Secretary Janet Yellen, and Commerce Secretary Gina Raimondo visited China consecutively from June to August.

[Image source=Reuters Yonhap News]

The report also focused on changes in the situation surrounding the Taiwan Strait and the impact of the presidential election of Taiwan's executive. It pointed out that geopolitical events that historically had short-term effects on markets and the economy have become structural risks today. It stated, "The U.S. is strengthening military and economic support for Taiwan," adding, "While military action is unlikely in the short term, the risk is increasing. The Taiwan presidential election in January next year will be a critical turning point."

Inside and outside Taiwan, there are forecasts that if Lai Ching-te, the pro-China opposition Democratic Progressive Party (DPP) candidate currently leading, is re-elected, tensions between the U.S. and China will escalate further. Accordingly, the recent large-scale investigation by Chinese authorities into Foxconn is seen as a move to prevent Foxconn founder Terry Gou from running in next year's presidential election. If he runs, the opposition vote will be split, giving the current ruling DPP an advantage in the election.

Gabriel Weildow, Managing Director of Teneo Holdings, a consulting firm based in New York, said, "Chairman Gou is pro-China and has continued various cooperations with China, and Foxconn has greatly contributed to putting China on the world’s factory map, so the news of this investigation is very shocking," adding, "The fact that Chairman Gou’s candidacy could act as a spoiler for the unification of pro-China opposition candidates likely upset Chinese authorities."

This content was produced with the assistance of AI translation services.