The founder and CEO of one of the world’s largest multi-strategy hedge funds, Citadel’s Ken Griffin, says the refusal of European allies to align with U.S. interests on their 5G infrastructure buildout is a strong tell that the continent is drifting closer toward an ascendant China.

Speaking at a gathering of the Economic Club of New York on Thursday, Griffin commented on news that the U.K. has apparently agreed to give China’s Huawei a part in its 5G expansion. The decision of Boris Johnson’s government was in direct contravention of U.S. preferences to block Huawei from accessing Europe’s 5G buildout.

After the Trump Administration officially blacklisted Huawei in May 2019 on spying and national security concerns, Griffin noted that the move was not met with the support of the country’s traditional European allies.

“They have left us at the altar,” he said.

Griffin characterized the U.S. blacklisting of Huawei as the “shot across the bow” causing China to move resolutely toward the elimination of all dependencies on the United States. This position has not wavered with the recent passage of a Phase 1 trade deal with the U.S.

The country’s rapid consolidation of technological capabilities—Griffin noted that China already graduates more engineers every year than the U.S. does—is quickly creating a pan-Asian “sphere of association” that he thinks will eventually prove irresistible to vital regional nodes of the global technology supply chain, such Taiwan and South Korea.

Momentary calm

While China’s fundamental distrust and disavowal of all U.S. dependencies remains, Griffin said the “momentary calming” of trade tensions between the economic superpowers had been helpful to investors.

That lull has proved short-lived following the rapid spread of the coronavirus within China and elsewhere, a development that Citadel’s head described as the most “concrete” threat facing global markets in the short term.

“Where the global supply chain had been severed due to tariffs, supply chains have now been re-severed [due to coronavirus] because you can’t ship goods and services across borders,” he said.

Griffin gave plaudits to China for appreciating the challenge that coronavirus poses to the world, and expressed hope that the Trump Administration would “take the high road” in acknowledging that China has been resolute in its response.

(i.e Not Private Equity)

He said that despite mounting global risks—particularly what he sees as a looming and under-appreciated threat of worldwide sovereign debt levels and widespread unpreparedness for a sudden inflationary environment—Citadel is still focused on fundamentals-based investment in “every liquidly traded asset class.”


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