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China Ascendent: The "technological space race" that will define this century
key takeaways.
The global economy remains in expansion despite risks surrounding conflict in the Middle East, with resilient labour markets and monetary policy supporting continued growth.
Energy markets are the key transmission channel for the current geopolitical shock, meaning the economic outlook will depend largely on whether disruptions to oil supply remain contained.
The US dollar and American consumer continue to anchor the global financial system, sustaining US financial dominance and attracting global capital.
Strategic rivalry between the United States and China is driving a new wave of investment, particularly in artificial intelligence and advanced technologies.
China’s rapid technological and industrial rise is reshaping global competition; investors and policymakers are navigating an increasingly complex economic landscape.
“Recently in Davos, Mark Carney spoke about a ‘moment of rupture’,” said Frédéric Rochat, Managing Partner of Lombard Odier Group, as he opened the latest edition of Rethink Perspectives in London, a series of events designed to examine the deeper forces behind the headlines shaping the global economy and markets.
Today’s environment, Frédéric Rochat noted, is marked by “an increased sense of uncertainty and volatility,” underscored by the recent outbreak of a new Middle East conflict – a reminder of how quickly geopolitical risks can intensify.
Against this backdrop, Frédéric Rochat reaffirmed Lombard Odier’s mission to help its clients rethink the world around them, setting the scene for an evening to “pause, take a step back, and seek a long-term view, a different angle.”
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The evening’s discussion brought together the perspectives of Samy Chaar, Partner and Chief Economist at Lombard Odier, who outlined our global macroeconomic and investment outlook, and James Kynge, Senior Research Fellow for China at Chatham House, who examined China’s role in the emerging geopolitical and technological order.
Despite a turbulent start to the year, Samy Chaar explained that Lombard Odier’s base case remains one of continued global expansion, with the firm choosing to remain invested rather than reduce exposure, with a central scenario of a conflict of relatively short duration in the Middle East.
Monetary policy is another reason for cautious optimism. While major market corrections are typically preceded by rising interest rates, Samy Chaar noted that central banks’ current easing cycle is an important offset to global risks.
Labour markets remain a key indicator of economic health. Whereas rising unemployment would signal a weakening expansion, Samy Chaar pointed out that, across major regions from the US to Europe and Asia, there are “no red flags” in job markets that point to an imminent recession.
Energy – the critical channel for geopolitical risk
The most immediate risk stems from the growing conflict in the Middle East. And, according to Samy Chaar, the key risk transmission channel to the global economy is in this case energy. Everything depends on the duration of the conflict and its impact on oil supply, particularly the Strait of Hormuz, through which roughly 20% of global oil flows. “Economic expansion cannot endure a closure or disruption of Hormuz lasting months or quarters,” he warned.
That said, he emphasised that Lombard Odier’s base case is that the conflict will be measured in weeks rather than months, limiting the impact on energy markets. In this scenario, our economic modelling of modest oil price rises in the order of an additional USD 10 per barrel would not be enough to derail the current expansion.
Our base case assumes the conflict will be measured in weeks rather than months, limiting the impact on energy markets
The American consumer remains the global economy’s centre of gravity
Samy Chaar also pushed back against the idea that the global financial system is rapidly moving away from the US dollar. Much of the recent discussion around “de-dollarisation”, he argued, overlooks the fact that the dollar started from a position of unusual strength versus other major currencies. Therefore, the recent adjustment represents a normalisation rather than a structural shift.
More fundamentally, the structure of the global economy continues to reinforce US financial dominance. While the world contains many producers, global demand remains concentrated in the American consumer. And corporate profitability – particularly among large US technology companies – further strengthens this dynamic by attracting global capital.
Competition, capex, and the technology boom
Technology sits at the centre of the current investment cycle. Rejecting comparisons with the dot-com bubble, Samy Chaar argued that today’s technology rally is supported by strong profits rather than speculation, with share price gains supported by robust earnings growth.
He also pointed to strategic competition between the United States and China as a powerful driver of investment. “Competition leads to capex. Capex leads to demand. Demand leads to profits,” he explained. Both countries feel strategically vulnerable in different domains, from rare earths and energy to computing power and advanced chips. That mutual insecurity is likely to prolong the race for technological leadership – and with it, the investment cycle supporting global growth.
Competition leads to capex. Capex leads to demand. Demand leads to profits
Policy support helps cushion global risks
Beyond geopolitical developments and technological competition, Samy Chaar also highlighted the role of meaningful fiscal support across major economies in supporting the global economy. While the Middle East conflict remains a source of uncertainty, and tariffs will continue to constrain growth, supportive monetary and fiscal policies across major economies will reduce the risk that today’s pressures trigger a broader economic downturn.
China’s technological ascent is reshaping global competition
James Kynge, Senior Research Fellow for China at Chatham House and former Financial Times China editor, argued that while geopolitical tensions may currently dominate headlines, the more consequential shift is structural: China’s emergence as a technological power. “Chinese technology … will be here for decades to come,” he said, suggesting that the scale and pace of innovation in China could reshape the global competitive landscape.
Evidence of this shift is mounting. According to the Australian Strategic Policy Institute, China now leads in 66 of 74 critical technologies, while the US leads in only eight. Chinese companies also file far more patents than their American counterparts , and the country produces around six million STEM graduates each year – more than the G7 combined. With China expected to contribute roughly a quarter of global GDP growth this year, its technology firms also benefit from a vast domestic market in which to scale their innovations.
A key driver of this momentum is China’s industrial ecosystem, where supply chains are so dense that in some areas innovators can source virtually any component within a day. This manufacturing capability, James Kynge argued, has become “one of the greatest single points of technological … power in the world today,” enabling Chinese firms to produce goods faster, cheaper, and often at higher quality.
By 2030, China could account for nearly half of global industrial production, up from just 6% at the start of the century
The result is a rapid move up the value chain. China is increasingly shaping industries from electric vehicles to advanced computing and artificial intelligence. In semiconductors – where the US still leads – Chinese firms are developing alternative approaches, such as clustering large numbers of chips to boost computing performance. In AI more broadly, China benefits from lower energy costs, abundant technical talent and rapid deployment of new applications across the economy.
At the same time, this transformation is unfolding against a backdrop of geopolitical and economic headwinds. Trade restrictions and technological competition with the United States remain intense, while domestic demand constraints and tariffs are creating additional pressures.
Yet, James Kynge suggested the broader trajectory created by China’s technological ascendency remains clear: “Chinese technology – either the thing itself or the disruptions it will cause to some of our biggest companies in the West – are already a part of our economic futures.” By 2030, China could account for nearly half of global industrial production, up from just 6% at the start of the century.
For investors and policymakers alike, the implication is a world in which China increasingly shapes supply chains, technology standards, and competitive dynamics – rewriting the rules of global economic competition in the decades ahead.
Short-term turbulence, long-term transformation
These conversations highlighted two powerful forces reshaping the world: short-term geopolitical shocks and longer-term technological transformation. In the near term, energy markets remain the key transmission channel for geopolitical risk.
Markets ultimately respond to fundamentals – earnings, capital flows, and policy support.
Over the longer horizon, technological competition – particularly around AI – is becoming the defining strategic battleground. China is rapidly expanding its industrial capacity and supply chains in its ascendency as a technological superpower. Meanwhile, the United States retains crucial structural advantages, from capital markets to innovation and corporate profitability.
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