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The world’s total population was about 6.9 billion in 2011 out of which 1.3 billion people live in China. So about one in five people in the world are Chinese. But China’s population has been declining since the mid 1970s primarily due to the country’s One-Child Policy. According to one estimate, by 2050 India is projected to overtake China as the world’s most populous country.
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Source: Quarterly Commentary 2, Allan Gray Investment Management, South Africa
While China’s population has been declining China’s share of the global GDP has been rising steadily since the early 1990s. Accordingly China’s share of global consumption of oil has also been increasing. Compared to oil China’s consumption of other commodities is significantly higher. Specifically as shown in the above chart, China consumes a large portion of the global supply of steel, cement, aluminium, iron ore and copper. China accounts for about 40 to 50% of the global supply of these commodities. Much of these commodities is used in the construction of the modern infrastructure. About half of China’s GDP is spent on fixed capital formation. Since infrastructure development cannot go on forever, the Chinese demand for the five commodities may have reached a peak already. In fact, China’s demand for the commodities may even decline from current high levels. Hence investors betting on continued rise in global commodity prices may want to be cautious.
Related ETFs:
iShares GSCI Commodity-Indexed Trust (GSG)
United States Commodity Index Fund (USCI)
PowerShares DB Commodity Index Tracking Fund (DBC)
iShares FTSE/Xinhua China 25 Index Fund (FXI)
EGShares China Infrastructure Index Fund (CHXX)
Disclosure: No Positions
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Here is an interesting chart on the future of the Top 10 Tobacco markets:
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Source: Euromonitor International
Also checkout:
The current U.S. corporate tax rate at approximately 40% is among the highest in the world. This figure includes the marginal federal corporate income tax rate of 35% and state and local taxes according to KPMG. As many U.S. companies are multinationals with strong presence in overseas markets, some of them earn more profits abroad than in the US. According to one estimate, just 70 U.S. firms hold $1.2 trillion in profits in foreign countries.Companies have stashed such huge amount of funds abroad because if they are repatriated back to the U.S., Uncle Sam will charge the same high corporate tax rate on them. Hence for many years now companies have been reluctant to repatriate profits firm abroad. Since the great recession U.S multinationals have lobbied for a tax holiday on profits earned abroad. But Congress has not yet embraced the proposal so far.
In addition to the high corporate tax rate, the U.S. is one of the few OECD nations that does not follow the territorial tax
system. Under this system,corporations pay a very law tax on repatriated profits. 27 of the 34 OECD countries follow this
system with tax deductions of 95% to 100% on foreign source dividends.Hence a reduction in the taxes on repatriated
profits would put the U.S. closer to the territorial tax system.
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Source: The Need for Pro-Growth Corporate Tax Reform, Repatriation and Other Steps to Enhance Short-and Long-Term Economic Growth. Prepared for the U.S. Chamber of Commerce, by Douglas Holtz-Eakin, August 2011
For individuals, the U.S. is one of the only seven OECD countries that levies taxes on worldwide income and not just income earned in the U.S. As shown in the chart above, the U.S. also has the highest tax rate among the seven OECD countries that levy taxes on worldwide income.
From the IRS site:
If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside.
Hence a U.S. citizen working in Dubai or Timbuktu or Sao Paulo is required by law to file income and pay taxes. However a tax credit is allowed in order to prevent to double taxation. Currently the US has tax treaties with 65 countries to help reduce the burden of double taxation.
So the U.S. tax system has to be amended to bring the tax rates inline with other developed countries for both individuals and corporations.
For more details on US Tax Treaties, please go to the following IRS web sites: