China now has 37 companies in the Fortune 500 while the US has 140. That doesn’t sound so bad, but when you notice that 140 is the lowest total for the US since Fortune began its rankings in 1995, then it is a cause for concern. China also sold 6.1 million cars in the first half of 2009 while the US sold 4.8 million.
Most people think Communism when they think of China, but consider that China has no capital-gains tax and only a 15-20% corporate tax rate. Compare this to the US corporate tax rates of 35-40% and a capital-gains tax that will be rising to 20%. Our corporate tax rate is 15% higher than most of Europe. I don’t think it is a coincidence that China is moving up while becoming more of a free-market while the US is moving down while becoming more socialist. Do people not see the connection? There is a reason why people aren’t banking on the US stock market.
Year-to-date, Dow Jones stocks are off 7 percent, while China stocks are up 71 percent. The world index is up 4 percent. Emerging markets are up 25 percent.
Last 3 posts by Taylor
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I’m always hesitant to get too excited about China. I think people give it too much credit. In my opinion, it’s a case of the us vs them. In the 80s and 90s it was Japan. In the 60s and 70s it was Russia. There is always some emerging power that we are afraid is going to overtake the US. A lot talk about the BRIC countries.
One thing you have to remember is that the Chinese cannot own land. There are no private property rights there. I bet some of those fortune 500 companies are some of the banks in china. How strong can a bank really be if it cannot foreclose on someone? I am always hesitant to jump on the China bandwaggon. The stock market is up 70%, but it was always down a ton last year. To me it’s just another bubble on no true fundamental improvement. How can they be doing well when we are doing so poorly and their economy is based on exports to us?
Good points. I imagine much of the reason for China’s market being up is because people are much more optimistic about China’s market than the US. It seems to say that more people would rather put their money in China than in the US which is unfortunate.
I’ve heard time and time again that investors are paralyzed in the US markets because of our political climate. It truly is unfortunate if people find China to be more stable politically than the US.
I remember investors saying they were paralyzed just before the Nov 2008 election. Now, eight months later, they are still paralyzed? If that’s true, then it doesn’t reflect well on our Presidential choice. Our country is only as strong as its economy, and if businesses get punished by the government for being successful (i.e. corporate taxes), then they will go elsewhere.
I’m also skeptical about the stat about China’s market being up 70%. It’s easy to make large gains when you’re market was beaten down. Reminds of the show “the Biggest Loser.” The fattest people always lose the most weight in the beginning, whereas those are a little more fit in the beginning find it hard to shed even a few pounds.
You can’t deny that China is becoming more economically strong. (Whether the wealth goes to the party or the people is up for debate).
It’s just ironic that China is getting stronger as it becomes more capitalistic and that the US is moving away from capitalism and we as the US have taken action to more socialistic in efforts to strengthen our economy.