It just keeps rolling along. "China Inc." keeps beating it's own trade records. It posted a trade surplus of $24.97 billion for August, up from $18.8 billion a year earlier, the customs administration said today, according to CNBC. That's not all, China just passed Canada as our number one trading partner, which although not unexpected, is just another example of the export steam roller that shows no signs of slowing down. All this despite numerous product safety recalls.
We are buying Chinese products at an ever increasing rate. It should also be noted that they are buying our goods and services at an ever increasing rate too. The problem is that they are getting the better end of the deal for now and the gap between imports and exports is increasing. When I wrote Stop blaming China - partners win, whiners lose, I addressed some of these issues, and readers added many more. Some categorized the situation as a Chinese trade war but I take exception to this. I think we are facing very strong Chinese competition and the question is are we prepared?
Our trade deficit is only part of the problem. While China is creaming us with very low labor rates and worse environmental, safety, and legal (piracy) issues, all of which need to improve to level the playing field, there are other issues that we should fear more. That is our failure to compete in producing math, science, and engineering graduates or even having a plan to stimulate improving our graduate rates in these areas. If we do not remain strong in these areas we will be exporting more and more engineering jobs, and worse, the things China imports now might slow down drastically. Many of the things China manufactures now are designed and engineered in the United States. Nothing guarantees this situation will remain as is. It is all very fluid and will become more so. We face the same dilemma with regards to India and eastern Europe.
One statistic that I would like to see discussed more, is the raw numbers showing the balance between our productivity and our consumption as a nation. We hear about the Gross National Product (GNP) all the time but what about "Gross National Consumption?"
I think we should be spending much more on education and much less on consumer products. If we start building more universities and improve education for K-12 instead of talking up the latest flat screen televsions (made in China) we will be a wealthier nation. The general population is more intrigued by the gadgets than the talented people who engineer them. We cannot complain about foreign competition if we are not doing anything about it. The irony of this is that as the Chinese adopt some of our foolish habits and increase their consumption of consumer products, they may fall into the same trap.One of the other issues that struck a chord with me was a comment that people like me, as an investor, are not feeling the pain of the average working person who is not able to take advantage of investing overseas. In general this is correct. Like other investors, I am benefiting from foreign investments. This is a very good way to share in the growing prosperity in China and elsewhere. The only thing I can suggest in this regard is to add an international stock mutual fund that allows small periodic investments on a regular basis. The problem for those of lesser means is not that they lack opportunity but that they lack the knowledge about how to help themselves. This too gets back to education.
Three individual stocks I have discussed on bloggingstocks.com that we own in several portfolios should all be on your watch list and have done very well over the last year.
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Aluminum Corp of China ADS (NYSE: ACH) see Aluminum Company of China -- laughing my head off!, Twelve months ago ACH was $17. It closed yesterday at $60.78 for a 257.53% gain.
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Huaneng Power Intl ADS (NYSE: HNP) see Volatile Markets: Huaneng Power (HNP) is my pick for the next 50 years, Twelve months ago HNP was $27. It closed yesterday at $43.10 for a 59.63% gain.
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PetroChina Co Ltd ADR (NYSE: PTR) see PetroChina: Not a bargain, but one to watch for 2007. Twelve months ago PTR was $105. It closed yesterday at $143.01 for a 36.2% gain.
The returns from these investments did very well by a wide margin over the increases in China's trade activity. Unless something unforseen happens I expect this trend to continue and these three stocks to appreciate faster than the overall Chinese or U.S. economies or stock markets will in the long run.
To find more potential opportunities and verify my track record read Chasing Value or Serious Money.
[Photo Allan Siew]
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He is on the advisory board of Internet start-up CircleBuilder.com.
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Reader Comments (Page 1 of 1)
9-13-2007 @ 2:09AM
Dan said...
You still need to pickup some CHL.