September 2023 Newsletter


China is big, its land area is only 2% less than the U.S. It has a large population of approximately 1.4 billion. It was the most populous country; sometime this year it is predicted that India will surpass it in total population. China’s GDP for 2022 was 18 trillion vs 23 trillion in the U.S. China at some point will probably have a larger GDP number than the U.S.

China’s GDP in the year 2000 was 1.211 trillion. This enormous growth has been built on China’s manufacturing prowess. This is amazing growth, and it has come at a huge environmental cost. Currently, China produces 33% of the worlds CO2 emissions. Here in the U.S., for every 1 billion tons we decrease our CO2 emissions, China’s has gone up 5 billion over the last few years. China is the world’s biggest automobile market and has the largest concentration of electric car manufacturing in the world. They produce 77% of the world’s batteries.

China has 21 nuclear power plants under construction. Here in the U.S., the two at plant Vogel are the only ones newly started or starting. China produces 80% of the world’s solar panels. China just surpassed Europe as the world’s biggest wind turbine producer.

You would think that with all the production of batteries, nuclear, solar panels and wind turbines China would not continue to lead the world in CO2 emissions. First, this manufacturing is dirty. Second, China’s per capita electric usage is about 50% of what we use in the U.S. Their standard of living is growing so they are catching up with our electricity use and demand for more electricity is growing fast. So much so that they are permitting 2 new coal plants a week on top of solar, wind, and nuclear just to keep up. Most likely they will hold the top spot in CO2 emissions well into mid-century. If you add India’s aspirations into the mix you can see why reducing CO2 emission worldwide is so hard. Eventually we will have to find ways to get rid of CO2 from the air in meaningful ways.

With all this growth, China has political aspirations to go along with their growth. They may well be the single biggest threat to our way of life. We will have to fight hard and hopefully, peacefully to maintain our freedoms. I hope my grandkids do not get sucked down by some dystopian future dictatorship. China was supposed to be more democratic as their economy and standard of living has risen. Just the opposite has happened. The Chinese communist party controls everything there. Modern technology has helped them in their quest to control the populist. They have cameras everywhere. They can tell when you cross the street. We have that here too; I hope our laws can protect our freedoms from surveillance tech.

The Wall Street Journal recently did a big article titled “China’s 40– Year Boom Is Over Raising Fears of Extended Slump”. The premise is that China has supercharged its economy on the back of building, roads, factories, and skyscrapers. It has made its economy grow based on an export manufacturing model which worked for a while. Now it is trying to navigate into a consumer-based economy, like we have here.  Our economy is more of a balance between manufacturing, service, and basically more consumer spending on everything. Private investment is down, and exports are going in the wrong direction. Providences which direct where, what and when to spend have little choice but to keep building and borrowing. As we all know, that usually does not end well. Remember 2008 when real estate died here?

A key matrix in all of this is per capita income. China’s reached $12,850 which is just below what the World Bank says is a high-income country. As a comparison, Japan is $42,440 and the U.S. is about $76,400.

China’s corporate average return on assets has gone down each year since 2017. Along with this: China’s productivity growth as well as the working age population are going down as well.  As long as Xi, along with the rest of the powers continue to disdain Western-style material wealth, things might not get better for them anytime soon. 38% of China’s GDP is based on consumers, compared to where we are at 68%. We kind of have the opposite problem and our government is currently spending multibillions trying to prop up manufacturing.

I do not put much faith in some of these long-term predictions as to where, what, and when for other countries. 30 years ago, Japan was supposed to rule the world by now.

 Thanks, Andy McClung CFP TM

Wall Street Journal  Wei Stella  Yifan Xie;;  

2023 Market Results

S&P 500                  +16.3%

NASDAQ Composite   +32.5%

Dow Industrials           +3.9%

Russell 2000                 +6.4%

World ACWI                 +12.3%

Source Wall Street Journal 09/07/23  

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