No One Believes Beijing’s Latest Numbers… But They’re Not The Real Takeaway

Keith Fitz-Gerald Oct 21, 2015
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China reported its most recent GDP figures and 6.9% growth versus the officially targeted 7% everybody was expecting. Predictably, the world gasped:

                …China’s slowing down

                …China’s faking numbers to meet political pressure

                …China’s real growth is far less than reported

                …OMG!

Now the media’s going to spend the next 72 hours talking about that “miss” as if it’s a real number. But I want you to try to pay as little attention to the discussion as you can. It’s a waste of time and hazardous to your finances.

Instead, focus on the data I’m going to share with you today.

Why?

For the simple reason that China’s going to fuel the world’s best businesses for decades to come. And, in the process of doing so, create yet another round of millionaires.

I want you to be one of them.

Ignore China at Your Peril

Beating up on China has become a national sport for Western commentators. Sadly, very few have actually set foot in country, much less spent the decades needed to really get a handle on what’s happening there.

At this point, their arguments are as predictable as they are laughable. Critics charge that the country isn’t democratic, or point out China’s in debt up to its eyeballs. Their economy is slowing, they lie about their statistics, and their “growth” is being propped up to meet political objectives, goes the chorus.

As I pointed out on Varney & Co. Monday morning, all of these things make them exactly like us.

Washington openly manipulates every data stream dished out to the American public as gospel. There are seasonable adjustments, cost of living improvements, and constantly changing calculations.

The U.S. government, for example, has changed the way it calculates the Consumer Price Index (CPI) more than 20 times in the past 30 years. Labor stats are calculated six different ways by the Bureau of Labor Statistics. Gross Domestic Product is deflated or inflated at will depending on “methodological changes” over time. It’s revised incessantly.

The Fed is especially blatant about manipulating data to arrive at the results it wants. For example, Mike Bryan, a senior economist in the Atlanta Fed’s research department, recalled walking to the podium during a 1991 Fed meeting in Cleveland and being greeted with “now it’s time to see what Mike is going to throw out of the CPI this month” prior to a discussion on destabilizing influences that might conflict with the official story. Stephen Roach, who worked for the Fed in the 1970s and is now a Yale faculty member, alleges that the Fed missed the vicious inflationary cycle of the 1970s because it monkeyed around with the CPI by excluding nearly half the CPI data basket from calculations, according to The Economist.

Every nation on earth engages in some form of monetary manipulation. When all else fails, the powers that be will manipulate the data, and that’s as true here as it is in China.

By far though, my favorite “argument” is the notion that China cannot succeed because it’s not a democracy. That’s a very popular line of thinking that, sadly, is grounded in ignorance, not to mention populism.

The Chinese believe government is legitimate when it represents their higher interests. That stems from thousands of years of Confucian thinking and the concept of higher collective interests. Westerners, on the other hand, believe government is legitimate when citizens vote it into power and it reflects their individual interests.

Most westerners are surprised to learn that China’s actually had a democracy since 1911, when revolution ushered in a constitutional monarchy following a decade of institution-building under the last Manchu court. Like us, Chinese citizens vote for their leaders via a hierarchal system that runs all the way from the local villages to the President and National People’s Congress.

That said, China will almost never adopt our version of democracy. It doesn’t need to.

To be really blunt, nowhere except in our own history books is it written that a society has to be democratic to be capitalist. That’s a convenient construct we created and one China has zero interest in fulfilling. China has proven that it can be communist and capitalist at the same time.

Centralized leadership has been a part of China since 220 BCE when it was first unified by Qin Shi Huang, a point made repeatedly by Singapore’s legendary statesman, the late Lee Kuan Yew. Their Confucian heritage implies a high level of institutional trust, hierarchy and collectivism. Based loosely on Judeo-Christian ethics and grounded in the intellectual expansion of the Enlightenment, ours implies a wisdom of the masses and the pursuit of individual liberty even at the expense of the collective.

Given the state of our nation today, I could argue with a straight face as many Americans do that our “democracy” no longer exists. Instead, it’s deteriorated to become an oligarchy. Well-connected individuals now steer policy against the will of the majority or in their own interests.

That’s why you want to concentrate on the bigger picture.

Most Americans Haven’t Done the Math (But They Should)

Most Americans simply cannot grasp that China has emerged onto the world’s stage. The challenge is not only economic, but ideological in nature.

And it’s eye-opening:

  • China’s economy is 25 times bigger now than it was in 1990
  • China’s output was $10.3 trillion dollars last year… up from only $1.9 trillion a decade ago. (America is the only other country to ever hit $10 trillion, and reached this landmark in 2000 according to The Economist)
  • China created 13.2 million urban jobs last year, up from 12 million in 2007, when it managed a staggering 14.2% growth in GDP

Ergo, China ISN’T a failing economy.

Rather, it’s becoming much more balanced, and that’s what’s throwing the statistics everybody’s screaming about out of kilter.

For instance, Western analysts once used Chinese electric production and industrial output as key gauges of Chinese economic activity. That made sense because growing nations in the early stages of capitalism need one to produce the other.

However, industrial output and heavy industry drop as services expand and consumption increases. Manipulation or not, consumption is rising and accounted for 51.2% of China’s growth in 2014, a rise of 3% from 2013. It’s logical that heavy production becomes a smaller segment of a growing pie. A slowing China is not a cause for alarm but a sign that the nation continues to develop.

People ask me all the time how this is possible. The answer is deceptively simple.

China now has the world’s largest middle class and it’s more than 600 million people strong. There will be more than 1 billion by 2020.

It’s a numbers game.

China’s middle class will have consumed approximately $41 trillion of goods and services, with annual expenditures rising from only $2 trillion in 2010 to more than $6 trillion only four years from now, according to The Boston Consulting Group. The United States GDP was estimated to be $17.94 trillion in mid-2015, to put this in perspective.

Most westerners simply don’t want to imagine this is happening because it implies a complete loss of economic hegemony. People resist change because they fear the unknown or are unsettled by a loss of security that can be very real or simply imagined. Worst of all, though, China’s rise flies in the face of everything the West believes when it comes to politics, philosophy, and human rights.

Yet, none of these things changes reality.

That’s why, when it comes to investing, you have to take emotion out of the equation. We’ve talked about this many, many times, especially when it comes to China.

The Red Dragon has had the world’s largest GDP for 18 out of the past 20 centuries. They will again as Chinese consumers set their sights on the things we take for granted in the West including homes, cars, appliances, electronics, travel and education for their children.

The only decision you have to make is whether your money will be “at the table or on the menu.”

The Best Way to Play This Is to Invest “Because of China” Rather than in China

Crony capitalism and volatility are part of today’s Chinese experience just like they were during the early days of the United States economy. Periodic setbacks resembling the Financial Panic of 1873 or the Panic of 1907 are to be expected, for example.

Even so, the numbers, to paraphrase CNBC personality Jim Cramer, make anybody who’s been skeptical about China look like “total dopes.”

I agree.

Premium U.S. brands, in particular, continue to do exceptionally well in China and if you want to really get a handle on what’s happening there, that’s the metric you want to watch. Forget about the outdated industrial data everybody else thinks is important.

NIKE Inc. (NYSE:NKE), for example, has reported a 30% year over year increase in revenue in Greater China leading to nearly $886 million… despite currency headwinds, a slowdown and macro-economic issues the critics are screaming about. Earnings there jumped by 51% year over year to $330 million.

Starbucks Corp. (NasdaqGS:SBUX)’s China, Asia Pacific Segment is growing at 15% a year despite having a far smaller store footprint that Starbuck’s Americas unit and contributing only about 12% of total operating revenue worldwide. Q3 numbers came in at 11% up 7% from a year prior. The company’s Starbucks for Life promo campaign tapped into nearly a billion Chinese mobile users and countless Xpats familiar with the brand when they get there.

Chinese demand helped Apple Inc. (NasdaqGS:AAPL) launch a record setting 13 million iPhone 6s, with China accounting for 2.4 million units alone. CEO Tim Cook noted in an email posted by CNBC’s Carl Quintanilla last August that the company continues to experience “strong” growth there. China already accounts for nearly 30% of global sales and that figure may double in the next five years making China, not the US, Apple’s most important market.

There are literally dozens of US and European companies selling high margin items into China because a) the markets have too much potential to ignore and b) Chinese consumers have plenty of cash available.

This wouldn’t be happening if the economy was going to pot.

Until next time,

Keith

62 Responses to No One Believes Beijing’s Latest Numbers… But They’re Not The Real Takeaway

  1. Freddy says:

    I agree with you 1000% …and I wish the media would stick their combined head into the sands of the Dead Sea!!!

    These guys with their defeatist attitude should be banned from all events …….never tell the truth and inflate every news item they can get their ugly hands on.

  2. David Merrell says:

    Interesting thoughts. Does this imply that the ghost cities will begin to be filled, that they just reflect long-term planning.
    From a religious view; last weekend a retired brother and I were talking about revived interest in his leadership training from Korea and China. One thought I had was that under the divine governance during the millennium the greatest need the Chinese will have will be for leaders who recognize that true leadership understands the need to allow men to exercise their agency.
    True leadership skills need to be developed before the time comes that they will no longer be able to “manage” people from power and authority.

    • Keith says:

      Good evening David.

      The ghost cities are not what they’re cracked up to be. There’s a tax loophole that encourages their construction, a point that’s actually missed by most Westerners. Briefly, when a developer “buys” land in China, they have to begin building because the law requires that even if there is no demand and even if they are way beyond existing urbanization and even if there’s not a population base to support them.

      As for the religious component, that’s a very interesting thought. There’s a dawning awareness in China that self-actualization is important. It will be interesting to see how that develops…or re-emerges as the case may be.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

      • yngso says:

        So they can fill up with people as migration from the countyside continues?

      • Patricia says:

        Is it really relevant in what specific way they incentivize the construction of the cites? Your explanation is exactly what one would expect, unless one imagines slaves or the military doing the actual construction. Whoever builds them is incentivize to do so. Isn’t that obvious? You can’t build an entire empty city without the support of the government. It’s not a 500 unit housing development that ran out of money before they finished the fixtures.

        Am I missing something? Are you essentially implying that there’s no actual loss of capitol in the private sector, because it’s more than 100%.subsidized? And that there is no consequence on the overall economy. It reminds me of stories of the old Soviet Union, where they’d make the same number of shoes in every size, without accounting for the fact that most people fall within an average size, and very few people wear 7’s or 14’s. The state creating supply where there is no demand.

        I guest what I’m asking is, I expected you to say the ghost cities are not as many or as big as the propaganda claims, but instead you said, “It’s irrelevant because there was corporate welfare.” Do the cites exist? Are they big? Are there several? Will they ever be filled? Is it irrelevant? If so, why? Because there were tax breaks, doesn’t seem to say anything at all.

        I’m genuinely curious, and it’s entirely possible that your explanation just flew right over my head. Can you elaborate? Because at a glance it looks like a state run economy doing what a state run economy does. Ignore the fundamentals of supply and demand. The fact that the U.S. does the same or worse doesn’t make me feel any better. In fact it just makes me think, “So they are a sinking ship just like we are.” We’re a mess. The fact they make some of the same mistakes we do in monetary policy isn’t comforting at all,

        • Mike says:

          I’m rather curious to read the answers to these questions as well. Also curious if they were once such a super power what happened and why wouldn’t it happen again? How did the people ever survive the way they did before Starbucks or Nike:)

          If China is growing at such an incredible rate and volume who “loses” in the capitalist model?

          • ungsuh park says:

            The builders of Chinese ghost towns are regional governments who has rights to change the zoning classifications to profit from the land value rises. China’s governments, local or central, do not go bankrupt. Banks who financed the projects will have to suffer but the Party cannot tolerate the long ques of depositors who wish to withdraw their deposits with no success. Banks in china are controlled by the Party and Party suppplies liquidity to stop the bank failure. That’s why the banks are still opening doors everymorning. I told my wife to sell all her China’s bank stocks. Ken Park

    • M.J.van Veelen, MBA, BS says:

      Your contribution shows that you did not understand the article. Your comments are based under the faulty presumption that American values should be adopted by other countries. The article states (correctly) that other countries/cultures have different values without being inferior to the States.
      Your mistake is unfortunately the same as made by your government over the decades, causing must resentment.

      • yngso says:

        There are fundamentally only human values that need to be practiced – not just talked about – everywhere. All countries are at different stages of development, and everybody can’t be best at everything.

    • RPatR says:

      Funny as the religious element begins to materialize in China it is evaporating in America.

  3. R. J. says:

    “The Red Dragon has had the world’s largest GDP for 18 out of the past 20 centuries. ”

    Huh?

    • Keith says:

      Hi RJ.

      That’s a mind-blower isn’t it – centuries. To learn more, check out the pioneering work done by British economist Angus Maddison and the Maddison Project which has continued after his death in 2010.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

      • omooc says:

        I just joined Keith’s High Velocity Windfall program around 11 p.m. on Oct 22,2015. This essay is the very first one Keith wrote that I just read. Being from China originally, I was truly surprised at Keith’s understanding of China and her culture — indeed, his clarity, his honesty, and his fearless comparison of practices in China and those in U.S.A. are, may I say, truly outstanding, if not unique. In this group of comments, the initial commentator questions Keith’s statement that China was leading the world, in economic terms, for the last 18 out of 20 centuries. But Keith is absolutely right. Up until the Opium War (which began in 1839), China’s GDP had been as high as 39 percent of the world’s total.

        I came to the United States as a graduate student. After earning a PhD but unable to return, I became a member of the faculty. Still, in my last decade of a long teaching career, I joined the World Bank in Washington, and have been to China some 20 times. With each visit, I saw visible improvements, both economically and emotionally. Keith talked about a large (and growing) number of middle-class people in China; this is so very true. I read, from another source, that the wages in China grew by an average of 7% each year for the last decade or so; in comparison, those in USA remained stagnant during the same period. So, the growth of middle-class people in China is understandable.

        Keith, keep up the good work.

        omooc

  4. armando Lacsina says:

    Hi Keith, I have 2 Brazilian Companies that are losing, esp. Vale (Down 60%) and CBD (Down 38.48%), should I sell both of them?

    any views will appreciate.
    Thank You.
    Armando

    • Keith says:

      Hello Armando.

      Unfortunately, I know nothing about your personal circumstances so it would be terribly inappropriate for me to answer that. However, generally speaking, if any investment makes you uncomfortable either because you’re sitting on huge gains or mounting losses, I submit that it’s time reduce the amount of capital you have in each. Please see the following articles on Trailing Stops, Position Sizing and Taking Emotion Out of the Equation – they may help you with your decision.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

      • yngso says:

        The Brazilian economy and political situation are difficult right now…

      • jrj90620 says:

        I would say that if you are really uncomfortable,the stock is probably so low,it is a buy and you should keep.If you are really happy with a stock,it’s likely to have performed well and maybe a sell.

  5. CHRISTOPHER BOWEN says:

    Outstanding summary of the cultural/historical/social value systems at play in China and the West. Public and collective vs. Private and Individual is a shorthand version of the difference. After many visits to China, where I lived in 1948 in Qingdao, I love the people: generous, friendly, smiling even in adversity, enterprising at their best.
    Americans need to strengthen the ties that bind us, and encourage the thousands of Chinese getting out of China and headed to Canada and the United States.

    • Keith says:

      Dear Christopher,

      Thanks for writing. WOW..Qindao in 1948. I would love to speak with you sometime. I’ll bet that was an amazing experience on many levels. I, too, think engagement is the better approach given the stakes.

      Best regards and thanks for being a member of the Total Wealth Family, Keith 🙂

  6. Frank Dohn says:

    What is your opinion on BABA ?

    • Keith says:

      Hello Frank.

      I think BABA is one of the great untold stories of modern capitalism and will be a global player that ultimately stands head to head with its Western peers. The markets don’t yet recognize the potential, which, to my way of thinking, makes for an ideal entry point for any investor with the right perspective.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  7. Dave M says:

    Keith, No one is really talking about BioPharm opportunities in China. Wuxi is loaded with BioPharm & CMOs.

    Dave

    • Keith says:

      Excellent observation Dave.

      I’ve highlighted a few over the years but it’s very hard to get a handle on their financial situation. That will, of course, change as China’s markets and legal system catch up.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  8. yngso says:

    We can’t just look at somone else as having an inferior system or being “different” and therefore useless. That way nothing ever will get done. Growth in China is down to half of what it was at the peak, but at around 7% it’s still the envy of the world.

    • Keith says:

      Well said Yngso.

      I learned early on in my career that the world is bigger than my own garage. It sounds like you did, too.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

      • yngso says:

        If I remember correctly, you Keith have been living in Japan for a long time. There’s a HUGE amount of trade and stuff going on between China and Japan. Some of it is negative, but much more makes it a strong relationship between the two.
        It’s really refreshing to see that someone from the US isn’t obsessed about changing the world all the time, but willing to cooperate, recognizing and willing to work around “differences”.

  9. Carl Russo says:

    The real disenchantment on the ground is air and water quality. If there is one government failure that the populace lives with every day, this is it, OK let’s add traffic like LA on steroids. Unfortunately, air, water, and traffic have become a serious pacific rim problem in just about every country.

    I’t like the Tom Leher song about American cities, “don’t drink the water and don’t drink the air”. Maybe we should be investing in Chinese pollution control technology. The test will be the political will to fix these problems

    • Keith says:

      Hello Carl.

      Last time I looked, China had appropriated nearly $500 billion to various pollution control programs. If there’s a downfall in the works, I think it will be the lack of potable water that ultimately causes it.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  10. Tony Taylor says:

    Just returned from my first visit to China on business. I must say that our whole group was astounded by what we experienced. The old stereotypes do not apply. What we say was a highly advanced capitalist society that is on the move. Sure they have their problems, as do we, but my gosh the Chinese certainly should be respected as a formidable economy at the least!

    • Keith says:

      Hello Tony.

      Thanks for sharing! I am thrilled you had the opportunity to see China first hand. If every American understood what you now understand, the relationship would be very, very different and far more engaging. Please keep us posted about what you see on your next trip – the nation changes at a speed that is simply mind-blowing.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

    • alicia says:

      I agree with you. My husband and I were in a tour group, in 2008, same time when Obama was there for his first visit. I remember because they, the WH Press stayed in the same hotel, our group stayed. I almost jumped into one of the 5 busses that were waiting at the hotel’s parking lot. The 5 busses were labeled WH Press. Our bus is the 6th one at the end. Our tour group is about 38 persons. We were traveling to China, Beijing, Tienanmen Square, Guangzhou, Guillin, Shanghai, Hongkong, Macao, Yangtze river, the Great Wall, the whole shebang.
      On our way to the hotel from Macao, we stopped at a Kentucky Fried Chicken to eat lunch. Two young college boys sat with us, suspecting we are “travellers”. That is what they called us. They are there to do their homework. After introducing ourselves and talking about our China trip, so far. I told them I was amazed and completely made an about face of my pre-conceived impression of China. My husband and I thought they are a POOR, 3rd world country. Travel by rick-saw, or bicycles or on foot. Dilapidated homes, no drinkable water, pollution, beggars. I was WRONG.
      There are skyscrapers galore and modern buildings everywhere you look. These skyscrapers put New York to shame, or San Francisco, or Chicago. They laughed at us when we mentioned we have modern cities, like New York, Chicago, etc. They thought we were making a joke.
      There are all kinds of cars, motorcycles, busses, trains, MagLev trains, Ferry boats, bigger than a small cruise-ship. Their train stations are like a big shopping mall. There is no rick-saw, carried by a man. It is only for tourist, like us.
      The US is way behind China and this is in 2008, as far as INFRASTRUCTURE is concerned, the businesses, the people, very helpful and they all speak ENGLISH. this is the key, one language, to China’s success. They keep mandarin and other dialects at home or to themselves. Street names, directions are in Mandarin and English.
      Back to the college boys: They asked how our government helps the people. We said, the gov helps the people, by giving them free food, free housing, free schooling, free healthcare, free children’s aid, free college education, and free phones, in the hope that they would vote for them next election. Next question: What do they do to “deserve” such free stuff. We said, nothing. They stayed home and watch TV. Their jaws dropped. One of the boys said: Here, (in China) you don’t work, you don’t eat, you die. This is the simplest explanation of the difference of China economy and US economy. And that was the “phrase that stuck to our heads”, maybe forever.

  11. Dennis says:

    Perhaps , to the Chinese, GDP number reporting in all ready taking the military expenses and the gold purchases out of the equation? Perhaps?

    • Keith says:

      Morning Dennis.

      That’s an interesting concept and one worth exploring. During my travels and meetings there, I’ve met with a number of government officials so I’ll ask. I’m sure that figure is there if we dig.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  12. Thomas says:

    This is very good. I lost a bunch in the Chinese market downturn earlier this summer but also picked up some global companies invested there after dumping my Asian mutual funds and etf”s . Investing “Because oF the Chinese” engine driving profits and growth is a much better way of looking at that country. India is another economy to consider this way. The markets in these countries are more volatile, but by targeting industry leaders in these countries you will do much better

    • Keith says:

      Hello Thomas.

      You’re not alone. The drop caught a lot of people by surprise. However, it sounds like you’re making some smart moves that will pay off big time when the markets settle down – and probably before most people are prepared. Way to go!

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  13. Harvey says:

    Keith, its a fresh breathe of air to listen to someone who isn’t ‘influenced’ by OUR Govt. in what they can tell the public. Washington controls the media to skew what goes on here as well abroad to support their agendas. The Fed has QE’ed us to oblivion so we now have basically worthless Bonds/Dollars; except for the other Debtor Countries that are broke, too. So, now China has a clear path to becoming the World Leader again as you pointed out. And when China announces they now hold more Gold than us, they will have the momentum to become the new ‘Benchmark’ currency of the World.

    Please keep on this last issue for us, too. Gold has been the ‘go-to’ store of value for over 6,000 years. And, it looks like its about to be resurrected again. Mankind has to keep playing games with their Fiat currencies to make their insatiable appetite for spending and subsidies work. However, China isn’t biting and will prevail!!!

    Keep up the good work MMP!!!

    • Keith says:

      Good morning Harvey and thanks for the kind words.

      Your points are well taken, especially regarding the use of fiat currencies as a means of making endless spending “work.”

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  14. Paparas Mokis Ahabh says:

    Its time to follow China now with investment interests.

    • Keith says:

      Hello Paparas.

      I agree. The country is a juggernaut in ways that the West hasn’t yet begun to comprehend. Whether that’s a matter of ignorance or arrogance is perhaps the only point for debate.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  15. Fakhri says:

    Your comments are spot on i

    • Keith says:

      Good morning and thanks Fakhri.

      I try my best and appreciate the kind words.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  16. Fakhri says:

    I agree with your comments investors only have to have patience when it comes to investing

  17. Eric Micko says:

    Hi, Keith! I am quite glad to read your article.
    I wish that more than 0.001% of U.S.A. citizens
    could receive and understand this message.

    As a fourth-generation Californian of northern-
    European descent who lived in Shenzhen for 9 years —
    not as an “expat”, but living and working with
    Chinese folks and Chinese businesses, speaking,
    reading and writing fluent Mandarin Chinese —
    I can bear witness, hopefully to awaken others,
    to the simple truth of what you share about China.

    In Shenzhen, a product developer can get ANYTHING
    that’s needed. It’s like 1980’s silicon valley . . . X10.
    Living and working in Shenzhen also gave me
    an insider’s view into China’s long history.

    Your article shows that there’s no “rise” of China; only
    a return to its usual power, creativity and productivity.
    It’s unbelievable the extent to which U.S.A. people
    are being deluded by the oligarchy’s pet media!
    Furthermore, today, the Chinese tsunami is only
    in the “water receding from the shore” phase;
    we have yet to experience the wave itself.

    It is sad to see our mother country run by oligarchs
    and corporations with limited long-term perspective
    (and with a limited view of the U.S.A.’s best interests),
    while China is governed by folks with perspectives
    balanced between China’s long history and China’s
    next few centuries. Even corruption cannot totally
    dim these perspectives.

    Unless we can start including long-term perspective
    in our country’s governance, we will continue to lose
    ground to countries that are guided by such perspective.

    Meanwhile, many thanks for your guidance
    on pragmatic investments in the actual world.

    • Mike says:

      How does a population of Grandparents drive a juggernaut of growth? I recall a fabulous Cspan clip where the speaker pointed out China’s 3-2-1 “problem” and why they would never go to war… Essentially 3 Grandparents, 2 Parents, 1 child. That was 15 years ago.

      America has a beautiful few decades or more of young people moving through it’s demographics. Please reveal what you know about how the one child policy has affected Chinese demographics. To clarify my perspective I’m neutral about Chinese or US Ideology. Oh and mired in debt goes both ways.

      Even the lifting of the one child rule hasn’t spurred people to produce even ONE child. The cat is out of the bag. Kids are a PITA. Believe that with the Nike and Starbucks culture, a self centered no child culture will prevail. Not to mention keep up with the Joneses and all the other wonderful things consumption brings. Americas dream included Kids/house/car. How does a sky rise do for a making babies? As potential parents see/HEAR (through thin apartment walls) the stress it causes others to have children, the Chinese will continue to age. Just like Japan. Why wouldn’t China? Sheer numbers of mostly old people? Now thats voodoo economics.

      • Keith says:

        Hello Eric and Mike.

        You guys made my day with a great discussion and consideration of each other’s views. That’s exactly the kind of exchange that makes Total Wealth valuable for everyone.

        I actually agree with both of you. Years ago I wrote an article on the shifting center of economic gravity and, as part of that, pointed to the “window” created by working age populations since the 1500s. The United States is closing, China’s has about 15 years to go even as Japan’s closed a few years ago.

        I’ll dig it up for an update in a future column.

        Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  18. Charlie B says:

    Kieth,

    One of your best articles. It certainly clears the air.

    Thanks,

    Charlie B

    • Keith says:

      Thanks Charlie.

      It was fun to write and, of course, challenging to make compelling given how polarizing China can be. I am thrilled that it resonated with you.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  19. Kate says:

    Great article, Keith. Thank you for sharing these vital perceptions. I often watch CNBC Asia’s Street Signs (from my exercise bicycle) and enjoy your frequent appearances. Every night, before all else, the Street Signs host(s) focus on 3 major topics: (1) the U.S. economy, almost exclusively on the Fed’s next move (2) the Japanese economy, mostly evaluating the response to Japan’s money printing (3) China–all things China. Then they go on to talk about the general region. They rarely even mention Europe. It’s been an eye opener and an education–but I learned more in your article than a year of CNBC Asia!!

    It’s amazing to me that CNBC keeps the narrative as negative as they do, in spite of experts in the region who repeatedly come on and explain China’s commitment to consumer driven growth as opposed to export growth.

    Really appreciate your insights–and use them!!

    • Keith says:

      Good morning Kate.

      You made my day and thank you very much for the kind words. You live in a marvelous country and I love visiting Singapore every chance I get.

      The irony of experts never seeing the forest for the trees is extreme and a point well taken!

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  20. Dave says:

    Can China even be called Comunist anymore?

    • Keith says:

      Hello Dave.

      Now that’s an interesting point! I wonder if the classic definition fits at this point. Certainly Chinese communism is very different from the Soviet version that so many of us grew up with.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

      • jeff howerton says:

        To be honest, there has never been a true communist state…at least not according to Marxist ideologies. USSR during the red revolt post WW1 Lenin/Trotsky era was as close as it came until Lenin’s death. Once Stalin came to power, he mangled classic Marxist communism to his own grotesque creation of collectivization, industrialization, starvation, ethnic cleansing, and general intellectual de-enlightenment(mainly through murder of the educated classes). Mao followed Stalin’s metamorphically mangled form of “communism” as well. Marxism eventually called for a classless society…unfortunately had classless leaders to carry out his ideologies. I have a strong background in both capitalism and communism and have come to the conclusion that the biggest factor that both these ideologies doesn’t account for is corruption…been with us ever since adam took that first bite. In all the forms of government/economic systems that have arised , the ones like communism with a very, very small group of highly centralized leaders making all the decisions for the masses seem to be the most corrupt because there is no system of checks and balances. I guess what I am getting at is that there has never really been what Karl Marx envisioned as a true communist government, and the doctrine of ” each works to the extent of their abilities and takes only according to their needs” is a nice thought but closer to a pipedream. Unfortunately, communism economics only works on that theory. Which is why all socialist states have had to introduce some capitalist workings fused into their socialism to keep the motor from breaking down.

  21. Robbert says:

    If all these numbers all over the world are bogus, why is everybody talking about them as if the are correct and using them in commenting on our status and the expected status?
    Just “to say something?”.

    • Keith says:

      Good morning Robbert.

      To some degree, sadly, you are correct. There is a certain amount of airspace and humans love a good story even if it’s totally irrational, erroneous or otherwise off base. Sociologists have a field day with this and chalk it up to how the brain actually works.

      Scientists in Spain, for example, have found that a good story activates the part of our brain that would be used were we experiencing the story being related to us. So, for example, if we are listening to a story about investing, that part of the cortex lights up. A story about motorcycling, and another part of the brain kicks on.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  22. Will Koenig says:

    Although I generally agree with this article, I just wish that people would quit talking about Nike, Starbucks and Apple as if these are the foundation of the Chinese or anyone else’s economy. Displaying your shoes and hand phone while sipping coffee is a social issue that is done to make the person on display feel good.

    • Keith says:

      Hello Will.

      Your point is exceptionally well taken. Bling is everything in China and, sadly, here too…at least if we look at how people like the Kardashians spend their money and millions long to be “like them.”

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  23. Miranda says:

    Thank you, Keith!
    I am a US citizen, but came from China, Shanghai in 1996. I was helping a multinational company (very big one) to buy Chinese companies… I appreciate you to write such inspirit and true article!

    • Keith says:

      Thanks for the kind words Miranda.

      I’ll be that was a fascinating experience and I’d love to compare notes some time. I hope we have that opportunity in the future.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  24. Dave says:

    I always enjoy reading your analysis. The question I have been wanting to ask about China for some time is “what changed” what did they fix to return themselves to former glory? The Chinese, like the Arabs, were the height of civilization and technology millennia ago. Then it seemed that the Western world left them behind.

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