Many Western observers are left scratching their heads by this reality, with quite a few of them simply assuming there is something about Chinese culture/habits so different that they will never be able to wrap their heads around it.

As not just an economist but an Eastern European economist, I believe I’m in a reasonably good position to shed some light on this topic. In other words, address the oftentimes misunderstood economic freedom in China, which frequently leads to excessive to the point of being tasteless consumerism… consumerism on steroids, if you will.

Having grown up in Romania, a formerly communist* nation (I was actually born in the year of the revolution which marked the transition away from communism) and having been raised by parents who were accustomed to living in a country where supermarket shelves were literally empty (the problem was not the lack of money but rather the lack of options when it came to spending said money), I ended up putting the pieces together when analyzing the behavior of people who assumed than since communism and its limitations were relics of the past, this meant spending every last penny in a reckless manner was in order.

To a significant degree, it is what made me decide to become an economist in the first place.

Paradoxical situations which involved people who I knew were living paycheck to paycheck and literally had difficulties putting food on the table, yet who somehow always found ways to buy status symbol goods such as cars and later on phones that they normally couldn’t afford. The idea that someone living paycheck to paycheck “splurges” with borrowed money in an effort to “fit in” was something I found fascinating and upon discussing the topic at length with a wide range of other professionals, we collectively realized that it all makes sense.

Think of it as a combination between economics and psychology, perhaps behavioral economics would be the appropriate category but for reasons I will not get into, I consider it too narrow. Actually, let us scratch that and view the situation from the perspective of simple logic:

1. In Romania prior to 1989, just like in China, life was defined by terms such as “privation” or in other words, most of the things the younger generation takes for granted would have been considered an exotic dream by that generation’s parents and grandparents
2. Naturally, this affected said parents and grandparents on a psychological level. In Romania, people used to literally dream about receiving oranges or bananas as a gift, fruits which are frequently thrown away without blinking by today’s generation. The same principle, not necessarily related to the same products, is valid in China
3. As time passed, Romanian as well as Chinese citizens found themselves able to buy things which were out of reach in the past, a complete consumerist paradigm shift
4. Naturally, a strong impulse manifested and manifests itself to consume as much as possible, in a manner similar to what those in the West report about their great-grandparents who lived through the Great Depression and are obsessively stocking up on food despite the fact that we are anything but in a shortage situation. Whether we are referring to Westerners who lived through periods of deprivation such as the Great Depression or entire generations of Romanian or Chinese citizens who were unable to consume, we shouldn’t judge the subconscious impulse to “recklessly” consume too harshly

What does the future have in store?

As always, it is impossible to draw perfect parallels between what happened in Romania 30 years ago and what is happening in China these days because history doesn’t repeat itself. I firmly believe, however, that it does rhyme and while predicting the future is impossible, finding common denominators is anything but.

The answer is most likely related to one key word: time.

As time passes, a lot of the wounds of the past are healed when it comes to people who have lived through emotionally challenging events… let’s not even refer to younger generations where collective “emotional history lessons” remain undiscovered. As such, consumption habits are gradually tweaked and while the desire to impress the proverbial Joneses never truly goes away (the habit is still very much alive and kicking in the West today), it gradually becomes less and less rough around the edges.

Why should you care about these trends as someone who either owns Chinese assets or is interested in gaining exposure to them? Simply put, understanding them enables you to meaningfully “get” the country you are analyzing and by doing that, you are able to position yourself far better than economic actors who limit themselves to a more than superficial understanding of complex phenomenon types such as the ones illustrated in this article.

Trends emerge and change, habits are either tweaked or replaced altogether. Keep your finger firmly on the pulse of let’s say a nation’s spirit and you will be able to take advantage of opportunities (in China and elsewhere) beyond your wildest dreams, whereas competitors will be left frustrated by the opaque lens through which they chose to view a certain jurisdiction. The ball is in your court and, of course, the ChinaFund.com team is at your disposal if you are interested in working with an entity which has been around the block with respect to “all things China” for over 13 years. Simply send us a message with what you have in mind through the Contact section of our website and we will touch base.

Does it reject economic interconnectedness so as to shield itself from unwanted cultural influences and enable the political status quo to persist or keep embracing the economic interconnectedness that has helped it achieve tremendous economic growth over the past decades, with everything it encompasses (including imports when it comes to culture and, yes, ultimately ideology as well)?

For most of its history, China has embraced a modus operandi which revolved around the former, around shielding itself from cultural influences and not being interested in interconnectedness… economic, cultural or otherwise. For more details on how that worked out for them, click HERE to read an article that briefly covers a very extended period of time.

In a nutshell, let’s just say that this self-imposed isolationism ended up resulting in the most humiliating period of China’s history, with it being dominated by countries that were on the receiving end of the Industrial Revolution’s many technological advancements, technological advancements which were brought to China’s attention but to no avail. While China kept its cultural framework intact, it ended up suffering from every other imaginable perspective.

Fast-forward to the Deng Xiaoping days, when the exact opposite started happening. Deng understood that China’s economic growth could only be sub-par in the absence of a meaningful connection to the worldwide economy and as such, embarked on a journey which would have been considered nothing short of ideological treason by many past leaders: warming up to the West and being willing to learn from it, embracing economic interconnectedness and so on. Did it work? From an economic perspective, the answer is a resounding yes and we have multiple decades of indisputable economic data which confirms this. However, let’s call them ideological purists have been continuously complaining about the high cultural price that needed to be paid, with them perceiving most cultural elements “imported” from the West as toxic, anything from fast food to pop culture, Hollywood and other examples.

Once again, pick your poison.

Each Chinese administration ends up facing the same ideological predicament: should China re-embrace isolationism, the very isolationism that brought about its most humiliating historical period, just to preserve the cultural and political status quo?

Up until this point, China’s leaders have chosen to for the most part preserve Deng’s status quo.

While there have been particularities from one administration to another, for example Jiang Zemin being criticized for going after what some observers believed to be economic growth at all costs or, on the other end of the spectrum, Hu Jintao and Xi Jinping who have tried to embrace policies one can consider more inclusive, so as to combat the inequality many economic observers have criticized and which can most definitely be considered a more or less unwanted byproduct of its explosive economic growth.

It remains to be seen what the Xi Jinping administration chooses to do as of this point and, of course, what future administrations will have in mind, especially in light of the fact that trade-related tensions such as the one with the United States might end up having repercussions when it comes to this debate as well.

This much is certain: a certain degree of Westernization brought about by anything from Western pop culture and Hollywood to the PR departments of Western companies is undeniable. One step at a time, from small changes such as the Chinese increasingly choosing to become pet owners (a topic we have actually dedicated an article to, an article which can be read by clicking HERE) to meaningful and potential status quo-altering changes such as the political change demands some members of China’s increasingly affluent middle class have in mind, the West is leaving its mark on China.

Can we consider China economically trapped in this respect?

Perhaps, because:

1. If it reverses course, the economic consequences brought about by this renewed isolationism could be so dire that social unrest generated by economic problems could become an issue more than capable of altering the political status quo
2. If it doesn’t reverse course, then one step at a time, the Westernization of China from a cultural perspective might bring about changes that… once again, are quite likely to alter the political status quo

Of course, a valid case could be made that the current interconnectedness of the global economy traps pretty much all individual economies in one way or another, with the many political implications this brings about. As such, analyzing China in isolation paints a picture that is incomplete at best and ignorant at worst.

Should the economic status quo when it comes to economic interconnectedness and the many more or less unwanted transfers it brings about (economic transfers, cultural transfers, political/ideological transfers, etc.) be altered, it is the opinion of the ChinaFund.com team that this will most likely be the result of a global set of circumstances rather than the result of the decisions of just one economic actor, be it China or the United States.

At the end of the day, investors (regardless of how exposed they are to Chinese assets) have no choice but to carefully monitor these developments, as changes when it comes to the global economic landscape cannot help but be portfolio-altering. Should you be in need of assistance with just that, whether this assistance pertains to the Chinese asset portfolio you own or your overall/diversified portfolio, the ChinaFund.com team is only a message away.

In the spirit of being thorough, the information we are discussing in this article is based on the World Bank data, which itself was gathered from the United Nations Population Division, various national statistical offices, Eurostat, the United Nations Statistical Division, the US Census Bureau International Database and the Secretariat of the Pacific Community.

What were the causes of this low life expectancy?

Simply put, the causes can easily be traced back to economics, with the low life expectancy numbers being to a significant degree explained by the fact that back then, China lacked the basic medical infrastructure to keep highly preventable deaths (deaths related to easily-curable infections, for example) to a minimum. Time and time again, we try to make it clear here on ChinaFund.com that pretty much everything ultimately revolves around economics and that behind the figures we and other experts throw around lie actual people, with real problems and oftentimes tragic destinies.

As China transitioned from an under-developed nation to the world’s #1 economy in nominal terms (even if per capita metrics paint a less optimistic picture), the life expectancy numbers ended up reflecting this new reality, with the average Chinese citizen being expected (at birth) to live almost 76.5 years at this point in time.

While still not impressive compared to let’s say none other than Hong Kong with its 85 value, Japan/Switzerland with 84 and so on, the life expectancy status quo in China doesn’t look terrible at all, being just 2.5 years below that of the United States and for the most part in line with let’s say the life expectancy associated with many European Union nations.

If we are to look at this metric on an aggregate basis, the worldwide life expectancy at birth lies somewhere in the vicinity of 72.4 years at this point in time. As such, it is fairly safe to say that China can be considered reasonably above-average from a life expectancy perspective. Should the authorities be content with this status quo?

Most likely not.

At the end of the day, there are already metrics such as nominal GDP which paint a very dominant picture of China, even metrics pertaining to cutting edge industries such as solar and wind energy (with, in both cases, China being the world’s #1 producer as well as consumer). On the other end of the spectrum, however, there are also metrics China would happily avoid being mentioned, for example the GDP per capita figures which are well below the global average.

In a nutshell: China’s life expectancy situation is not bad at all, but there is still room for improvement.

Finally, it is worth pointing out that as desirable as impressive life expectancy numbers may be, there are economic consequences associate with them. Perhaps a textbook example to this effect is represented by Japan, with its remarkable 84-year life expectancy on the one hand but its equally remarkable in the worst possible sense demographic growth trends on the other. To put it differently, sub-optimal natality correlated with high life expectancy numbers make it clear that a country is dealing with an unsustainable demographic situation. This ultimately puts tremendous pressure on a wide range of systems, from pension systems to various industries.

While not a textbook demographic problem example such as Japan, things are definitely less than ideal in China as well. From the Westernization of China in many respects with repercussions on trends involving natality to problems “inherited” by the current administration such as China’s disastrous one-child policy, it would be severely irresponsible not to pay adequate attention to the very real demographic challenges China is facing.

As a conclusion, however, this is indeed a “first world problem” to use a tongue-in-cheek reference or, if you will, a good problem to have. As China reaches parity with the proverbial West when it comes to a wide range of economic as well as social/cultural indicators, it is to be expected that it will end up having to deal with many of the West’s problems as well and the demographic dimension is clearly in the spotlight.

It is ultimately up to those interested in gaining exposure to Chinese assets how they perceive this issue. Some may choose to see the downside dimension and consider the demographic problems a deterrent, whereas others embrace the exact opposite attitude and look for generational opportunities associated with industries and assets that tackle this problem, for example opportunities in the elderly care field.

As you might have expected, we for the most part choose the latter approach here at ChinaFund.com and see the various challenges a maturing China ends up being confronted with as opportunities to position ourselves properly. Of course, we just as strongly believe in helping our clients do just that. As such, should you have concerns pertaining to demographics, economics or anything else, do not hesitate to reach out by sending us a message through our Contact section. On the other hand, if you (like us) are on the lookout for promising opportunities associated with these challenges, we would be more than happy to embark on this journey together.

But what if we venture outside China for a moment?

In other words, wouldn’t there be tremendous merit associated with putting overseas Chinese or if you will the Chinese diaspora under the proverbial microscope?

The ChinaFund.com team most certainly believes so and as such, we have decided to dedicate an entire article to this very topic. And the numbers seem to be clearly on our side, in light of the fact that based on 2012 data, there are 50 million Chinese living abroad and according to more recent numbers, the figure is closer to or even north of 60 million.

As a more plastic perspective, let’s just say that if China’s diaspora were a country, it would represent the world’s #25 nation ranked by population. In terms of financial prowess and potential, things seem even more optimistic, in light of the fact that overseas Chinese control assets that amount to over $2.5 trillion. To put it differently, China’s diaspora would hold an even more impressive #8 global rank alone based exclusively on assets.

Do the Chinese authorities understand the potential of this economic as well as demographic force?

History as well as current economic data and trends seem to indicate that yes, the authorities are more than aware how much potential there is on the table. This should come as no surprise in light of the fact that for example, the wealthiest overseas Chinese tend to have their origins in Fujian, a region close to Xi Jinping’s heart in light of the almost two decades he spent there. If we dig even deeper, we realize that Sun Yat-sen himself, who overthrew the last of China’s imperial dynasties back in the earlier part of the 20th century, ultimately chose Hawaii as his final destination.

In-between these two historical reference points, we have countless more or less influential leaders who made it clear that reaching out to China’s diaspora should represent a strategic priority. Overseas Chinese represented a significant variable in Deng Xiaoping’s international outreach strategy (with China finally becoming willing to partake in the global economy as a key player), with rather spectacular results.

While we know where the authorities stand, what about overseas Chinese themselves?

Those of you who are accustomed to the Chinese modus operandi when it comes to public relations know all to well that the authorities rarely shy away from speeches where they depict the glorious present as well as future of China and in our case, also the key role the Chinese diaspora can and should have in this equation.

A mistake that tends to be made by the authorities themselves as well as various observers is assuming that the Chinese diaspora is a monolith, a highly homogeneous entity which consists of individuals who see the world around them in the exact same manner and are looking forward to somehow contributing to China’s glorious future… a perspective one can consider short-sighted at best and downright childish at worst.

There is a world of difference between someone who is ethnically Chinese and simply ended up abroad on a temporary basis (for career-related reasons, to pursue a certain degree and what not) and someone who is also ethnically Chinese but comes from a family that has been living abroad for multiple generations. Needless to say, the former is multiple orders of magnitude more connected to the Chinese status quo than the latter.

The various exchange programs China has started so as to warm up the ties to its diaspora occasionally make this crystal-clear once feedback from the individuals in question is analyzed, feedback which makes it clear they are closed to being tourists than let’s say glorious allies or key players in China’s economic future.

As tends to frequently be the case when it comes to all things China, trends and realities are frequently exaggerated. Now, of course, this doesn’t mean there isn’t tremendous potential on the table for China by going after closer ties with as many overseas Chinese as possible, even let’s say “Westernized” Chinese diaspora members who have pretty much nothing in common with today’s China value-wise. On the contrary, identifying common denominators may very well end up being a fascinating endeavor for both parties involved.

However, “nuance” is the operative word. While the Chinese diaspora is a more than potent collective financial force and while there are generation-defining opportunities to be had bridging the gap between China and them, overseas Chinese are most definitely not a homogeneous entity that can act as a universal panacea. The same way, many overseas Chinese are not exactly as eager to partake in projects meant to enrich China’s economic future as the average Chinese citizen and even more so, may very well prove to be hostile to any such idea for political reasons revolving around sensitive topics such as China’s track record with respect to key issues such as human rights.

As always, the ChinaFund.com team is at your disposal should you and/or your organization be interested in additional clarity on this topic and especially guidance with respect to the many opportunities associated with the Chinese diaspora. To find out what we can do for you, simply visit the Consulting section of our website or if you already have a certain request in mind and would like to get in touch quickly, send us a message by accessing the Contact section of ChinaFund.com and we will get back to you as soon as possible.

As can be seen, this topic is perceived by the average citizen as more important than let’s say economic growth and this should come as no surprise to anyone who meaningfully “gets” Chinese culture in general and Confucianism in particular. As mentioned in more detail through the article we have dedicated to Confucianism and which can be accessed by clicking HERE, taking care of the elderly represents a cultural pillar in China arguably more so than in the West, to the extent that a government not able to properly implement a solid pension system might end up with a serious legitimacy perception problem.

Needless to say, the Communist Party of China cannot afford to let this happen. While widespread social unrest with the pension system in the spotlight is not yet a concern, it is worth noting that in 172 distinct cases, workers ended up protesting for reasons in the realm of social security and the pension system in 2018… more than enough to represent a serious cause for concern as far as the CPC is concerned.

Finally, we have a potentially deadly cocktail: growing GDP growth on the one hand and an aging population on the other. For various more than legitimate concerns, Chinese citizens are worried about the sustainability of China’s pension system and insisting that the government find ways to ensure that the elderly aren’t left holding the proverbial bag if or when China experiences hiccups with its growth success story.

Aside from reasons related to the past and reasons that have to do with the future, Chinese citizens are also worried about the present system for reasons that have to do with… of course, the present. It is difficult not to notice how ineffective the current system is due to its fragmented nature and downright awful collection performance.

And in that collection framework, pension funds represent the proverbial elephant in the room, accounting for over 70% of all social security inflows at this point in time. If these pension funds would have been in stellar shape, concerns would have been at the very least alleviated. But that is hardly the case, with pension funds most likely either collapsing or being on the verge of collapse in the absence of government subsidies. The fact that deficits are expected to lie north of 500 billion CNY by the year 2022 speaks for itself.

Furthermore, not only are there clear warning signs with respect to future sustainability, there are also present-day issues which occasionally even cause pension payment delays. This is especially valid for let’s say the Chinese equivalents of Detroit or, if you will, the rust belt of China. One such region, Heilongjiang, ended up having to delay pensions in July of 2018 despite being on the receiving end of (in hindsight obviously insufficient) state subsidies.

The current state of affairs with respect to China’s pension system can be attributed to a wide range of factors, such as:

1. Companies… well, not paying. As per 2018 survey data, barely over a quarter of all Chinese companies paid the appropriate social security contributions for their employees
2. Severe fragmentation, with there being many loopholes which pretty much invite corruption, with local governments frequently ending up in questionable negotiation positions with companies run by individuals who are far more influential (not to mention financially potent) than the officials they are negotiating with
3. The playing field being anything but level, with the most vulnerable categories of workers such as migrant and/or temporary workers having a difficult time navigating the pension landscape due to the difficulties associated with them signing up for an urban pension. At this point in time, only 1 out of 4 to 5 migrant and temporary workers are able to correctly register as urban employees, which generates a bureaucratic mess… to put it mildly
4. Pension gaps being downright ridiculous in some instances, for example the fact that a pensioner who lives in a less developed rural area receiving a monthly payment 45 to 50 times lower than his Beijing or Shanghai counterpart

… the list could go on and on.

The bottom line is that to any realistic outside observer, it becomes strikingly obvious that the Chinese pension system is anything but sustainable in its current form. While the average Chinese citizen has proven to be wiling to tolerate a wide range of adverse conditions (anything from human rights issues to pollution), the pension system risks representing one issue where a line is drawn and the authorities seem aware of that.

Efforts are indeed being made to reform the pension system, even if this comes with increased centralization, as per the 2018 tax reform plan which ended up generating effects on the 1st of January 2019. While China is by no means the only culprit with respect to the sustainability (or lack thereof) of the financial system (from the European Union to Japan or the United States, systemic threats abound), it needs to be especially careful when it comes to issues which affect its most vulnerable citizens because unlike its Western counterparts, it doesn’t have robust enough frameworks in place to ensure they land on their feed in adverse scenarios. As such, our team will continue following pension system-related developments closely and sharing them with ChinaFund.com readers.

Whether we are referring to mainland China, to Taiwan which itself has a ~90% Han Chinese population, Hong Kong with its almost 7 million Han Chinese individuals or Singapore with almost 3 million, it becomes clear just how dominant this ethnic group is in the region. However, in light of the fact that many Han Chinese made lives for themselves abroad across multiple generations, you can find this ethnic group from Australia to the United States, from France to India or even Peru.

Historically speaking, the Han Dynasty was established back in 206 BC and for additional context, we would recommend reading our article on Chinese dynasties (a general overview) that you can access by clicking HERE. Let’s just say that the Han Dynasty brought about increased prosperity and progress on most fronts:

1. There is a reason why it tends to be called the Golden Age, with scientific developments (matches, gunpowder, fireworks and so on) abounding
2. Culturally speaking, we have the emergence of Buddhism as well as the spread of Taoism as well as Confucianism that we have covered on ChinaFund.com through individual articles or to read a post about the three teachings as a whole, simply click HERE
3. When it comes to trade, the #1 achievement was (of course) represented by the introduction of the Silk Road, with trade routes being established between China and many countries of the let’s say West
4. Even the organization of the average family had business-oriented characteristics, with the head of the household acting as the de facto manager of the business and other family members chipping in with various responsibilities
5. As far as the tangible heritage dimension is concerned, we have two of the world’s most famous UNESCO World Heritage Sites: the Great Wall on the one hand (with its construction starting under a Han emperor and later on, the Ming Dynasty took over, which also had Han Chinese in charge) and the Terracotta Army on the other
6. In terms of intangible heritage, we obviously have examples such as Hanyu, which later on turned into early Mandarin Chinese
7. Administratively speaking, Han public administration became a benchmark to such a degree that even those who occasionally defeated China militarily ended up having to resort to Han “bureaucratic know-how” so as to keep the system running

To say that the list could go on and on would be a severe understatement, let’s not even start mentioning notable modern-day achievements (Nobel Prizes included) of Han Chinese. Suffice it to say that it is difficult to identify a more influential ethnic group than this one, not just domestically but internationally speaking as well.

Of course, Han Chinese haven’t exactly always been keen on let’s say interacting with foreigners.

On the contrary, as mentioned very frequently here on ChinaFund.com, China in general and the Han Chinese ethnic group in particular have always assumed that all other nations will ultimately gravitate toward the superior entity that is China and as such, being proactive or even downright engaging in missionary campaigns was deemed unnecessary.

Fast-forward to the present and, as the title of this post states, we find ourselves noticing that 1 out of 5 individuals is Han Chinese at this point in time, in a totally different geopolitical landscape which makes the type of isolationism China has been accustomed to both unprofitable and, frankly, impossible. On the contrary, China has arguable been the main beneficiary of our deeply interconnected globalization-oriented system and for this reason, we find ourselves in a situation where populations with sometimes completely different cultural values are faced with the task of finding common denominators.

Needless to say, the rewards can be unprecedently high if or when they do and for this reason, unlike many other teams of experts, ChinaFund.com firmly believes that there is more to China in general and the Han Chinese ethnical group in particular than GDP figures, GDP growth trends and other economic data. Without meaningfully factoring in the cultural dimension and without at the very least trying to have a deep understanding of let’s say all things China, economic interactions can be superficial at best.

Functional? Perhaps but most definitely sub-optimal. The cost to benefit ratio associated with investing time/energy into meaningfully understanding China are, in our view, asymmetrically in your favor. As such, putting in the work is the name of the game. Should you be interested in our help with respect to digging deep, simply visit our Consulting page to find out what we can do for you or if you have a specific request, access the Contact page of our website so as to leave a message and we will get back to you in a timely manner.

However, let’s just say that meaningfully understanding China from a cultural, geographical as well as historical perspective without having a firm grasp on the very basics in terms of ethnic groups is sub-optimal to put it mildly and ignorant at worst.

As such, here are a few quick facts worth knowing about the 55 Chinese minorities, ordered from highest to lowest in terms of population based on data gathered through the previously-mentioned 2010 census:

1. Zhuang, China’s #1 ethnic minority and the only one with a share of China’s population that exceeds 1% (1.27%, to be more precise)
2. Hui, a Muslim minority that accounts for approximately 0.79% of China’s population
3. Manchu, accounting for almost 0.78% of China’s population, commonly referred to as the ethnic group behind the Qing Empire
4. Uyghur, with roughly 0.76%, a minority in the spotlight whenever repression-related topics surrounding the Xinjiang region emerge
5. Miao, roughly 0.71% of China’s population, found primarily in the Guizhou region
6. Yi, at 0.65%, an ethnic group found mostly in the southwestern regions of China (especially Sichuan and Yunnan)
7. Tujia, with almost 0.63%, found primarily in Hunan, Guizhou, Chongqing and Hubei
8. Tibetan, the largest sub-0.5% minority… 0.47% to be more precise
9. Mongol, the most (in)famous minority for obvious historical reasons, accounting for roughly 0.45% of China’s population
10. Dong, at approximately 0.22%, famous for their specific architecture as well as music (Lusheng)
11. Bouyei (0.215%), located primarily in Guizhou, Sichuan and Yunnan
12. Yao (0.21%), located primarily in Hunan, Gnangxi, Yunnan, Guizhou and Guangdong
13. Bai (0.145%), located primarily in Hunan, Yunnan and Guizhou
14. Korean (0.14%), located primarily around the geographical areas one would expect given its name (Beijing Koreatown, Jilin, Heilongjiang and Liaoning)
15. Hani (0.125%), located primarily in the Yunnan region
16. Li (0.11%), located primarily in the Hainan region
17. Kazakh (0.11%), once again as geographical intuition tells us, located primarily in Gansu, Qinghai and Xinjing
18. Dai (0.095%), located primarily in the Yunnan region
19. She (0.053%), located primarily in Fujian, Anhui, Zhejiang, Guangdong and Jiangxi
20. Lisu (0.053%), located primarily in Sichuan and Yunnan
21. Dongxiang (0.047%), located primarily in Xinjiang, Gansu, Qinghai and Ningxia
22. Gelao (0.041%), located primarily in Yunnan, Guizhou, Sichuan and Guangxi
23. Lahu (0.037%), located primarily in Yunnan
24. Wa (0.032%), located primarily in Yunnan
25. Sui (0.03%), located primarily in Guangxi and Guizhou
26. Nakhi (0.025%), located primarily in Sichuan and Yunnan
27. Qiang (0.023%), located primarily in Sichuan
28. Tu (0.022%), located primarily in Gansu and Qinghai
29. Mulao (0.016%), located primarily in Guangxi
30. Xibe (0.014%), located primarily in Jilin, Xinjiang and Liaoning
31. Kyrgyz (0.014%), located (once again as geographical etymology tends to indicate) primarily in Heilongjiang and Xinjiang
32. Jingpo (0.011%), located primarily in Yunnan
33. Daur (0.01%), located primarily in Xinjiang, Inner Mongolia and Heilongjian
34. Salar (0.01%), located primarily in Xinjiang, Qinghai and Gansu
35. Blang (0.009%), located primarily in Yunnan
36. Maonan (0.008%), located primarily in Guangxi
37. Tajik (0.004%), located primarily in Xinjiang
38. Pumi (0.003%), located primarily in Yunnan
39. Achang (0.003%), located primarily in Yunnan
40. Nu (0.003%), located primarily in Yunnan
41. Evenki (0.002%), located primarily in Heilongjiang and Inner Mongolia
42. Gin (0.002%), located primarily in Guangxi
43. Jino (0.002%), located primarily in Yunnan
44. De’ang (0.002%), located primarily in Yunnan
45. Bonan (0.002%), located primarily in Gansu
46. Russian (0.001%), located (as dictated by geography) primarily in Xinjiang, Heilongjiang and Inner Mongolia
47. Yugur (0.001%), located primarily in Gansu
48. Uzbek (0.001%), located primarily in Xinjiang
49. Monba (0.001%), located primarily in Tibet
50. Oroqen (0.001%), located primarily in Heilongjiang and Inner Mongolia
51. Derung (0.001%), located primarily in Yunnan
52. Hezhen (0.0004%), located primarily in Heilongjiang
53. Gaoshan (0.0003%), located primarily in Taiwan (unaccounted for in the census) and Fujian
54. Lhoba (0.0003%), located primarily in Tibet
55. Tatars (0.0003%), located primarily in Xinjiang

… aside from that, we are also left with approximately 0.05% citizens categorized as “undistinguished” for the purpose of this census.

Will you be able to memorize all of the above information robotically?

Unless you are an outlier in terms of memorization potential, most likely not.

Should you?

No.

What you should however do in our opinion is simply read this article 2-3 times, bookmark it (old school, we know) and revert to it whenever you come across information related to a Chinese minority. Do just that a few times and you will quickly realize that you end up “getting” China from the perspective of ethnic groups more so than the average Western investor and, quite frankly, even more so that most Chinese citizens.

Is it a walk in the park? Of course not. But as stated ad nauseam here on ChinaFund.com, we firmly believe in going the extra mile in terms of documentation so as to develop an edge over competitors. Fortunately for you, especially if we are to refer strictly to Western investors and the extent to which they “get” China, the bar is not exactly set very high. It’s ultimately all a matter of putting in the work and seeing how it all adds up. Of course, should you be interested in digging even deeper, the ChinaFund.com team is here to help, simply reach out and we will get back to you as soon as possible.

As such, it should come as no surprise that it is time to put the various languages spoken in China under the microscope. With “languages” being the operative word because while there is a certain degree of interchangeability between most of them, using the term “dialects” would not be very accurate because if you speak Mandarin, you definitely cannot say you speak Cantonese as well and the same principle is valid when comparing the other languages spoken in China.

The “textbook” approach would be making it clear that languages are usually written as well as spoken, while dialects are only spoken until (unless) they are promoted to languages. But that is a rabbit hole we will avoid, so let’s just say that for the sake of convenience, we will only use the term “languages” from now on. Furthermore, it is important to make it clear right from the beginning that the various languages spoken in China can be so different from one another that even Mao Zedong with his (in)famous humor mentioned that if a war would result in China’s population being reduced dramatically, at least perhaps afterward, the remaining citizens can decide on a common language (as per Henry Kissinger’s recollection). Leaving dark humor aside, language fragmentation is indeed a major problem for any country.

On that note, we will start with the written language dimension and point out that there are two scripts, broadly speaking:

1. Simplified Chinese, which was promoted widely by Mao Zedong in the earlier part of his rule in an effort to improve the literacy level of the average Chinese. As the name suggests, the language has been… well, simplified. This means anything from reducing the number of strokes as well as the number of characters to removing characters altogether
2. Traditional Chinese or, if you will, pre-reform Chinese

There are of course variations involved. While simplified Chinese (Mandarin) used in mainland China and let’s say Malaysia is interchangeable, the same cannot be said about the simplified Chinese used in mainland China and that used in Singapore, which developed many more particularities. The same way, on the traditional front, we have traditional Mandarin in Taiwan and traditional Cantonese in Hong Kong and Macau. All in all, however, things aren’t that difficult to comprehend in a broad sense when it comes to the written language dimension, with simplified Chinese on the one hand and traditional Chinese on the other.

Moving on to the spoken language dimension, things get tricky.

For the sake of this article, we will limit ourselves to mentioning the eight popular spoken Chinese variants but it is important to know that there are hundreds of less common options. Aside from being different from one another, various forms also have region-to-region differences between them, anything from relatively slight differences (think of it as the differences between US and UK English) to differences so great that we end up in mutual unintelligibility territory.

Without further ado, here are the top eight:

1. Mandarin, China’s official language as of 1913, with many Chinese speaking at least a little bit of Mandarin
2. Modern Standard Mandarin or Standard Chinese, the official language of the People’s Republic of China as well as Taiwan, one of the official languages of Singapore and one of the six official United Nations languages
3. Cantonese or Yue, primarily spoken in Guangdong (with the capital Guangzhou being formerly referred to as Canton), Hong Kong and Macau. For the most part, Cantonese speakers won’t be able to understand all that much if they are spoken to in a different language
4. Gan, spoken frequently across Western China, especially in Jiangxi but also regions such as Fujian, Anhui, Hunan or Hubei
5. Hakka or Kejia, relatively similar to Gan, spread across anywhere from mainland China regions such as Jiangxi to Taiwan or Hong Kong
6. Min, primarily spoken in Fujian, which has the most endogenous variations by far
7. Wu or “Shanghainese” which is of course spoken in the Shanghai region but also let’s say the Yangtze delta region
8. Xiang or “Hunanese” which is spoken primarily in Hunan and has Mao Zedong as the most popular speaker

With respect to language-related trends, they are all over the place. While increased standardization would be desirable for China as a whole, there are also trends which revolve around moving toward traditionalism in various regions for political pride-related reasons. On a similar note, while there has been major progress with respect to Mandarin fluency in regions such as the Cantonese Hong Kong, there tends to also be backlash against it in the more political volatile regions.

As with most things China-related, “complex” is the operative word and for investors who are interested in gaining exposure to Chinese assets, being thorough is the only reasonable option. Needless to say, should you seek clarity in this department as well as anything else that pertains to China, our team is here to help. For more information about what we can do for you or your organization, visit our Consulting section or to get in touch right away, simply access the Contact section of ChinaFund.com.

From simple protests to large-scale civil unrest, social tensions inevitably emerge once the right set of circumstances present themselves. Yes, it is true that “China is different” but it’s most definitely not different in the form of some kind of immunity to human nature, not at all. Social tensions do represent a dimension worth analyzing but, indeed, triggers/causes and manifestations can differ compared to let’s say Western societies.

Yes, citizens tend to be more “trigger-happy” in the West.

Or, in other words, prosperity coupled with a solid track record of respecting human rights (with the right to free speech in the spotlight in our case) bring about a climate in which the average Westerner tends to be far more willing to complain in a remarkably vocal manner than the average Chinese citizen. And when it comes to prosperity, the education dimension represents perhaps the number one variable in this equation. To put it differently, the more prosperous and especially educated a population is, the more it knows where and when to draw the line. In this respect, the average person in China still has a lot of catching up to do.

To keep things organized, here are a few reasons why, indeed, the Chinese are less “eager” to manifest themselves in a way that generates social tensions:

1. Fear, plain and simple. While an authoritarian regime cannot create a system which guarantees zero social tensions, it is true that if the general population is afraid, it is more likely to let’s say know its place. To inhibit the desire to protest, for example. As such, social tensions do end up being bottled up more so in China than in the West
2. Tremendous economic progress. While the average person in China is still nowhere near as well off as the average Westerner (as illustrated by the striking discrepancy between nominal and per capita GDP levels), tremendous progress has been made in a relatively low time span. As such, a person who used to live in extreme poverty let’s say 40 years ago will most likely not rush to the streets just because his life is far from perfect nowadays because even this “far from perfect” is light years ahead of the gloomy status quo of the past decade(s)
3. Lack of education. At the risk of sounding somewhat politically incorrect, it is difficult for thought currents which are conducive to social tensions to emerge when the population is still largely illiterate in many regions. Think of it as Maslow’s hierarchy of needs, with many in China still struggling with the very basics of life (food/water and shelter) and not being ready (or intellectually prepared just yet) to tackle “bigger picture” topics

At the same time, however, we need to realize that on the opposite end of the spectrum, we can find quite a few reasons why China is a “ripe” candidate for social tensions:

1. While fear can act as a deterrent, it can also lead to a lot of let’s call it negative political energy being bottled up. As such, something that seems to be working in favor of the authorities can easily end up working against them eventually because when that energy finally erupts, the compounding effect can be devastating
2. The combination between poverty and inequality, which can be quite deadly, as any sociologist worth his salt can confirm. Once again, human nature is at play. For let’s say a Western China citizen, it is bad enough that his economic situation is poor, knowing how much better other Chinese citizens have it (the Beijing/Shanghai bourgeois, for example) adds gasoline to fire and brings about a climate that can give birth to social tensions under the right set of circumstances
3. While for many regions of China, education is still strongly sub-par, progress is being made in this department as well and as time passes, one cannot help but observe that the population of China is becoming better and better-educated. While this is great for the economic future of China, it is also something that can bring about social tensions, as an educated population is far harder to keep on a short leash politically and therefore, political movements originating from this reality are to be expected

As can be seen, there are many “Chinese realities” in any social tension-oriented analysis but the bottom line is this: believing that China is somehow immune to social tensions is downright imprudent. While this variable cannot and should not constitute the star of the show when it comes to your overall China analysis, it needs to be included in your arsenal, with China-related subtleties added to the mix. When it comes to just that, working with a team of consultants who have been around the proverbial block as far as China is concerned would perhaps be a wise idea. With an active presence in China for over a decade, the ChinaFund.com team is at the disposal of investors who are serious about meaningfully “getting” China rather than limiting themselves to a superficial analytical framework.

The truth, while perhaps not in the middle, is definitely complex.

Simply put, the entire debate ends up being nothing more than a collection of individuals sharing their biases if China’s poorest regions are not included in the equation. For example, someone from “deep” rural China, for example an inhabitant of the Qinghai region is indeed a Chinese citizen, just like someone who lives in Beijing. Realistically speaking, however, that person has more in common with someone from let’s say rural Pakistan than with his fellow Chinese citizen from Beijing. The same way, a prosperous Shanghai inhabitant most likely finds more commonalities with someone living in San Francisco than with a farmer from Tibet, who has a roughly 4.5 times lower level of disposable capital to “work” with and a 3.2 times lower GDP per capita.

At this point in time, the following provinces have a GDP per capita of less than $10,000, with the average for China itself (including its most prosperous regions) being south of $8,000:

1. Shandong
2. Chongqing
3. Hubei
4. Hunan
5. Jilin
6. Hainan
7. Heilongjiang
8. Anhui
9. Jiangxi
10. Hebei
11. Shanxi
12. Ningxia
13. Shaanxi
14. Sichuan
15. Henan
16. Guangxi
17. Xinjiang
18. Qinghai
19. Yunnan
20. Guizhou
21. Gansu
22. Tibet

… in other words, only 9 of China’s 31 provinces have a GDP per capital level north of $10.000.

The same way, the following provinces have a per capita disposable income level that is below 20,000 CNY, with the average for China being just north of that figure:

1. Chongqing
2. Hubei
3. Hunan
4. Jilin
5. Hainan
6. Heilongjiang
7. Anhui
8. Jiangxi
9. Hebei
10. Shanxi
11. Ningxia
12. Shaanxi
13. Sichuan
14. Henan
15. Guangxi
16. Xinjiang
17. Qinghai
18. Yunnan
19. Guizhou
20. Gansu
21. Tibet

… in this case, only 10 provinces are left which can boast a disposable income level that is greater than 20,000 CNY.

The bottom line is this: when it comes to China, we need to understand that the binary “developed vs. developing” construct makes little sense. As Bill Gates pointed out himself, a category that includes both China and the Republic of Congo is most likely far too broad to be scientifically relevant. In light of the many discrepancies that exist between regions, the situation is simply too complex for this binary system to make sense.

Perhaps the 4-tier system recommended by statistician Hans Rosling represents a step in the right direction, which involves:

• Level 1 countries where extreme poverty is the norm, with mechanized transportation and even footwear being uncommon and citizens living on less than $2 daily
• Level 2 countries, with incomes in the $2 to $8 zone and where the average individual can at least hope to afford transportation options such as bicycles
• Level 3 countries, where individuals live on $8 to $32 daily and can afford something along the lines of a scooter or even (cheaper) motorcycle
• Level 4 countries, where citizens live on a daily income that exceeds $32 and can most likely afford to purchase automobiles

… the World Bank had a somewhat similar approach when discontinuing the practice of referring to countries as either developed or developing. Based on this methodology, China as a whole would be considered a level 3 nation but even so, it is worth pointing out that any analysis that limits itself to seeing China as a homogeneous entity is fundamentally flawed.

Whether we are referring to income levels, access to medical services, infrastructure, access to credit markets or anything else (and we have covered these topics extensively here on ChinaFund.com), we need to take into account just how deeply fragmented China is so as to put together a coherent analytical framework.

Needless to say, the average media consumer isn’t exactly patient enough to listen to a comprehensive analysis and precisely therein lies the information gap that needs to be addressed with respect to China: the situation is far too complicated for it to be explained in sound bites by more or less superficial pundits.

If you haven’t by now, we would strongly recommend visiting the New Here section of ChinaFund.com and seeing just how many articles on a remarkably wide range of topics it contains. From economic indicators to culture, from geopolitics to history. The secret to meaningfully understanding China is that there is no secret, all one has to do is dig deep enough and the fragmentation of China when it comes to any metric imaginable illustrates this rather clearly.

Is China a rich nation, a poor nation or somewhere in between?

The answer to this ultimately subjective question all depends on how we define a “rich” nation. If our definition revolves around simply analyzing the nominal GDP of a country, the answer is a clear yes. If it revolves about individual-centric metrics such as the GDP per capita, China has come a long way but there is still progress to be made. Finally, if we analyze China on a province to province basis, then in some cases “prosperity” is the operative word, whereas in other situations, the reality tends to be on the gloomy side. Once again, seeing things in black or white is sub-optimal when it comes to China… to put it mildly.