China Is Failing, Not Ascending

I'm going to be out for a week. I'm traveling to a wedding. While, I'm going, I will leave you with this...

Throughout my life, there has always been a boogieman. There was always one before I was born too. Nazi Germany, the Soviets, Japan Inc., China. People in the US pushed the idea that these societies were better organized than us, had a longer-term outlook, outworked us, out-thought us, out-bred us, and would eventually beat us. It was never true. In fact, to believe these things, these people had to ignore so much evidence.

In the case of China, I've been telling you all this since the beginning of the blog. China is a paper tiger. And now, people are finally starting to catch on. What has tipped them off? LINK

(1) China's demographics are terrible. They may (or may not) have reached a billion people but they are now crashing fast. The reason is they don't produce enough kids, their population is aging, and they have 40 million "extra" men (or missing girls) who will never have families. I've always understood China will fall from a billion people to around 750 million, but now the Chinese themselves are estimating it's going to be 587 million. Think about that. Their population is going to halve over the next fifty-sixty years. Imagine if half the people in your town vanished. Think about the economic, societal and psychological effects. Think about the effect on property values, the business environment if half the consumers are gone, and long-term development with half the number of scientists, businessmen and thinkers. Demographics has tripped them up... it always would.

Making this worse, it turns out their lower officials are lying to their central government and their population figures might be overstated very badly. Some estimates say by as much as 25%. That has led to a worst case estimate of just over 400 million. That's the size of the US in about 10 years. So much for world dominance.

(2) For years, we've been treated to article after article about the Chinese economy passing ours. Some pretended to gnash their teeth and then gloatingly claimed they might even have already done it. In the early 2000s, some group tried to sell this idea by re-figuring the Chinese currency based on hocus pocus to add a hidden 25% to their economic value -- and then recommended we better get humble. Yet, somehow China never caught up. Imagine that. And now many are saying they never may. Why? Well, demographics is a killer. But even more, as their currency has gained in value, their economic growth stalled. Why? Because China made its money being a cheap place to put factories. But as wages and the currency went up, it stopped being cheap. It's now cheaper to put a factory in Mexico than China... never mind Bangladesh and Vietnam. So that is where the factories are going. This was inevitable if you understand even basic economics.

Third, China wastes its resources very badly. This is the controlled economy problem. This is why the Soviets could build a decent fightercraft but couldn't produce enough food to feed their people... and why it cost so much to build. The world is just too complex for one person to run it. It takes billions of people making decisions every day to balance an economy. China has tried to do it the totalitarian way which has resulted in ugly, unmanageable cities, civic projects that destroyed more than they helped, fraud, failed economic kickstarts over and over, and a massive debtload. How large of a debtload? There's a really good article that explains everything I'm saying here. Here's the LINK. In it, the author explains how US debt has basically doubled since 2007 whereas China's has gone up 50 times. That's insane, and it's not slowing down. China is trying to buy a perfect future and is bleeding money on boondoggles in the process.

(3) China has no friends either. China has tried for years to buy friends through something called the Belt and Road Initiative. It's like US foreign aid only more direct. The idea is to build infrastructure in foreign countries to bind them to China. Africa in particular has been a recipient of this. The problem is, the Chinese are arrogant. They bring Chinese workers and (abusive) managers, preventing any economic benefits from hitting these countries. They remain secretive, angering these places. And they drive hard bargains for these projects, killing any goodwill. The end result is that China has poured billions into foreign countries with precious little to show for it. Even their plan to hand out Covid vaccines to buy friends turned into a disaster because China's vaccines really didn't work.

(4) China's military is crap too. We hear talk of China's military build up every day. The problem is, they have based their military on building their own versions of Russian garbage. The same stuff getting smoooshed in Ukraine right now is the stuff China is building. The pride of their navy is their third (but really first to work) aircraft carrier. It's based on a Russian design from the 1980s. Keep in mind, the Russians were not known for their naval expertise or their carriers and the ship this is modeled on is so terrible that tugboats accompany it overseas in case it breaks down and sinks. Not joking. The Chinese bought its scrapped sister ship and then built their own two based on its hulk. The new one is the first that's really seaworthy.

The Chinese are building volume. That is true. And they are excellent spies. True. But they have no ability to project their military outward and, even if they did, it would get crushed in a real battle... just like the Russians in Ukraine.

I'm not saying China's not a threat to start a war, but keep all of this in mind the next time some professor or stockpicker tells you about China's inevitability. The only thing inevitable about China is its collapse. The US remains the preeminent economic and military power and we are pulling ahead every day. The reason is economic freedom, individuality allowing creativity, and our cultural mix of seeing ourselves as problem solvers and dreamers. That is what we must defend.