The topic of an economic and political balance of power between the United States and China has always been a hot topic. Some believe, however, that there are other more important things to consider when it comes to the emerging nation and its exchange traded funds (ETFs).
Simon Johnson of Baseline Scenario states that two things to look at when analyzing China are productivity and rent-seeking. China is very well known for investing in activities that raise productivity, which is evident in their emphasis on infrastructure and manufacturing.
Johnson, who outlines rent-seeking as “effectively a tax extracted by one sector from the rest of the economy,” feels that we’re in a perilous path by rent-seeking in the financial sector, boosting it at the expense of taxpayers.
Johnson suggests that finance, in its modern American form, is not productive. If we continue to focus on this and China continues to focus on making things, then we could be in trouble. Year-to-date, China has performed very well and the nation’s emphasis on productivity has served it will in recent months.