It was a pleasure to welcome Louis Gave, the Founding Partner and CEO of Gavekal, back to the Alpha Exchange. Our discussion centers on what he describes as one of the most consequential and underappreciated macro developments today: the mispricing—and now the policy shift—of the Chinese renminbi. Louis is quite bullish on China. Louis argues that for much of the past decade, China has acted as a powerful deflationary force on the global economy. In response to US trade restrictions, Chinese policymakers redirected domestic savings away from real estate and toward industrial capacity. This dual dynamic—collapsing real-estate activity alongside surging industrial investment—produced a deflationary impulse that many underestimated. A central feature of this adjustment was a deliberately undervalued currency. Despite large trade surpluses, the renminbi remained weak even as inflation diverged sharply between China and the United States. Louise describes this as one of the clearest examples of a “wrong price” in global markets, particularly when measured against purchasing-power indicators such as housing, transportation, and services. The discussion highlights a notable inflection point: the renminbi has recently begun to strengthen, signaling a shift in policy stance. According to Louis, this change has important implications for global asset prices. A strengthening currency in China alters incentives for capital deployment, challenges the appeal of holding US dollar cash, and reinforces broader reflationary trends already visible across commodities, yield curves, and financial assets. I hope you enjoy this episode of the Alpha Exchange, my conversation with Louis Gave.
It was a pleasure to welcome Louis Gave, the Founding Partner and CEO of Gavekal, back to the Alpha Exchange. Our discussion centers on what he describes as one of the most consequential and underappreciated macro developments today: the mispricing—and now the policy shift—of the Chinese renminbi. Louis is quite bullish on China.
Louis argues that for much of the past decade, China has acted as a powerful deflationary force on the global economy. In response to US trade restrictions, Chinese policymakers redirected domestic savings away from real estate and toward industrial capacity. This dual dynamic—collapsing real-estate activity alongside surging industrial investment—produced a deflationary impulse that many underestimated.
A central feature of this adjustment was a deliberately undervalued currency. Despite large trade surpluses, the renminbi remained weak even as inflation diverged sharply between China and the United States. Louise describes this as one of the clearest examples of a “wrong price” in global markets, particularly when measured against purchasing-power indicators such as housing, transportation, and services.
The discussion highlights a notable inflection point: the renminbi has recently begun to strengthen, signaling a shift in policy stance. According to Louis, this change has important implications for global asset prices. A strengthening currency in China alters incentives for capital deployment, challenges the appeal of holding US dollar cash, and reinforces broader reflationary trends already visible across commodities, yield curves, and financial assets.
I hope you enjoy this episode of the Alpha Exchange, my conversation with Louis Gave.