Is China the future?
Wherever you look, China is in the news. Last night’s tragedy on the Yangtze River is just the latest example. But China seems to always be on the business, politics, and op-ed pages too. Concerned about pollution? China has an environmental crisis at hand. Geopolitics? China is constructing a pair of artificial islands in order to claim deep-sea mineral rights. Whether it’s green energy, infrastructure, or education, Americans are continually reminded that China is beating us at something. It feels like we’re back at school, nagged by a “tiger-parent” to emulate to some overachieving classmate. “Why can’t you get A’s—run faster—practice the piano—build high-speed rail—host the Olympics?”
China is impossible to ignore. With 1/6th of the world’s population and 6% of the globe’s landmass, it’s certain to have a huge impact in any arena. New York Times columnist Tom Friedman famously wished that America could be “China for a day,” so that we could enact a series of environmental reforms, bypassing the gridlock in Washington. He was later accused of having “China-envy.”
China is so large and diverse that something, somewhere in that country is either excelling or falling apart. Want a techno future? You can buy a latte in Beijing on your cell phone—if it still has a charge after one of the almost-daily power failures. If you like central planning, it looks like China’s government is key to its economic progress. If you favor free markets, it’s only because Deng Xiaoping opened China’s markets to outside competition.
China seems to be a slate onto which many westerners project their own hopes and fears. In many ways, it’s reminiscent of late-19th century America: undergoing a technological and demographic revolution, but also politically corrupt, with immense economic and monetary challenges.
Investors can’t ignore China. They’re less than 4% of the global market, but 13% of the world’s economy. There’s tremendous opportunity for growth. Just remember—any developing market will have huge ups and downs. China’s potential comes with its own special risks.
Douglas R. Tengdin, CFA
Chief Investment Officer
Leave a comment if you have any questions—I read them all!