Dividends and China sets a modest 5% growth target as economy struggles

For many years growth in the Chinese economy was a given as the country moved to become the 3rd largest economy behind the US and the European Union. Even now, as politicans talk about bringing manufacturing jobs to the US, the reality is if you walk the aisle of Wal-mart and the Dollar Tree or similar outlet, you will see many items from China. As long as the world’s largest retailers are buying from China, the country will remain important to the US economy.

Every year the session of parliament or the National People’s Congress begins with a report on the economy and how the government will make lives better in China. Economic growth is expected to be 5% down from the double digits for the past 20 years and the goal is create 12 million urban jobs up from 11 million.

To bolster growth, the government plans to stick to its playbook of investing in infrastructure, increasing funding for big ticket items with $ 748 billion in special government bonds.

President Xi Jinping will remain as President as he appoints more loyalists to the Congress. China does have problems including fraught relations with the US, try to change its demographic outlook after the 1 child policy left not enough bodies for the future.

Linking to dividend paying stocks, for decades growth in China led to growth in stock markets around the world because China was the world’s manufacturer. To be the world’s manufacturer, great amounts of raw materials flowed into China and goods flowed to Europe and the US. Many companies benefited from this relationship and the stock market was good. If the jobs in manufacturing were in China, it stands to reason jobs in the US and Europe were eliminated. At some level that has come back to politicians in the US and Europe and thanks to COVID, growth in China slowed. It is hard to imagine manufacturing companies moving from China as the support systems exist and labor costs are what they are. For your investments asks what percentage of products and services come from China which makes profits possible.

There are more questions than answers, till the next time – to raising questions.


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