E China PPP, Asian Infrastructure Investment Bank & Powerhouse Economics

Everyone knows somebody has to make something somewhere for stocks to be strong. Risk-on clearly comes from good news out of China. Of course, that could be offset by really bad news in the west, but so far that isn't happening. Stocks go up due to buybacks and success in investing in China's growth.

China, then, is crucial to the success of the USA stock market and world growth. That is one reason why a tariff deal may turn out to be tariff settlement light. We must understand that China makes a lot of things, churns out a lot of steel and cement, to survive as a viable nation. The alternative to putting Chinese men to work is chaos.

China PPP in the slowdown of the World Economy

John Rubino is out with a fascinating article regarding the slowdown in China and possible fake numbers in measuring GDP and economic activity there. John says this quoting from Ambrose Evans-Pritchard:

Japan’s manufacturing exports to China fell by 9.4 per cent in March (year on year). Singapore’s shipments dropped by 8.7 per cent to China, 22 per cent to Indonesia, and 27 per cent to Taiwan. Korea’s exports are down 8.2 per cent.

This looks like a slowdown and maybe on one level it is. But we have to apply PPP to this situation because we are talking about exports to China, the big kahuna. This could be a slowdown in purchasing by the wealthy Chinese. It could be a slowdown in middle class purchasing of imports as they substitute homegrown production in place of higher priced foreign goods. It is not certain that it is interfering that much with actual purchasing power of Chinese citizens. 

China still may be able to pull the world out of hard times, especially if we don't get in the way with stupid tariffs. A tariff war is the economic equivalent of wrist slitting. 

AIIG Funds Belt and Road 

This, of course, is why the Belt and Road (BRI) is so crucial to the continued success of an economic feat that has lifted 500 million people out of poverty. By expanding outside of China, that nation can build openings for more trade, as well as for keeping the base industries going. Empty cities are not the intelligent way forward. The BRI is the intelligent way forward.

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Disclosure: I have no financial interest in any companies or industries mentioned. I am not an investment counselor nor am I an attorney so my views are not to be considered investment ...

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Gary Anderson 1 year ago Author's comment

Update 2: If Donald Trump does not grasp the economic concept of purchasing power parity he will embarrass himself and our nation. We trail China in ppp and that is a crucial weakness facing the USA in a trade war with China.

Gary Anderson 1 year ago Author's comment

Update 1: purchasing power parity coupled with a manufacturing base 5 times larger than the USA means China can make what it needs. We cannot and therefore, we could lose a trade war.

Daniel Robertson 1 year ago Member's comment

Unfortunately, it's not a surprise that China is the strongest. America is still a power to be reckoned with, but they are no longer the world leader.

Gary Anderson 1 year ago Author's comment

We have lost real security, global respect, and traded it for military hardware.