Blain’s Morning Porridge August 25^th, 2026 – What follows the end of the American Age? China? Or India?

“Financial Gravity is shifting East – as will investment.”

One rule of finance is “follow the money”. The ructions and rising doubts on the sustainability of the US Treasury Market and dollar in the evolving post-US era economy means it may be time for investment transition strategies – where will the future lie? What aspects of US and other Western Democracies will thrive, and how much more investible will China and, perhaps, India become? What are the risks?

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Key Takeaways:

• The West is no longer the only game in town. Concerns over the sustainability of Western debt, economic growth, political stability, America First transactionalism, and “financialisation” have eroded confidence.
• The unravelling of NATO and western division has accelerated decline – the West is no longer a cohesive economic block – and is less economically and militarily formidable than it was.
• China’s economy has evolved swiftly and leaves the state command and control economy look like a viable alternative to the West.
• China is not self-sufficient. There are still areas the West can maintain comparative advantage to trade from. The West is still “richer” in GDP capita terms.
• Europe faces a choice – pragmatic reciprocal engagement with China may be better than trying to deal with unstable populist politics in the USA. But that will further strengthen China’s strategic aim of splitting the Western Democracies.
• Longer-term, India’s demographics may prove a second option for Europe – both seek growth and markets. Perhaps a new European/Indian trade alliance could become a new trading block?

Headlines on the front page of the Thunderer of London this morning is the news the Rausing family – billionaire inventors of the tetra Pak – have taken $1 bln out the US stock market. According to investment banks servicing the hyper-wealthy, they ain’t the only family money who’ve lost confidence in the Trump administration and are concerned about the sustainability of the US markets. UBS says two thirds of the family offices it covers expect confidence in the dollar as the global reserve currency to deteriorate through the year.

I didn’t plan this deliberately, but over the last couple of weeks I’ve written a series of Morning Porridges that string together my depressingly negative theses around the weakness of the West: “Crisis Week for US Markets”, “Should we be worrying about US bonds”, “Instability and Polarised Western Politics”, “Trump and the end of the American Era” and how “AI Driven markets and liquidity may part company”. (If you are of a nervous disposition (or voted for Trump and now have buyer’s remorse), don’t read them while holding a sharp bladed instrument…)

The succession of notes describe aspects of the erosion of confidence in the foundations of Western economies – burgeoning debt, aging infrastructure, overregulation, bureaucracy, failing politics, and declining economies. They lay out the rising uncertainty about what may follow. Critically, they explain how the strength of the West was its cohesion as an aligned economic block – which Trump has now unravelled.

Yet, the bulk of investment advice that tumbles into my in-box every day is all about why I should continue to invest in the West. There is precious little consideration about how the current unravel should be a signal to diversify into the broader global markets.

Let me be clear. I don’t expect the Western Economies to vanish in puff of sudden logic – but they are no longer the only game in town. There will still be great investment opportunities, but on top of them will be a sense of crisis – around rising social tensions and wealth inequality fuelling polarised populist politics, and how declining political standards and corruption are becoming almost endemic across populists’ politics – further eroding Western Capitalism. The more divided the western economies become, the more vulnerable they become to future geopolitical challenges. As the mood and sentiment turns bleaker, you can guarantee that makes the market less investible.

I haven’t written much about what comes next – which increasingly looks to be around China’s emergence as the dominant global economic power. Shocking but it’s not an unexpected development. Ever since the doors of the WTO were opened to it in 2001 – China’s future domination became a possibility, a likelihood and is now nailed on. Every 120 years or so the 2K cycle predicts a turnover in the global economic and military hegemon – often accompanied by unrest and conflict… as we are seeing today.

It took the USA about 60 years to advance from disgruntled former colony to becoming the global industrial powerhouse by the late 1800s. Uniquely it did so as a hodgepodge immigrant nation – attracting the hungry, the keen to get rich, willing to take risks, poorer classes from across Europe. Their success in the land of opportunity was incredible, but it took America a further 60 years to understand, almost by default, it had become the Arsenal of Democracy by 1940, the most powerful, most productive nation on the planet. If only Trump understood Economic History as well as he understands building gaudy towers…

Although the best-known industrialist/entrepreneurs in the US today are the Tech founders like Altman, Musk, Bezos, and Zuckerburg, today much of the US economy is run by a generic class of extremely powerful CEOs schooled in MBAs, the dark arts of Financialisation, the Power of Capital Markets, and Cost Accountancy – all as prescribed by school of Jack Welch. But the incredible stock market valuations of US firms aren’t a reflection of management successes and returns, but how much inflated stock prices have created wealth amongst that class of glorified corporate bureaucrats. Sadly, US market valuations oft mistake avarice and greed for success.

In contrast… China’s economic miracle has advanced over a mere 25-years. It has risen with unity of purpose from candidate member of the WTO through manufacturer of everything to leading economy by moving swiftly up the financial food chain. After exporting deflation around the world (enabling the QE era to skip the threat of massive inflation), now it competes directly in every single aspect of the Global Economy – dominating top-end manufacturing areas like renewable power, EVs and consumer tech. They have done so with a nod to capitalism and human greed, but with precious little reference to the other precepts of The Wealth of Nations. That includes global trade – where they seek dominance rather than comparative advantage.

China’s economy, financial markets and unprecedented modern infrastructure rollout are essentially state planned and financed. As the property crises, and overbuilding, show, it’s not been free of mistakes. But capital generally flows to where the government directs – new factories, new industries to support the aims and ambitions of the Chinese Communist Party, which is broadly to maintain stability and remain in power by keeping the people happy with the Iron Rice Bowl concept of jobs and prosperity in return for the CCP running everything. That was the core of the Deng Xiaoping reforms that enabled capitalism with Chinese characteristics. If freed up the natural trading propensities of the people and secured the Party in power.

To an extent it has worked. China now competes head-to-head across the key competitive sectors of the global economy, and it’s thus far managed to dodge some of the mature economic costs of Western Democracies – there is little spent on Chinese health services, and provision for old age is not a state concern – despite its demographic challenges. Hence the Chinese economy is one of massive retail savings, (held against future life-cycle costs) into government banks which then allocate investment. It’s utterly unlike the West – where welfare costs dominate spending.

But it’s a myth that China is now a self-sufficient, manufacturing behemoth that imports nothing, yet dominates every aspect of the global markets through its exports. It still doesn’t have a functional civilian aviation sector – hence they buy planes from Airbus and Boing. It is still consuming western MedTec at the behest of wealthy Chinese seeking and willing to pay for the best treatments, and it still imports significant amounts of Western precision engineering and high spec components – including chips.

The West can’t ignore the fact the bulk of the wealthy emerging middle classes are now to be found in South-East Asia. That is where demand lies. That means finding ways to do business with China and the rest of the region is critical. The problem is the Chinese have built an export led powerhouse that can sell the West everything it will ever need – including AI – but resents buying anything back.

In recent years China’s success has accelerated, encouraged by the break-up of the traditional Western Economic Alliance which had coalesced as a by-product of NATO. While Europe is unlikely to ever share defence with China – who are perceived as running the Axis of Autocracy (Iran, Russia and North Korea) – the secret to rebuilding growth in Europe is likely to be about finding a new way to work and trade with China.

However, the population of the Western democratic block (the USA, Europe, Canada, Japan, Korea and Australasia) is around 1.2 billion people, not far off the size of China at 1.4 billion. Purchasing Power Parity GDP per capita of the Western Alliance at $75k is more than double China at $32K. The West still leads – but maybe not for long. If you watched any of the footage from the World Robot Olympics currently underway in Beijing – you’d realise Elon Musk has no chance of capturing 50% of the global robot market with his still unready Optimus droids.

Both the West and China face the demographic problems of aging workforces. A clue to the future may be India – often dismissed in the West as chronically corrupt and bureaucratic – which benefits from a vast pool of impoverished young workers among its 1.5 billion citizens looking at education as their route to success. Indian PPP GDP is only $13k, but its average age is 29 compared to 40 plus across China, Europe and the USA. (China’s problem is more acute as a consequence of one-child policies that has dramatically skewed the population structure.) China may slow on the costs of caring for an increasingly elderly population while India still has the opportunity to plan.

Interesting question – should Europe now be engaging more with India to ensure its access to its rising Middle classes? Europe may be perceived as middle ground between America (where Trump is well-liked but Indian’s dislike his tariffs) and China – which is generally disliked.  Britain is the former colonial power but contains a massive Indian diaspora that is increasingly influential in UK politics and business, and who could form the basis of a future trade alliance.

All issues to think about… especially in terms of how to invest in a global economy in transition.

Out of time, and back to the day job..

Bill Blain

Author of the Morning Porridge
CEO Windshift Capital
Advisor – Spitfire Strategic Capital

Meanwhile, don’t forget about my new book: The Battle for Hamble

You can read a review on the Society of Professional Economist’s website here.