The Bull Case for China: The Best Opportunity Right Now? | Louis Gave
5/4/202645 min
Wilfred Frost is joined by Louis Gave, the founding partner and CEO of Gavekal, one of the world’s leading independent research firms. With a focus on the shifting geopolitical landscape, Gave outlines why traditional investment assumptions – from the safety of US Treasuries to the dominance of US tech & defence stocks – are being fundamentally upended, and why China is screamingly cheap.
The Middle East & The Inflationary "Air Pocket": Louis analyzes the ongoing conflict in the Middle East, noting that even a diplomatic resolution will leave a two-month "air pocket" in global supply chains. He argues that the resulting inflationary shock is definitely coming, and while it might be priced into commodities it isn’t priced into equities and bonds.
The US-China Reset: Amidst these dark clouds, Gave identifies a potential silver lining: the economic pressure of inflation may force a "positive reset" in US-China relations. He suggests that both nations are now "condemned to get along" to avoid simultaneous inflationary shocks. He also wonders whether it might force Europe to finally adopt sensible energy policies.
The Death of the "Capital-Light" Model: Louis offers a provocative take on the US market and the AI boom. He explains how the world’s most successful "platform companies" (like Microsoft and Amazon) are shifting from capital-light models to massive capital intensity, questioning if their 35x earnings valuations remain justified.
The Bull Case for China: Contrary to popular sentiment, Gave argues that China is structurally undervalued. “China has the lowest cost of capital, the lowest cost labour, the lowest cost of electricity, and has the world's cheapest currency and it's not even close. And that makes for a very powerful combination.” He also thinks they are the economy best prepared for the Iran War.
The Changing Face of Warfare: Louis explains his bearish stance on traditional defense stocks, arguing that the age of the "$275 million fighter jet" is being replaced by the age of the "$50,000 drone". He compares the current defense industry giants to IBM in the era of the personal computer.
Sovereign Vulnerabilities: A look at why the bond markets in the UK, France, and the US are uniquely vulnerable due to their reliance on "the kindness of strangers" (foreign investors) rather than domestic savings.
Finally he reflects on his overriding investment advice for listeners. "The first thing you have to know as an investor is to know yourself... making sure to not put yourself in the situation where you're going to make the wrong decisions."
Recorded 29th April 2026
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First 90 secondsLouis Gave· Guest0:00
China comes into this crisis, I think, better prepared than pretty much anybody out there, mostly through luck. China today has more oil in storage than the rest of the world combined. It has more natural gas in storage than the rest of Asia combined. It has more fertilizer in storage than the rest of the world combined. The reason China has all this is because eight years ago, the US told China, "No more semiconductors." And China thought, "Oh my God, they can block us from this. They can block us from anything. We better store up on everything." Look, if you're looking for places in the world that have, uh, deep, deep vulnerabilities on their bond markets, uh, there, there's a few countries that stand out. What always matters is the percentage of bonds owned by foreigners, and today there's three countries that stand out. Uh, one is yours, the UK, and yes, bond yields are going up there. The other is mine, France, and the third is the United States. Uh, these are the three countries that essentially depend on the kindness of strangers to keep the lights on. Now, when I look at China today, what I find is the country today that has the lowest cost of capital, the lowest cost of labor, the lowest cost of electricity, and has the world's cheapest currency and it's not even close, and that makes for a very powerful combination.
Wilfred Frost· Host1:17
Welcome to the Master Investor Podcast with me, Wilfred Frost, where we celebrate and learn from the success of the greatest investors, business leaders, and politicians in the world, giving