by Gary Alexander

August 24, 2021

While all eyes are on the Kabul airport, let’s not ignore the main Heavyweight battle in that region.

Last May 4-18, I wrote three articles here (“Who Will Win the 21st Century – China or the U.S.?”), timed to the 25th anniversary of our investment group’s tour of central China and the 55th anniversary of their Cultural Revolution. This addendum was inspired by a pair of extensive special reports I’ve just perused:

Special Reports on China Images

I was also inspired by what Louis Navellier just wrote in his column this week: “Most wars these days are predominantly economic wars, where China has been perceived to be the big winner.” I wholeheartedly agree, and I also celebrate the fact that these bloodless trade wars are a great advance over what we see in history, from “Saving Private Ryan” to Walter Cronkite’s Vietnam coverage to today’s carnage in Kabul.

As Louis said, China is “perceived” to be the winner, but are they really? I don’t like reading tea leaves based on weekly retail sales or trade figures, since it’s too short-term. I tend to look at China vs. USA as a Hundred Years’ War and we’re in Round 3 (the 2020s). By my rough calculation, China won Round 1 (2000 to 2010), as they experienced tremendous growth while America suffered two major financial crises and very slow growth. Round 2 was roughly a draw (2010 to 2019), with America enjoying its longest recovery, while China grew far faster, but ballooned short-term debt and had a flat stock market.

Round 3 (the 2020s) began with China’s inadvertent (?) export of that killer COVID-19 virus to the world. At first, it seemed that the virus hit Europe and America the hardest, while impacting China and most of East Asia less, but that assumption is now coming into question. Now, multiple reports are showing that the U.S. is pulling ahead of China. America and China are converging in the GDP race.

China's Gross Domestic Product Charts

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Specifically, U.S. GDP rose 12.2% in the second quarter vs. a year earlier, while China’s grew 7.9%, and Moody’s forecasts that U.S. GDP growth will outpace China’s over the next four quarters as well. If that happens, it would mark the first time since 1990 when the U.S. grew faster than China for over a year. (Source: “For Now, U.S. Tops China in Growth,” by Bob Davis, Wall Street Journal, August 16, 2021).

America is recovering faster than China, in part, because the U.S. is the center for vaccination research and got the winning vaccine formulas first. That’s one more advantage of a free-market economy over a command economy. America also poured trillions into the domestic economy while China kept pouring more money overseas into its Belt & Road Initiative, other grandiose plans, and building up their military.

According to Daniel H. Rosen, writing in “China’s Economic Reckoning: The Price of Failed Reforms” (Foreign Affairs, July-August 2021), China’s foreign direct investment rose from $73 billion in 2013 to $216 billion in 2016, so “from 2013 to 2016, borrowing via the short-term money market quintupled.”

It’s the WEALTH of Nations, Stupid

Short-term, “It’s the economy, stupid,” as James Carville so crudely counseled the Clinton campaigns of the 1990s, but Adam Smith wrote an “Inquiry into the Wealth of Nations,” not just their growth or GDP.

U.S. households have now accumulated $2.6 trillion in what Moody’s Analytics calls “excess household savings,” or savings that exceed what would have been anticipated before the pandemic. That is nearly seven times as much as in China, with four times as many people. China also has demographic challenges resulting from long decades of its “one child” (usually, one male child) policy, which only ended in 2016.

China’s labor force – age 15 to 59 – peaked in 2014, and has been shrinking, including a 0.5% drop in 2020, according to Capital Economics, which expects China’s GDP growth to slow to about 2% by 2030.  China’s birth rate fell 15% in the last 12 months; one-third of its people will be over age 60 by 2033 and The Lancet forecasts that China’s population will shrink by nearly 50% by the end of the century (“Xi’s Gamble: The Race to Consolidate Power and Stave Off Disaster,” by Jude Blanchette, Foreign Affairs).

Wealth takes time to accumulate, China just started to think about capitalism in 1978 – over 200 years after America was born and Wealth of Nations was published. It takes time to build a military power, too. For instance, there are 22 aircraft carriers on earth. The U.S. has 11; no other nation has more than two.

America is winning the Wealth Race. In “Round 2” (between 2011 and 2021), China closed the GDP gap with the U.S. by $2 trillion, according to International Monetary Fund estimates, but during that same decade, America’s lead in wealth increased by $13.5 trillion, according to Credit Suisse estimates.

In City Journal last week (August 19), Allison Schrager wrote (in “Why China Will Never Have the Pre-Eminent Global Economy”) that China lacks a spirit of innovation. “The industries Beijing favors may continue to grow and attract investors,” wrote Schrager,” but growth will slow as its population shrinks and China finds that it lacks the innovation needed to reach the pinnacle of the global economy.”

China may have better math training in primary schools, but their best students often come to America for college training and employment. That trend will only grow after China’s dictator-for-life, Xi Jinping, cracked down on many forms of innovative technology – social media, private tutoring, and gaming – while nixing key mergers and halting what could have been one of the world’s largest IPOs. Xi’s restrictions are growing. Instead of “allowing 1,000 flowers to bloom,” he thinks he can control innovation from Beijing.

Capital and brain power go where they are most richly rewarded, so creative Chinese engineers will keep migrating to America and other Western nations to invent cool new things.  According to the August 14-28 edition of The Economist, Xi is reversing much of the progress engineered by his predecessors:

“In the past nine months China’s regulators have cracked down on the country’s effervescent tech scene, which, though it has generated world-beating innovations and astounding shareholder value, is no longer seen as fit for purpose. On August 11th, the authorities indicated that regulations over all manner of tech businesses will be strengthened in the next five years. As a consequence of all this, the country’s hottest tech groups have lost at least $1 trillion in market capitalization since February.”

Last week, China’s market cratered (“Half a trillion dollars wiped from China markets in a week as clampdowns shatter confidence,” Reuters, August 20, 2021). The Reuters article begins like this:

“China’s tech stocks slumped to new lows on Friday and Hong Kong’s benchmark index hit an almost 10-month trough, as an unrelenting series of Chinese regulatory crackdowns crushed investors’ confidence. More than $560 billion in market value has been wiped off Hong Kong and mainland China exchanges in a week as funds capitulate out of once-favored stocks, unsure which sectors regulators will target next. The Hang Seng fell 1.8% and its weekly drop of 5.8% was the largest since the height of the pandemic panic in financial markets in March 2020.”

China's Markets Indices Charts

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The Shanghai stock market was flat for a decade (2009-19), while the S&P 500 tripled. Since then, the situation has grown even worse for Chinese investors. Since its February 2021 peak, the MSCI China ETF is down 31% while the U.S. S&P 500 is up about 14%. Since the end of 2019, NASDAQ is up 66%, the S&P 500 is up 37%, the MSCI World Index is up about 30% while MSCI China is flat as a pancake.

Big questions remain – like whether we want to grow and remain #1, and whether our internal factions can co-exist as a cohesive nation over the next 75+ years – but if we do, the U.S. is winning Round 3 of the Hundred Years’ Economic War, whether measured by Wealth (preferable) or Growth (short-term OK).

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
Money Supply is (Almost) All About the Fed

Sector Spotlight by Jason Bodner
A 30-Year (or 3-Month) Investment Game Plan

View Full Archive
Read Past Issues Here

About The Author

Gary Alexander

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

Important Disclosures:

Although information in these reports has been obtained from and is based upon sources that Navellier believes to be reliable, Navellier does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute Navellier’s judgment as of the date the report was created and are subject to change without notice. These reports are for informational purposes only and are not a solicitation for the purchase or sale of a security. Any decision to purchase securities mentioned in these reports must take into account existing public information on such securities or any registered prospectus.To the extent permitted by law, neither Navellier & Associates, Inc., nor any of its affiliates, agents, or service providers assumes any liability or responsibility nor owes any duty of care for any consequences of any person acting or refraining to act in reliance on the information contained in this communication or for any decision based on it.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any securities recommendations made by Navellier. in the future will be profitable or equal the performance of securities made in this report. Dividend payments are not guaranteed. The amount of a dividend payment, if any, can vary over time and issuers may reduce dividends paid on securities in the event of a recession or adverse event affecting a specific industry or issuer.

None of the stock information, data, and company information presented herein constitutes a recommendation by Navellier or a solicitation to buy or sell any securities. Any specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. The holdings identified do not represent all of the securities purchased, sold, or recommended for advisory clients and the reader should not assume that investments in the securities identified and discussed were or will be profitable.

Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. Individual stocks presented may not be suitable for every investor. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. Investment in fixed income securities has the potential for the investment return and principal value of an investment to fluctuate so that an investor’s holdings, when redeemed, may be worth less than their original cost.

One cannot invest directly in an index. Index is unmanaged and index performance does not reflect deduction of fees, expenses, or taxes. Presentation of Index data does not reflect a belief by Navellier that any stock index constitutes an investment alternative to any Navellier equity strategy or is necessarily comparable to such strategies. Among the most important differences between the Indices and Navellier strategies are that the Navellier equity strategies may (1) incur material management fees, (2) concentrate its investments in relatively few stocks, industries, or sectors, (3) have significantly greater trading activity and related costs, and (4) be significantly more or less volatile than the Indices.

ETF Risk: We may invest in exchange traded funds (“ETFs”) and some of our investment strategies are generally fully invested in ETFs. Like traditional mutual funds, ETFs charge asset-based fees, but they generally do not charge initial sales charges or redemption fees and investors typically pay only customary brokerage fees to buy and sell ETF shares. The fees and costs charged by ETFs held in client accounts will not be deducted from the compensation the client pays Navellier. ETF prices can fluctuate up or down, and a client account could lose money investing in an ETF if the prices of the securities owned by the ETF go down. ETFs are subject to additional risks:

  • ETF shares may trade above or below their net asset value;
  • An active trading market for an ETF’s shares may not develop or be maintained;
  • The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track;
  • The cost of owning shares of the ETF may exceed those a client would incur by directly investing in the underlying securities; and
  • Trading of an ETF’s shares may be halted if the listing exchange’s officials deem it appropriate, the shares are delisted from the exchange, or the activation of market-wide “circuit breakers” (which are tied to large decreases in stock prices) halts stock trading generally.

Grader Disclosures: Investment in equity strategies involves substantial risk and has the potential for partial or complete loss of funds invested. The sample portfolio and any accompanying charts are for informational purposes only and are not to be construed as a solicitation to buy or sell any financial instrument and should not be relied upon as the sole factor in an investment making decision. As a matter of normal and important disclosures to you, as a potential investor, please consider the following: The performance presented is not based on any actual securities trading, portfolio, or accounts, and the reported performance of the A, B, C, D, and F portfolios (collectively the “model portfolios”) should be considered mere “paper” or pro forma performance results based on Navellier’s research.

Investors evaluating any of Navellier & Associates, Inc.’s, (or its affiliates’) Investment Products must not use any information presented here, including the performance figures of the model portfolios, in their evaluation of any Navellier Investment Products. Navellier Investment Products include the firm’s mutual funds and managed accounts. The model portfolios, charts, and other information presented do not represent actual funded trades and are not actual funded portfolios. There are material differences between Navellier Investment Products’ portfolios and the model portfolios, research, and performance figures presented here. The model portfolios and the research results (1) may contain stocks or ETFs that are illiquid and difficult to trade; (2) may contain stock or ETF holdings materially different from actual funded Navellier Investment Product portfolios; (3) include the reinvestment of all dividends and other earnings, estimated trading costs, commissions, or management fees; and, (4) may not reflect prices obtained in an actual funded Navellier Investment Product portfolio. For these and other reasons, the reported performances of model portfolios do not reflect the performance results of Navellier’s actually funded and traded Investment Products. In most cases, Navellier’s Investment Products have materially lower performance results than the performances of the model portfolios presented.

This report contains statements that are, or may be considered to be, forward-looking statements. All statements that are not historical facts, including statements about our beliefs or expectations, are “forward-looking statements” within the meaning of The U.S. Private Securities Litigation Reform Act of 1995. These statements may be identified by such forward-looking terminology as “expect,” “estimate,” “plan,” “intend,” “believe,” “anticipate,” “may,” “will,” “should,” “could,” “continue,” “project,” or similar statements or variations of such terms. Our forward-looking statements are based on a series of expectations, assumptions, and projections, are not guarantees of future results or performance, and involve substantial risks and uncertainty as described in Form ADV Part 2A of our filing with the Securities and Exchange Commission (SEC), which is available at or by requesting a copy by emailing All of our forward-looking statements are as of the date of this report only. We can give no assurance that such expectations or forward-looking statements will prove to be correct. Actual results may differ materially. You are urged to carefully consider all such factors.

FEDERAL TAX ADVICE DISCLAIMER: As required by U.S. Treasury Regulations, you are informed that, to the extent this presentation includes any federal tax advice, the presentation is not written by Navellier to be used, and cannot be used, for the purpose of avoiding federal tax penalties. Navellier does not advise on any income tax requirements or issues. Use of any information presented by Navellier is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance.

IMPORTANT NEWSLETTER DISCLOSURE:The hypothetical performance results for investment newsletters that are authored or edited by Louis Navellier, including Louis Navellier’s Growth Investor, Louis Navellier’s Breakthrough Stocks, Louis Navellier’s Accelerated Profits, and Louis Navellier’s Platinum Club, are not based on any actual securities trading, portfolio, or accounts, and the newsletters’ reported hypothetical performances should be considered mere “paper” or proforma hypothetical performance results and are not actual performance of real world trades.  Navellier & Associates, Inc. does not have any relation to or affiliation with the owner of these newsletters. There are material differences between Navellier Investment Products’ portfolios and the InvestorPlace Media, LLC newsletter portfolios authored by Louis Navellier. The InvestorPlace Media, LLC newsletters contain hypothetical performance that do not include transaction costs, advisory fees, or other fees a client might incur if actual investments and trades were being made by an investor. As a result, newsletter performance should not be used to evaluate Navellier Investment services which are separate and different from the newsletters. The owner of the newsletters is InvestorPlace Media, LLC and any questions concerning the newsletters, including any newsletter advertising or hypothetical Newsletter performance claims, (which are calculated solely by Investor Place Media and not Navellier) should be referred to InvestorPlace Media, LLC at (800) 718-8289.

Please note that Navellier & Associates and the Navellier Private Client Group are managed completely independent of the newsletters owned and published by InvestorPlace Media, LLC and written and edited by Louis Navellier, and investment performance of the newsletters should in no way be considered indicative of potential future investment performance for any Navellier & Associates separately managed account portfolio. Potential investors should consult with their financial advisor before investing in any Navellier Investment Product.

Navellier claims compliance with Global Investment Performance Standards (GIPS). To receive a complete list and descriptions of Navellier’s composites and/or a presentation that adheres to the GIPS standards, please contact Navellier or click here. It should not be assumed that any securities recommendations made by Navellier & Associates, Inc. in the future will be profitable or equal the performance of securities made in this report.

FactSet Disclosure: Navellier does not independently calculate the statistical information included in the attached report. The calculation and the information are provided by FactSet, a company not related to Navellier. Although information contained in the report has been obtained from FactSet and is based on sources Navellier believes to be reliable, Navellier does not guarantee its accuracy, and it may be incomplete or condensed. The report and the related FactSet sourced information are provided on an “as is” basis. The user assumes the entire risk of any use made of this information. Investors should consider the report as only a single factor in making their investment decision. The report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. FactSet sourced information is the exclusive property of FactSet. Without prior written permission of FactSet, this information may not be reproduced, disseminated or used to create any financial products. All indices are unmanaged and performance of the indices include reinvestment of dividends and interest income, unless otherwise noted, are not illustrative of any particular investment and an investment cannot be made in any index. Past performance is no guarantee of future results.