Boycott or not, eyes are on the Beijing Olympics as China, in harness with Russia, tries to burnish its brand as a peer power rival to America.
At the 2020 Olympics in Tokyo (held last summer, delayed by the pandemic), the gold medal race came down to the wire. A last-day surge by America enabled it to eke out a win in the gold medal race over China, 39-38. That it was this close should not be a surprise. China always plans while America usually reacts.
In 1988, China won just five Olympic gold medals. Then came the super ambitious Project 119 – China’s Plan for Olympic Glory. This blueprint strategically targeted 119 of the 339 Olympic events for medal gains. Two decades later, in 2008 at the last Beijing Olympics, China beat the United States to top the gold medal count.
[text_ad]
But China’s Soviet-style approach in identifying and training athletes comes at a very high price. For example, female divers are recruited as young as age six and as they move into their teens, they are sometimes ordered to skip dinner to keep their weight below 70 pounds, allowing them to enter the water with a swoosh rather than a splash.
“To achieve Olympic glory for the motherland is the sacred mission assigned by the Communist Party central,” is how Chinese Sports Minister Liu Peng stated at the beginning of the Beijing Games.
China’s Olympic Aspirations a Microcosm
While China’s sports supply chain produces medals, its obsession with beating America has an end game. By becoming the world’s largest economy and the most dominant power in Eurasia, China aims to end America’s reign as a superpower.
America is equally determined to stay on top but has opened the door due to a mix of complacency, hubris and a lack of unity at home.
It might surprise you to learn that China was the world’s dominant economic power at the time of America’s birth. The monarchies of Europe closely followed the unexpected emergence of America with a blend of admiration and trepidation. A youthful America of 3 million people began its experiment by forging a republic amidst foreign intrigue and political infighting at home. By 1776, the Qing Dynasty had ruled China for well over a century as its population, borders and wealth were all expanding. As the Celestial Empire mandated by heaven to rule, China looked down on America and all Westerners as barbarians.
At the end of the Civil War, a riven and rebooted America with a population of 33 million was on the cusp of a four-decade surge that increased the size of its economy by a multiple of five, becoming twice the size of England or Germany.
An analysis by British economist Angus Maddison shows that China lost its role as the world’s leading economy in 1890 after descending into turmoil and instability.
The American industrial machine that emerged victorious in World War II, producing over 300,000 aircrafts, was a superpower with a population of 133 million while China was traumatized by both the war and then its own ensuing civil war leading to widespread poverty.
America then began a period of leadership consistent with publisher Henry Luce’s 1941 description of an American Century. A global order was led by the economic and military power of the United States and its allies through the collapse of the Soviet Union in 1991.
Now, America, with a population of 333 million, remains a superpower but faces multiple foes: instability, debt, and stagnation at home, and a rising peer rival abroad. After meeting Japan’s economic challenge and outlasting the Soviet empire, America’s chief rival now is a formidable, resurgent China with a population four times that of America. The world is now watching with a combination of hope and fear as the points of abrasion between China and America grow year by year.
The Chinese Communist Party (CCP) marked the 100th anniversary of its founding on July 1, 2021. For most of the century, China has been in tumult but over the last four decades, it has delivered rapid “catch-up” increases in urbanization, economic growth and power. China is an odd mix of state capitalism sitting uncomfortably alongside an increasing totalitarian state. The number of Chinese with stock trading accounts is twice as large as those with party membership. Meanwhile, the American brand appears divided and distracted in a world that calls out for the opposite.
U.S. vs. China: Why it Matters for Investors
Make no mistake, the U.S.-China contest is of great consequence – a time of testing for all Americans that will impact everything from our pocketbooks to our security. While we’re focused on the next quarter, China has played the Japan 2.0 long game and has steadily gained economic and military strength during the past three decades. China’s de facto alliance with Russia is distracting America on the western flank of Eurasia while Taiwan simmers on the much more important eastern flank. A deeper alliance with Japan is essential to deter and protect our mutual interests while maintaining freedom of navigation through forward deployment in the Pacific.
While China sees an America divided and in decline, America sees China’s brand as one of determination, deception and disruption. American power has relatively diminished on the world stage in part due to China’s rise and also because we’ve needlessly squandered our resources and reputation – but the rivalry is just beginning.
This decade will be decisive. We’ll need unity at home, ambition all around, a sharper eye on rivals, and a strategy to rebuild our industrial base as well as economic mobility and security.
As investors, this U.S.-China rivalry should be the backdrop for every investing decision you make, now and in the coming years. We should all be investing globally. And in doing so, you need to consider how the ongoing U.S.-China power struggle affects every global stock you buy.
And if you need a little help selecting the best growth stocks from around the world, consider subscribing to my Cabot Explorer advisory, where we currently have an average gain of 136% on the nine stocks in our portfolio.
To learn their names, click here.
Editor’s Note: This post was partially excerpted from Carl Delfeld’s new book, “Power Rivals: America and China’s Superpower Struggle”. You can buy Carl’s book by clicking here.
How closely do you pay attention to the U.S.-China rivalry in your investing?
[author_ad]
