I have a whole host of “China is Screwed” videos I’ve gathered to post, but haven’t had the time to properly queue them up. So here’s a big picture piece from Peter Zeihan on China’s immediate economic foe: deflation.
“They never really recovered from Covid.” Aw. My heart bleeds.
“Growth is actually lower now than it was over the course of the last two years when they were supposedly under complete lockdown.”
“Consumption is down. Imports and exports both dropped in July compared to a year earlier by double digits of percentages. Normally the sort of stuff you only see out of a country like, say, Ukraine or Russia when a war starts.”
“We saw a demographic bomb go off in China before Covid. going back to as early as 2017, the demographics really turned negative from 2017 to 2021. The birth rate dropped by about 40%.”
“We’ve had all of these trends with four, five, six, years behind them, and as they’re manifesting in a more normal environment, the numbers are really, really, really bad.”
A whole lot of that is due to the One Child Policy.
Problem two: Deflation. The rest of the world suffered inflation when the lockdowns ended.
“The consumption boom never happened, so supply chains never had to adjust. What has happened is people are less confident in their future, so they’re consuming less.”
“We’re seeing mounting trade wars out of Europe, Japan, the United States, and increasingly secondary states like the Koreans are joining in. And that means the Chinese have fewer places to send stuff.”
“Product that was normally produced for export from China is now being locked up within the Chinese system at the same time that the population is purchasing less. You have an oversupply of goods and an under demand, both at home and abroad. With all those extra goods prices go down, and you get deflation.”
“This is what you would expect when you’re at the beginning of a deflationary spiral that’s caused by a fundamental mismatch between supply and demand, which is where we are going with deglobalization and the Chinese demographic. Trends which are now well past the point of no return.”
Japan’s deflationary spiral lasted 20-25 years.
Deflationary spirals are very hard to pull out of.
“The Chinese economic system isn’t really based on exports or consumption, it’s based on investment, the idea that the state fosters mass borrowing in order to build industrial plant infrastructure. Based on whose numbers you’re using, those are somewhere between 40-70% of the entirety of the Chinese economy, and has generated the vast majority of economic growth.”
“You can only do that for so long. Eventually you don’t need any more bridges, or any more factories, and I would argue the Chinese reached that point before Covid. Again, there’s been this three, four year lag between reality and the data finally manifesting.”
More spending won’t help.
“The amount of growth they get for every Yuan spent has been dropping steadily for 40 years, and now it’s in far less than one to one. So it really doesn’t matter how much more fuel and how much cheap capital the Chinese pump into the system, it’s never going to generate more economic activity than what it costs to put it in the first place.”
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Bridges collapse, vacant cities, trains that don’t work, bankruptcies everywhere and rampant unemployment among a long list. But they still steal everything they can. Yeah, I feel bad for ‘em.
Did China widely distribute the jab? Because when you’re injecting pregnant women with a “vaccine” that causes a “miscarriage” (read as “spontaneous abortion) 87% of the time, it might have some short-term effect on birth rates. Nobody knows what the long-term effect will be.
I’ve said it before, but the biggest thing we need to worry about isn’t “Chinese Empire”, but “Chinese Collapse”.
The root problem with all this crap, whether you’re talking China today or the collapse of “Japan, INC.” is the utter failure of central planning and authority.
You can’t “plan” an economy; you have to let it grow by itself, and just do what little you can to influence it from the center. If China had left things alone, they’d be a hell of a lot better off, but with central planners misconstruing what was going on with birth rates, and failing to anticipate what would actually happen once the masses got off their farms…? Yeah. They screwed themselves, via central planning. Same as Japan did, but not to the same degree. In Japan, MITI only performed peripheral stupidities like telling Honda they shouldn’t go into the automobile business…
Has anyone, anywhere really gotten places over the long term, via central planning? Where is the industrial legacy in the former Soviet Union? They still can’t manufacture the machine tools they need, or build their own factories. All that was bought, brought in from elsewhere.
Similarly, Japan has done very well in the things that it did, organically. The planned things? LOL… Where the hell is their vaunted MITI supercomputer industry, that they were building back in the early 1990s?
China will be lucky, indeed, if they’re even in the same sort of position that Japan is, today. I think the inherent contradictions and disappointments of Chinese life out in the mass population is going to bite them in the ass, hard.
Huge mistake that they’re making? This whole “social credit” scheme. One, it’s inevitably going to be corrupted, and two, even if it isn’t…? They’re cutting off a huge swathe of their population and turning them from merely being “not-so-good citizens” into actively disaffected and enraged people. I don’t know how that’s going to turn out; in lab animals, when the behavioral cues become too confusing and contradictory, the animals usually just go catatonic. That may be what happens in China, with entire sectors of the population going “Hikikomori” the way some young men are in Japan.
The stagnation and disaffection is going to have some follow-on effects, not the least is the probability that something like Falun Gong will turn into another Taiping or Boxer Rebellion. I don’t think the current set of central authorities really know what they’re doing, by tamping down on social unrest. It’s like a boiler; you shut off the release valve and paint over the pressure gauge…? The following explosion is only going to be far, far worse than the one you think you’re preventing.
Same thing going on all around the world. The normies are getting tired of being told that the piss running down their backs is actually rain… That won’t end well, anywhere.
If the Chinese leadership has a clear-eyed view of their own country, they’ll recognize that their “One Child” policies of fifty years ago are crippling them.
Couple of salient facts: China has no universal “old age pension” system. Couple that with everyone putting all their eggs in one basket, child-wise, and you’re looking at a situation where any major personnel losses in an adventurous war are going to be highly risky for the regime. What do you do, when you have to explain a few hundred thousand dead young men in a Taiwan invasion? Do you think that they’ll take that risk?
Their demographics are limiting their options, and one of the options that’s off the table is losing a bunch of young men, entirely aside from what that will do to their work force.
Like I said, the biggest worry with China is what happens if the regime fails to navigate all the rocks and shoals they’re finding themselves amongst. China ought to be an object of pity, rather than worry… Particularly since they’ve saddled themselves with a gerontocratic leadership that’s entirely delusional about almost everything.
The final denouement will be very, very ugly. I suspect that the entire contradiction-in-terms house of cards will come down, all at once, and in very unpredictable ways and times.
Chinese have most of their savings invested in real estate. Two years ago the fragility of China’s housing market came to light when property developer Evergrand defaulted on its bond payments. Recently, Country Garden, the country’s biggest private-sector developer by sales, missed interest payments on two US-dollar-denominated bonds.
When your largest investment is being threatened by a market collapse, you will not take on additional debt. Even if you were willing, lenders are demanding higher rates. This will curb household spending.
To make matters worse, China’s principal export markets are seeing escalating inflation, causing Europeans and Americans to reduce spending on discretionary items.
Japan’s housing market was flat for more than a decade after rising to unprecedented heights in the late ‘80s and bursting in the early ‘90s. It is possible that China could have a long wait before asset prices recover.
[…] face eight-fold increase in their social security taxes Baldilocks: Evil Twin BattleSwarm: Red China’s New Enemy: Deflation, Red China Is Screwed: Pipe People, and Ruble Now A Penny Behind The Black: Red China’s Long […]
Regarding deflation, people always say it’s a bad thing, and I can certainly understand that there are downsides, but there are downsides to *inflation* as well. Is deflation somehow qualitatively worse than inflation? If so, why? I rather like the idea of prices going back down to sane levels. Even if I don’t get another raise for the foreseeable future, the increase in purchasing power would be nice.
Likewise, if everything gets cheaper, there’s less demand for household subsidies and less of that “we need two incomes to support a family!” twaddle (learning to live within one’s means is apparently a lost art for too many people anymore).
“If China had left things alone, they’d be a hell of a lot better off”
Never in their millenia-long history have the Chinese left things alone, and no one can convince them to. They’ve outlasted dozens of empires doing things their way.
“but with central planners”
The Chinese practically invented central planning. They’re not about to give it up now.
Bridges collapse, vacant cities, trains that don’t work, bankruptcies everywhere and rampant unemployment among a long list. But they still steal everything they can. Yeah, I feel bad for ‘em.
Did China widely distribute the jab? Because when you’re injecting pregnant women with a “vaccine” that causes a “miscarriage” (read as “spontaneous abortion) 87% of the time, it might have some short-term effect on birth rates. Nobody knows what the long-term effect will be.
I’ve said it before, but the biggest thing we need to worry about isn’t “Chinese Empire”, but “Chinese Collapse”.
The root problem with all this crap, whether you’re talking China today or the collapse of “Japan, INC.” is the utter failure of central planning and authority.
You can’t “plan” an economy; you have to let it grow by itself, and just do what little you can to influence it from the center. If China had left things alone, they’d be a hell of a lot better off, but with central planners misconstruing what was going on with birth rates, and failing to anticipate what would actually happen once the masses got off their farms…? Yeah. They screwed themselves, via central planning. Same as Japan did, but not to the same degree. In Japan, MITI only performed peripheral stupidities like telling Honda they shouldn’t go into the automobile business…
Has anyone, anywhere really gotten places over the long term, via central planning? Where is the industrial legacy in the former Soviet Union? They still can’t manufacture the machine tools they need, or build their own factories. All that was bought, brought in from elsewhere.
Similarly, Japan has done very well in the things that it did, organically. The planned things? LOL… Where the hell is their vaunted MITI supercomputer industry, that they were building back in the early 1990s?
China will be lucky, indeed, if they’re even in the same sort of position that Japan is, today. I think the inherent contradictions and disappointments of Chinese life out in the mass population is going to bite them in the ass, hard.
Huge mistake that they’re making? This whole “social credit” scheme. One, it’s inevitably going to be corrupted, and two, even if it isn’t…? They’re cutting off a huge swathe of their population and turning them from merely being “not-so-good citizens” into actively disaffected and enraged people. I don’t know how that’s going to turn out; in lab animals, when the behavioral cues become too confusing and contradictory, the animals usually just go catatonic. That may be what happens in China, with entire sectors of the population going “Hikikomori” the way some young men are in Japan.
The stagnation and disaffection is going to have some follow-on effects, not the least is the probability that something like Falun Gong will turn into another Taiping or Boxer Rebellion. I don’t think the current set of central authorities really know what they’re doing, by tamping down on social unrest. It’s like a boiler; you shut off the release valve and paint over the pressure gauge…? The following explosion is only going to be far, far worse than the one you think you’re preventing.
Same thing going on all around the world. The normies are getting tired of being told that the piss running down their backs is actually rain… That won’t end well, anywhere.
There is a way to eliminate excess productive capacity at home and abroad. Wasn’t really available to Japan. They didn’t have an independent military.
Ir IS available to CCP – Aggressive war.
Destroys lots of excess capacity on both sides.
Lots of China’s neighbors should be very worried…
No, Pat Brady… It really isn’t.
If the Chinese leadership has a clear-eyed view of their own country, they’ll recognize that their “One Child” policies of fifty years ago are crippling them.
Couple of salient facts: China has no universal “old age pension” system. Couple that with everyone putting all their eggs in one basket, child-wise, and you’re looking at a situation where any major personnel losses in an adventurous war are going to be highly risky for the regime. What do you do, when you have to explain a few hundred thousand dead young men in a Taiwan invasion? Do you think that they’ll take that risk?
Their demographics are limiting their options, and one of the options that’s off the table is losing a bunch of young men, entirely aside from what that will do to their work force.
Like I said, the biggest worry with China is what happens if the regime fails to navigate all the rocks and shoals they’re finding themselves amongst. China ought to be an object of pity, rather than worry… Particularly since they’ve saddled themselves with a gerontocratic leadership that’s entirely delusional about almost everything.
The final denouement will be very, very ugly. I suspect that the entire contradiction-in-terms house of cards will come down, all at once, and in very unpredictable ways and times.
Chinese have most of their savings invested in real estate. Two years ago the fragility of China’s housing market came to light when property developer Evergrand defaulted on its bond payments. Recently, Country Garden, the country’s biggest private-sector developer by sales, missed interest payments on two US-dollar-denominated bonds.
When your largest investment is being threatened by a market collapse, you will not take on additional debt. Even if you were willing, lenders are demanding higher rates. This will curb household spending.
To make matters worse, China’s principal export markets are seeing escalating inflation, causing Europeans and Americans to reduce spending on discretionary items.
Japan’s housing market was flat for more than a decade after rising to unprecedented heights in the late ‘80s and bursting in the early ‘90s. It is possible that China could have a long wait before asset prices recover.
[…] face eight-fold increase in their social security taxes Baldilocks: Evil Twin BattleSwarm: Red China’s New Enemy: Deflation, Red China Is Screwed: Pipe People, and Ruble Now A Penny Behind The Black: Red China’s Long […]
Regarding deflation, people always say it’s a bad thing, and I can certainly understand that there are downsides, but there are downsides to *inflation* as well. Is deflation somehow qualitatively worse than inflation? If so, why? I rather like the idea of prices going back down to sane levels. Even if I don’t get another raise for the foreseeable future, the increase in purchasing power would be nice.
Likewise, if everything gets cheaper, there’s less demand for household subsidies and less of that “we need two incomes to support a family!” twaddle (learning to live within one’s means is apparently a lost art for too many people anymore).
“If China had left things alone, they’d be a hell of a lot better off”
Never in their millenia-long history have the Chinese left things alone, and no one can convince them to. They’ve outlasted dozens of empires doing things their way.
“but with central planners”
The Chinese practically invented central planning. They’re not about to give it up now.