Will India and China rise in the wake of a failing American empire?

[Acting Like Godot]

Mod note: split from Chinese mothers are superior?

Originally Posted by VinceG

. I mean, it really is night and day how much wealth we have as opposed to most immigrants' countries.

You don't. You only think you do.

The USA owes China about USD 900,000,000,000 as of Jan 2011. And a little less, to Japan.

I would have thought that by now, the financial crisis would have led more Americans to understand that their wealth is rather illusory, but apparently not.

[VinceG]

Originally Posted by Acting Like Godot

You don't. You only think you do.

The USA owes China about USD 900,000,000,000 as of Jan 2011. And a little less, to Japan.

I would have thought that by now, the financial crisis would have led more Americans to understand that their wealth is rather illusory, but apparently not.

Numbers on a ledger != wealth. In a country with real wealth, nobody starves. Let's see China pull that one off any time soon.

[Acting Like Godot]

Originally Posted by VinceG

In a country with real wealth, nobody starves.

Your social security is being funded by China and Japan (your two biggest creditors today, by far).

[jellybeanpimp]

Originally Posted by Acting Like Godot

Your social security is being funded by China and Japan (your two biggest creditors today, by far).

The United States is very new compared to China. For China to just be catching up says a lot.

[Acting Like Godot]

Originally Posted by jellybeanpimp

The United States is very new compared to China. For China to just be catching up says a lot.

It's the rise and fall of civilisations.

In the 18th century. China would have been one of the most advanced civilisations, if not THE most advanced civilisation, in the world. Fell apart in the 19th century though.

Similar thing for England. Once upon a time - would you believe it? - England was the world's most powerful nation. That was when the British Empire was the ruler over one quarter of the world's population. (They owned, among other things, what is now known as the USA. Also - India, Singapore, Hong Kong, Malaysia, Canada and various African countries).

I'm sure you watched at least one or two of the "Pirates of the Carribean" movies? In these movies, there is constant reference to a company, called the East India Company (which is busily taking over the oceans of the world). This is actually based on a real company, called the British East India Company, from the days of the British Empire. The company was, indeed, busily taking over the oceans of the world.

Next new superpower on the block was the USA. The cycle has run its course, that star is fading now. I think so, anyway.

Doesn't mean that the USA will suddenly become a slum overnight, of course not. It does mean that the USA is in for a protracted period of slow decline. Like the British empire, and the fall of Chinese dynasties before that.

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By the way I'm not from China. I have visited it only once in my life, as a tourist. I have no sentimental attachments to it.

I am, however, a very international financial investor and I will put my money wherever I think it has a good chance of making money. So I pay a lot of attention to data and info about long-term trends etc.

And looking at long-term trends, well, I wouldn't put money in the USA. It's pretty shaky, from that perspective. If you talk about individual companies, sure there are excellent ones - if you talk about a broad-based look, ummm, no, sorry, not the USA.
I'd rather go with Brazil, India, China, Australia, Korea, Singapore.

[jellybeanpimp]

Originally Posted by Acting Like Godot

It's the rise and fall of civilisations.

In the 18th century. China would have been one of the most advanced civilisations, if not THE most advanced civilisation, in the world. Fell apart in the 19th century though.

Similar thing for England. Once upon a time - would you believe it? - England was the world's powerful nation. That was when the British Empire was the ruler over one quarter of the world's population.

(They owned, among other things, what is now known as the USA. Not to mention India, Singapore, Hong Kong, Malaysia, Canada and various African countries).

Next new superpower on the block was the USA. The cycle has run its course, that star is fading now. I think so, anyway.

Doesn't mean that the USA will suddenly become a slum overnight, of course not. It does mean that the USA is in for a protracted period of slow decline. Like the British empire, and the fall of Chinese dynasties before that.

But if the USA falls, and the USA owes China something like 1.5 trillion dollars, it would logically follow that China's economic growth will be stunted if the USA does indeed fall into a period of slow decline. China needs the United States to prosper right now. And just because one surpasses the other in a race does not mean that one is slow and the other is fast.

[Michael Chui]

Originally Posted by Acting Like Godot

Next new superpower on the block was the USA. The cycle has run its course, that star is fading now. I think so, anyway.

Doesn't mean that the USA will suddenly become a slum overnight, of course not. It does mean that the USA is in for a protracted period of slow decline. Like the British empire, and the fall of Chinese dynasties before that.

Is this a theory of empire thing, or are you making this up whole cloth? Because I've yet to see a theory of empire that actually does a historical analysis convincingly. They all seem to be "hey look, it's a CURVE!" and made up purely so that they can put the United States at the top just before a nice gentle slide.

[Acting Like Godot]

Originally Posted by jellybeanpimp

But if the USA falls, and the USA owes China something like 1.5 trillion dollars, it would logically follow that China's economic growth will be stunted if the USA does indeed fall into a period of slow decline. China needs the United States to prosper right now. And just because one surpasses the other in a race does not mean that one is slow and the other is fast.

Correct.

China would have loved to start switching to the euro as a reserve currency, but the euro has its issues as well. And there is no other obvious alternative at the moment. The euro zone is a mess, except for Germany.

So this is not a zero-sum game. If everyone can prosper together, that would be nice.

The thing is - China can't solve America's problems either. So China must do whatever it can, to thrive, even as America declines. And every other country in the world must do its own best to thrive, as America declines.

Let's take for example, Brazil. For 80 years, Brazil's biggest trading partner had been the USA. That is because (1) Brazil and the USA *are* on the same continent, and (2) historically, the USA is a huge consumer.

But the US is declining. In 2009, China overtook the US as Brazil's biggest trading partner and they have been Brazil's biggest trading partner ever since. This means that for economic growth, Brazil now relies more on China than it does for the USA.

[Acting Like Godot]

Originally Posted by Michael Chui

Is this a theory of empire thing, or are you making this up whole cloth?

Do you know this term - BRIC? It is a term coined by the smartest bank (by far) in your own country, Goldman Sachs, back in 2001.

BRIC is now a very well-known acroynm among governments and hedge funds and investment banks. It is so well-known that many financial articles use this acronym without even bothering to state what it is.

Goldman's prediction was that by 2050, BRIC will overtake the combined wealth of what are currently the world's richest countries. Let me say that again -the prediction is that by 2050, BRIC will overtake the combined wealth of:

USA
Japan
Germany
France
Italy
UK
Canada

Goldman's original prediction, made in 2001, is turning out to be looking wrong. Based on current data, the latest predictions are that BRIC will overtake the G7 nations sooner than 2050.

BRIC is Brazil, Russia, India and China. These will be the leading economic powers of the world, in the future.

Now, in a direct comparison between the US and China, the current thinking is that China will overtake the US, as the world's largest economy, by 2016.
(Don't take my word for it, google and see for yourself). This is just a few years away.

China is already in the no. 2 spot. Japan used to be there, it has been overtaken.

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Because my country is one of the world's private banking hubs, and also because I happen to work in a bank, I come across a lot of information about where wealth is rapidly growing.

The US still has, by far, the most millionaires and billionaires.

But the BRIC countries still has, by far, the fastest rate of production of new millionaires and billionaires. And the rate isn't slowing down - it is getting faster and faster with every passing year.

According to Forbes, last year the world saw 214 new billionaires. 108 of them come from a BRIC country.

Five years ago, one out of every 10 of the world's billionaires come from a BRIC country. In 2011, one out of every four come from BRIC.

In other words, the BRIC percentage of the world's billionaires jumped by 2.5 times, in 5 years.

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[Acting Like Godot]

Originally Posted by jellybeanpimp

But if the USA falls, and the USA owes China something like 1.5 trillion dollars

Nah, not so much. Only 900 billion dollars.

[votoshka]

Originally Posted by Acting Like Godot

Let's take for example, Brazil. For 80 years, Brazil's biggest trading partner had been the USA. That is because (1) Brazil and the USA *are* on the same continent, and (2) historically, the USA is a huge consumer.

Actually they're not But that's beside the point (as they're close enough together lol).

But yes, as for the rest what you say makes perfect sense. When you start putting some of the most populous countries on earth together, and you put them against the US whose economy is in decline... it's obvious to see what's going to happen.

One wonders if anything can be done to counteract it?!

[Acting Like Godot]

Goldman Sachs is an investment bank. They only think about making money. When Goldman creates the concept of "BRIC", they aren't really thinking about which country is going to fight or beat the U.S.

All Goldman is interested to know is which countries offer the best investment prospects. The countries which offer the best investment prospects are the ones which are going to grow the most, over the long term.

And Goldman has identified Brazil, Russia, India and China. Out of these four, two are significantly more important than the other two. The two very important ones are China and India.

Now, if I were an American, what I would do is invest a significant chunk of my money in non-USD assets.

Traditionally, investors hold a lot more assets in their own local currency. Eg if you are living in the US, you would invest more in USD assets. This is to protect yourself against FX risk.

For Americans, I think that this doesn't hold true any more. The US dollar is set for a protracted decline, and so the easiest way for Americans to make money is to invest in non-USD assets, and just periodically cash out some of it and re-convert to USD, when they actually need the money.

[Michael Chui]

Originally Posted by Acting Like Godot

Do you know this term - BRIC?

Yeah. I've known about it for six years, during which I was under the impression that the term fell into disuse because most of those countries foundered for too long.

But what you're saying is that you're making up the superpower stuff and the necessary decline stuff. Cool.

[SnerpGoodWord]

US per capita GDP: about $47,000 per year
China per capita GDP: about $7,500 per year

That means China has caught up to where the US was in 1926. Which is good for them, but they're not going to be overtaking anything any time soon. Don't believe the hype.

Taiwan per capita GDP: about $35,000 per year
Hong Kong per capita GDP: $46,000 (and falling)

It's amazing how much better you do when you don't have murderous communists running your country The Chinese do great economically, just not in China.

[Michael Chui]

Originally Posted by SnerpGoodWord

It's amazing how much better you do when you don't have totalitarian communists running your country

Fixed that for you.

[JSB]

Originally Posted by SnerpGoodWord

It's amazing how much better you do when you don't have murderous communists running your country

Or 1.4 billion people among whom to distribute GDP. My guess is Chinese GDP per capita may never reach current GPD per capita of the US, but total Chinese GDP will far surpass total US GDP.

[SnerpGoodWord]

Originally Posted by Michael Chui

Fixed that for you.

The communists in question are plenty murderous.

[SnerpGoodWord]

Originally Posted by JSB

Or 1.4 billion people among whom to distribute GDP. My guess is Chinese GDP per capita may never reach current GPD per capita of the US, but total Chinese GDP will far surpass total US GDP.

That question is probably mostly a matter of demographics.

However, I don't think national GDP (or GDC for that matter) is a good economic metric. Per capita GDP/GDC is a much more interesting stat because it allows one to compare the successes and failures of various systems without the relative size of the countries tainting the results.

What those comparisons show is that mainland China has radically underperformed both the world as a whole, other ethnically Chinese populations, and Asia as a whole. The common thread in their repeated economic failures is China's horrible governance. Current propaganda aside, I see no reason to believe any of this will change any time soon.

[Acting Like Godot]

It depends on what you're interested to measure.

1. If you want to know which country is going to be a more domineering presence in the global economy, you do want to look at total GDP.

2. If you want to know which country's average citizen earns more, you want to look at GDP.

(You also want to adjust for purchasing power parity. As the cost of living in China is much, much lower than in the USA, you can live very comfortably in China for a fraction of the cost required for a comparable standard of living in the US).

3. Now, if you want to know where wealth is GROWING, you probably want to look at annual GDP growth.

[Acting Like Godot]

Originally Posted by SnerpGoodWord

It's amazing how much better you do when you don't have murderous communists running your country

Oh, the world has plenty of commentary like yours. Why they fall flat or at least become rather confused is because of the world's largest democracy.

(That's India, by the way. Not the U.S.A).

China and India are interesting counterpoints to each other; because of their marked differences and their marked similarities.

You say, for instance, that China is doing badly on a GDP per capita basis, and you attribute this to the political system. On the other hand, India on a GDP per capita basis is ALSO going to look pathetic next to the USA, and yet India is as democratic as the U.S. Meanwhile, BOTH communist China and democratic India have GDP growth rates that are MULTIPLES of the U.S. growth rate.

So your hypothesis gets busted.

If you just look and compare the three countries - the U.S., India and China - all you can logically say is that there is:

(1) no correlation between political system and economic growth;
(2) no correlation between political system and average citizen's earnings; and
(3) both India and China are growing much, much faster than the USA.

[Acting Like Godot]

Originally Posted by SnerpGoodWord

The communists in question are plenty murderous.

I just wanted to let you know that there are plenty of people in the world who think the same of the U.S.A., for various reasons such as the U.S. claiming that Saddam had weapons of mass destruction and then bombing Iraq to bits and killing lots of Iraqis because of that, when actually he didn't have any WMDs at all.

[Acting Like Godot]

Originally Posted by Michael Chui

But what you're saying is that you're making up the superpower stuff and the necessary decline stuff. Cool.

I don't know what you're disagreeing with, Michael.

Are you disagreeing that the USA has been a global superpower for many decades? Or are you disagreeing about the British Empire, or what? Seems a bit strange to me, but well, you're entitled to your view.

Or are you disagreeing that the USA is going to decline? Well, I've stated quite clearly that this is merely my view (although certainly not a very original view nowadays). I have, however, enough conviction on my view to put my money on it.

(I am very short on US equities and I refuse to touch any US government bond funds).

[Acting Like Godot]

Originally Posted by SnerpGoodWord

Taiwan per capita GDP: about $35,000 per year
Hong Kong per capita GDP: $46,000 (and falling)

It's amazing how much better you do when you don't have murderous communists running your country The Chinese do great economically, just not in China.

You DO know that:

(1) Taiwan is NOT part of the People's Republic of China; and

(2) Hong Kong IS part of the People's Republic of China

.... right? Would you like to, errrrr, explain your point again?

[Acting Like Godot]

Originally Posted by Michael Chui

Yeah. I've known about it for six years, during which I was under the impression that the term fell into disuse because most of those countries foundered for too long.

Actually I do think that Russia is floundering. I treat Russia and the USA similarly in my investment portfolio - I don't touch them. A quick snapshot for comparison of the various countries: http://en.wikipedia.org/wiki/List_of...e_(latest_year)

Last year, based on GDP growth, India and China were the 5th and 6th fastest growing economies in the world. That might not sound that impressive, but the top four countries - Qatar, Paraguay, Singapore & Taiwan - are too small to have any startling effect on the global economy. So among big economies, India and China were clearly the world's top performers. Both had slightly more than 10% growth.

(Singapore had 14 point something % and Taiwan had 10 point something % too).

Brazil grew by 7.49%, coming in 31st place out of 184 countries. Important to bear in mind that Brazil had in fact been trying to slow down its growth, to reduce inflation.

The laggard is the "R" in BRIC. It was in 93rd position, with a pathetic 3.95% growth

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Just for comparison though, the USA was 24 places below Russia, in 117th position (with 2.8% growth). Growing about 3.5 times slower than India and China.

[SnerpGoodWord]

Originally Posted by Acting Like Godot

You DO know that:

(1) Taiwan is NOT part of the People's Republic of China; and

(2) Hong Kong IS part of the People's Republic of China

.... right? Would you like to, errrrr, explain your point again?

You DO know that both developed economically outside communist influence, right? That's why their GDPs are 5-7 times higher than mainland China - that's the factor by which communism suppresses an economy. Now that China has Hong Kong back, it's GDP is dropping as their policies kill its economy.

[SnerpGoodWord]

Originally Posted by Acting Like Godot

It depends on what you're interested to measure.

1. If you want to know which country is going to be a more domineering presence in the global economy, you do want to look at total GDP.

No you don't. When a huge chunk of your GDP is subsistence farming and services to support the associated rural economy, that doesn't have much if any impact on the world stage. Roughly 40% of mainland Chinese work in agriculture. In the US it's well under 1%.

For historical reference, the US workforce fell below 40% farmers somewhere between the 1890 census and 1900 census. So that's another data point about where China is in terms of comparative economic development.

[Michael Chui]

Originally Posted by Acting Like Godot

I don't know what you're disagreeing with, Michael.

Are you disagreeing that the USA has been a global superpower for many decades? Or are you disagreeing about the British Empire, or what? Seems a bit strange to me, but well, you're entitled to your view.

Or are you disagreeing that the USA is going to decline? Well, I've stated quite clearly that this is merely my view (although certainly not a very original view nowadays). I have, however, enough conviction on my view to put my money on it.

(I am very short on US equities and I refuse to touch any US government bond funds).

I'm disagreeing with these statements:

"The cycle has run its course, that star is fading now."

"It does mean that the USA is in for a protracted period of slow decline. Like the British empire, and the fall of Chinese dynasties before that."

I don't think you know what you're talking about here. I certainly don't disagree that America is foundering, and there is no shortage of problems here. But I find it silly to struggle for analogies with other empires in order to explain its decline without actually addressing the basis for those analogies and spelling out the legitimacy of the claim.

By and large, the "US as Empire" claims come down to, "We don't like them," and on a good day, three or four points of tenuous similarity.

[Acting Like Godot]

Originally Posted by SnerpGoodWord

No you don't. When a huge chunk of your GDP is subsistence farming and services to support the associated rural economy, that doesn't have much if any impact on the world stage. Roughly 40% of mainland Chinese work in agriculture. In the US it's well under 1%.

Ah, good point.

However, subsistence farming doesn't count into GDP. This is true, whether you are in China or the USA. For example, if you grow tomatoes in your garden and your family eats them, this has no effect on GDP. It doesn't matter how many tomatoes you grow.

My point here being that subsistence farming doesn't factor into China's 10+ % GDP growth. The average 10% growth per year, every year over the past decade, is a reflection of other things.

As for 40% of mainland Chinese working in agriculture, well, assuming that your figure is correct, hmmm, that means there are about 800,000,000 Chinese in mainland China NOT working in agriculture.

Err, that's about 2.6 times the entire population of the USA, right?

[Acting Like Godot]

Originally Posted by SnerpGoodWord

So that's another data point about where China is in terms of comparative economic development.

Quite frankly, from my investor's point of view, it doesn't matter. Goldman Sachs probably wouldn't care either.

Let's look at this, firstly from the companies point of view.

- Apple makes iPads.
- Sunkist makes orange juice.
- Coca-Coca makes Coca-Cola.
- Toyota makes cars.

Really, we don't care. As long as it's a good, solid company, the earnings are growing, the product is viable, the share valuation is cheap or reasonable - it can be a good investment. Ipads or oranges - it doesn't matter.

From a country point of view, well let's say you invest via a broad-based country ETF. Again, you don't care whether the country, as a whole, sells iPads, blockbuster movies, soya beans, screwdrivers, suitcases, textiles, ships or coffee.

All you care about is - whether the country's economic performance is good; whether companies are making money; whether share valuations are cheap / reasonable. Stuff like that.

[Acting Like Godot]

Originally Posted by SnerpGoodWord

You DO know that both developed economically outside communist influence, right?

Ok, I want to share a few perspectives with you.

I think I sparked off a few sensitivities here. I guess I underestimated the pain I might have caused here, telling Americans - "Actually, I think your country is declining."

So now, this has become an "evil communist China vs good, democratic US" sort of debate. Or rather you would like to see it that way. Furthermore, you're getting so agitated that you're twisting facts and figures rather ... dramatically .... to win your side of the debate.

Just to get the personal stuff out of the way.

1. I am Chinese, but not from China.

2. China is as foreign a country to me, as the USA. I have visited both, but hey, I have visited a whole bunch of countries all over the world.

3. I am not interested in defending communism. As a political system, it's a dinosaur.

Having said that, I think that a few things should be made clear. Looking at your posts, I think you might have conflated several distinct, separate concepts quite badly. For example, I think you might have confused "democracy" with "capitalism" and equated communism with the opposite.

I think that capitalism is a key ingredient for wealth creation and economic growth. And China is very capitalist. It might surprise you to hear that a communist country could be capitalist - but that's China for you.

There are 43 million companies in China, and more than 90% are privately owned. The Chinese government has created a great number of Special Economic Zones (SEZs) - about 14 cities in total - where they can behave and operate in .... well, a very capitalistic manner. Meanwhile, Hong Kong, a SAR, not a SEZ, is essentially SEZ-like, in that businessmen and entrepreneurs there have as much freedom as their SEZ counterparts, to run their businesses.

The SEZes aren't exactly small little cities either. Guangzhou has a population of about 24 million, making it the 2nd largest urban area in the world (after Tokyo). Meanwhile, Shanghai has a population almost three times larger than New York. Shenzhen, population 14 million, is almost twice as large as London, and has attracted USD 30,000,000,000 of **foreign** investment.

This might shatter or somewhat change your impression of China. Your mental image of China might be something like this:




Actually, nowadays it looks more like this:



or this:



Anyway, a few interesting thoughts on capitalistic China. From your own favourite American media: Huffington Post & Time:

U.S. Support For 'Free Market' Capitalism Drops Below China, Brazil, Poll Finds

Why China Does Capitalism Better than the USA

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Finally, a small counterpoint to your argument that China's policy is stifling Hong Kong's economic freedom to do business and prosper. To put it simply, your claim just isn't borne out by proper studies.

You can, for instance, look up comparative studies on the ease of doing business, in different countries. Take a look:

(1) A study of 184 countries.

For the purposes of this study, Hong Kong is treated as separate from mainland China). And this study, done in 2010, ranks Hong Kong as the 2nd most business-friendly country in the world.

Note that as of 2010, Hong Kong has already been part of China for 13 years. After being part of China for 13 years, Hong Kong is the 2nd most business-friendly zone in the world - how does this gel with your theory?

It isn't anything new, either. This Wikipedia entry gives the "Ease of Doing Business" rankings (done by the World Bank) rankings for the past 3 years (2011, 2010, 2009). Hong Kong has occupied the 2nd spot for 3 years running.

In comparison, the USA was in 4th place for 2009 and 2010, and slipped slightly to 5th place for 2011. Of course, these are still excellent rankings (4th/5th place, out of 183 countries), and I do not (at all) mean to say that capitalist America is a bad place to do business - that would be absurd.

I only meant to demonstrate that Hong Kong is in the same league. Well, slightly better, but essentially in the same league, the top league for business-friendliness.