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Competing With China

Sigma Investment Counselors

August 20, 2021

Recently, two articles crossed my desk that provide some insight into the extent and complexity of attempting to compete with China.

The first article addressed the issue of labor and introduced, at least to me, the number 996.  Apparently, this is shorthand for the schedule that has become the workplace norm at many Chinese companies: 9 a.m. to 9 p.m., six days a week.  So much for work-life balance.

The second article discussed the economics of the manufacture of solar panels.  Not only is China a major manufacturer of solar panels, Chinese factories supply more than 75% of the world’s polysilicon, an essential component in most solar panels.  It is refined through a process that consumes large quantities of electricity.  China generates cheap and dirty electricity through an array of coal-burning power plants located in sparsely populated areas to support energy hungry industries. It is estimated that China relies on coal for about 70% of its power, and they’re still building coal plants to supply increasing national demand for electricity.   Like electric vehicles, solar panels seem to be an answer to emission reduction, until you look under the rug.

Investors should recognize that competing with, and exploring opportunities in China, may be more complex and present greater risks than had been previously thought.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA®

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