Welcome to my video interview with Scott Chan. Below are edited excerpts.

Scott Chan is the lead analyst for Real World Investing and The Complete Investor. I sat down with Scott to discuss China and a range of related geopolitical topics as they affect investors.

Scott Chan moved from China to the U.S. with his family at the age of 10. He earned undergraduate degrees from New York University followed by an MBA degree from the Zicklin School of Business at Baruch College. Scott reads and speaks fluent Mandarin and Cantonese Chinese. My questions are in bold.

China just finished hosting the Winter Olympics. How big a deal is that, to the country’s economy and prestige?

What’s most interesting to me about the Winter Olympics is China’s first official unveiling of the digital yuan to foreigners. You could exchange a foreign currency, like the U.S. dollar, at a kiosk for digital yuan, which is called eCNY. It is not a crypto because China bans cryptocurrencies and unlike crypto, eCNY is fully backed by the Chinese central bank.

One important feature about eCNY is that it does not use SWIFT, which is the bank-to-bank transaction settlement system in use globally today. Due to the dominance of the U.S. dollar in cross-border financial transactions, America has significant influence over the system. It’s how Washington can impose sanctions and freeze assets. Well, Washington won’t have that influence on transactions settled using the digital yuan.

Right now, the Chinese government is saying it only wants the digital yuan for retail use, but that’s what you would expect them to say. China probably wants the digital yuan for eventual use in transnational trade.

China has taken an authoritarian turn, against not just Taiwan and Hong Kong but also against mega-cap technology companies. How big a threat is Beijing’s crackdown to the tech sector?

Chinese stocks have always carried a stigma. One reason is doubt, fair or unfair, about the legitimacy of the accounting. Another reason is that the Chinese Communist Party can do whatever it wants. The crackdown on the tech sector limits the upside of these mega-cap Chinese tech companies, and that’s been reflected in their falling stock prices.

It is important to make the distinction that the crackdown in tech has been limited to consumer tech companies. China hasn’t touched tech sectors like semiconductors, so China knows what it’s doing in regard to prioritizing what’s important to its standing in the world.

We’re seeing Sino-Russo coziness unfold during the Ukraine crisis. What does this geopolitical realignment mean for investors?

As the saying goes, the enemy of my enemy is my friend. It’s in the interest of both countries to reduce American influence in that part of the world.

China and Russia both want to reduce the dollar’s influence. In fact, whereas trade between Russia and China used to be almost entirely settled in U.S. dollars, over the past six or seven years the situation has changed a lot. Nowadays, most bilateral trade between the two countries is settled in the euro, which is still a third-party currency.

Chances are China will want to see if eventually it can work the digital yuan into the relationship. Perhaps to increase confidence, China could at least partially back the eCNY with gold.

China’s debt woes, as epitomized by China Evergrande Group’s inability to make interest payment deadlines, have shaken global investors. What are the odds of this debt triggering global contagion?

We’ve all heard the comparison of China Evergrande Group (OTC: EGRNF) to Lehman. I don’t want to downplay the situation because there’s a lot of money at stake, but I don’t think the emergency will be a repeat of the Lehman collapse and the 2008 Financial Crisis.

Beijing could bail out Evergrande, but it looks like it wants to make an example of the property developer, so it’s letting the situation play out. Stricter debt regulation caused Evergrande to run out of money. Beijing was willing to tolerate short-term pain to stop the debt bubble from growing.

Inflation is a global threat, not just an American problem. What inflation hedges do you recommend now?

At The Complete Investor and Real World Investing, we have long been wary of the threat of inflation posed by resource scarcity. Real World Investing, in fact, was created to help investors deal with the very issue of resource scarcity.

There are two megatrends affecting every investor now. One is the continuing modernization of the developing world, with China playing a huge part. The other is the global transition to cleaner energy.

Both of these megatrends require tremendous amounts of natural resources. The pandemic exacerbated the situation, but inflationary forces were already in place. We have long recommended natural resource plays to hedge against inflation as well as for growth and there’s no reason to change now that commodity-led inflation is here. These plays include energy producers, miners, and precious metals ETFs.

Editor’s Note: In this interview, my colleague Scott Chan focused on the appeal of commodities and precious metals as investment plays that make sense under current conditions. For a high-quality gold play now, click here.

John Persinos is editorial director of Investing Daily.

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