A renowned economist ranked among the world’s top forecasters, Christophe Barraud joined LIOR Global Partners in early October 2025. He now heads up Discretionary Management and Research, after nearly fifteen years in brokerage supporting hedge funds, banks, pension funds and family offices. Now involved in asset management, he continues to provide high-level macroeconomic analysis for both institutional investors and high net worth clients.
At LIOR, two businesses coexist: asset management and wealth management. I am responsible for discretionary management and all research. The goal is to launch one fund – possibly several – by the end of the first quarter or the beginning of the second quarter of 2026, depending on regulatory deadlines. On the research side, I am continuing to do exactly what I was doing before: in-depth analysis for a long-standing institutional clientele, while producing a more accessible version for private clients. I rely on seasoned professionals who handle all the administrative aspects of management, which allows me to focus on analysis and investment decisions. And I remain based in Monaco, which was an important factor.
The number one problem in China is household confidence, which has returned to the levels seen just after Covid. However, this confidence depends above all on real estate, as between 60% and 70% of Chinese households’ wealth is based on the value of their homes. Today, prices continue to fall, at a rate of around 5% on an annualised monthly basis, and we have even seen a recent acceleration. This negative wealth effect is automatically weighing on consumption.
Before we can hope to revive domestic demand, the property market must be stabilised. This will undoubtedly require a major plan around 2026, which may be announced before the Chinese New Year. We can expect further easing of purchase restrictions, additional cuts in mortgage rates – on both new and existing loans – and more attractive tax and budgetary measures.
Once this first step has been taken, Beijing will need to restore confidence by strengthening social protection, helping families and taking action on the cost of education. The idea is to bring China’s social structure closer to that of developed countries. Beijing has already increased consumer subsidies, particularly for electric vehicles and certain electronic products, and these measures could be extended. Given that consumption still accounts for only around 40% of China’s GDP, compared with more than 70% in the United States, there is considerable room for improvement. This is all the more important given that China also has to deal with a negative demographic shock.
I don’t think so. After an initial stabilisation plan in autumn 2024, which provided a few months’ respite, prices began to fall again. The bottom will not be reached until Beijing has implemented a much more comprehensive plan, combining support for developers, restructuring of the most fragile players, strong action on financing and credit, and probably direct or indirect absorption of part of the excess supply. Until this adjustment takes place, real estate will remain a powerful deflationary factor.
China’s goal is not limited to self-sufficiency. Historically, China has started by seeking autonomy, then sought to become a leader and export. This is the pattern it has followed in the areas of electric vehicles, mobile telephony and industrial equipment.
In AI, 2025 marks the emergence of Chinese models capable of competing with Western models. Some players, including Alibaba, have developed solutions whose performance is close to American standards. DeepSeek (a conversational AI agent) is still slightly behind, but the cost of processing queries is up to fifty times lower in some cases, which radically changes the market outlook in Asia.
At the same time, China is already ahead in several areas: robotics, drones, part of the cloud, high-performance computing and, of course, electric vehicles. The dynamic is very similar: reliable, competitive products intended for mass export.
China remains an importer of semiconductors, particularly advanced chips, but it is progressing rapidly and is aiming for a self-sufficiency rate of around 70% in the first instance. The authorities are pushing in this direction, as evidenced by official communications on the increase in local production, particularly at Huawei.
However, the real balance of power lies in rare earths. China controls at least 70% of their production and refining worldwide. These materials are essential to all the technologies of tomorrow. The recent episode in which Beijing hinted that it might restrict their exports just before the G7 summit was very instructive: the mere threat was enough to overshadow the summit. This shows that, when it comes to certain critical resources, China has the upper hand. It also highlights the limitations of Western strategies based on tariffs, which result in imported inflation and sometimes harm key sectors such as American agriculture.
The United States currently has three forms of dichotomy. First, a social dichotomy: the lowest social classes are suffering from limited wage growth, while job creation is concentrated in skilled sectors. AI threatens certain low-paying jobs, and default rates on credit cards and car loans are at their highest since 2011. Even when the Fed lowers interest rates, consumer credit becomes more expensive because the perceived risk increases.
There is also a sectoral dichotomy. Sectors related to AI, software and technology continue to drive growth, while manufacturing, construction, freight and heavy goods transport are in technical recession.
Finally, there is a geographical dichotomy: around 20 states are already in difficulty or experiencing a sharp slowdown. Aggregate US growth paints a picture of a strong economy, but it masks many internal weaknesses. In the event of a negative shock, the slowdown could be very rapid.
The central issue is profitability. The whole logic of investing in data centres is based on the idea that generative AI models will quickly be monetised on a large scale. However, this is no longer so obvious. Chinese competition on lower-cost models is calling revenue projections into question. Many data centres cannot be connected in time due to a lack of electrical capacity. The cost of electricity is rising and the imbalance between supply and demand could be very significant by 2030. At the same time, the regulatory framework could tighten, particularly after the Trump era, around environmental impact.
The major technology players can manage these investments on their balance sheets. But many smaller companies are announcing massive investment plans even though they are losing money every quarter. Some have extremely high debt ratios. The markets are already beginning to factor this in through widening credit spreads.
The scenario of a reversal could come from a sharp revision of AI-related revenue expectations, followed by a pause in data centre construction projects and then a downward revaluation of equities, with a negative wealth effect on the wealthiest households that support part of consumption.
Europe has placed itself in a weak position vis-à-vis the United States. This has calmed tensions in the short term but poses a problem for competitiveness in the long term. At the same time, China is redirecting part of its exports, particularly electric vehicles, to Europe. European customs duties of around 30% only slowed imports for two months: when the price differential is so large, this is not enough.
Two paths are emerging: either much higher tariffs, which are politically difficult to justify, or the gradual integration of Chinese manufacturers into European industry through factories and joint ventures. This is already beginning in Germany and Central Europe. Europe also remains limited by its structural dependence on Chinese rare earths, which reduces its ability to take more aggressive measures.
That is not my central scenario, but it is not a scenario that can be ruled out. A resolution of the Russian-Ukrainian conflict would immediately reduce agricultural prices, generating strong disinflationary pressure. On the other hand, the process would be slower for energy, as relations with Russia will remain strained for the foreseeable future.
Furthermore, the implementation of European spending plans could be slower than anticipated. Even defence spending, which is a priority, is taking time to materialise, especially as a significant proportion of it consists of imports, which reduces its macroeconomic impact. Finally, political risks – in France, the Netherlands and Austria – are reinforcing a climate of sluggish growth and persistent disinflationary pressures.
Europe is playing it by ear. It has real assets, particularly in hospitality and tourism, but that is not enough to constitute a model for sustainable growth. The comparison with China is telling: Beijing makes decisions with a 20- or 30-year horizon, while European countries are locked into much shorter electoral cycles. This difference in timeframe partly explains Europe’s relative decline in economic power, attractiveness and geopolitical influence over the last twenty years.
Contrary to the current discourse of several members of the Governing Council, I believe that the risks are skewed towards a further cut in key interest rates. Growth momentum in the eurozone, the risks of imported deflation and the possibility that inflation could fall below target in the medium term could lead the ECB to cut rates again between now and June 2026. This is far from the consensus view, but a more accommodative surprise is entirely possible if economic conditions deteriorate faster than expected or if public spending plans have less impact than anticipated.
