Comparing how China and America spend their money

Finding little that is newsworthy to discuss in capital markets as equity prices seem to be in a mood to consolidate the recent rise. The latest German manufacturing new orders data declined, underpinning concerns as to the ongoing slow down in the euro area economy. The US economy has recently surprised to the upside, not so the case for the euro area. The exception seems to be Spain. 

President Trump’s modestly delayed state of the union address did little to excite investors despite the president addressing the subjects of trade, medical care and infrastructure spending. What political commentators have concluded from the speech is that Mr Trump is keen for another four years. 

The market bears may continue to argue that there is still no sign of a trade deal with China, growth is still slowing, and we could have another shutdown of the US government. The bulls would argue these concerns provide the Fed more reason to stay dovish and support risk assets. 

We discovered a chart of the fiscal spending for China and thought it would be of interest to compare with the equivalent data for the US economy. Three pct. of America’s fiscal spending goes on education, China spends fourteen pct. America spends sixteen pct. of its fiscal budget on its military, China closer to four. On medical and healthcare America spends almost 30%, China only 8%. Social security America spends over 30%, China less than half that. Just looking at the data without studying the underlying stats behind it, are there any immediate conclusions one can draw? 

On the face of it, the Chinese appear to believe that investing in education makes more sense than on the military - perhaps understanding there is a distinct link between education and the success of an economy. America spends far more on social security; does that make them a more caring society or does the Chinese government expect the people to support themselves to a greater degree? The fact that China only spends 8% on healthcare may mean there remains a great opportunity for healthcare companies around the globe to invest in China. These are just a few possible conclusions.

Posted on February 7, 2019 .