Update: China’s Great Leap Backward
China Enters a Stage of Vulnerability
Here are some vulnerabilities, all of them affecting China’s economy and the Communist dictatorship’s ability to project power.
Corruption challenges the dictatorship’s legitimacy. Managing the complex economy and addressing social and environmental problems test its technical credibility. China can no longer supply itself internally. It must import resources from Asia, Africa and the Americas. Communist legacies like state-owned enterprises employ people and party loyalists but they eat capital. Modernizing China’s military to rival the U.S. has bled red ink and matching the Pentagon’s might is not assured. Strategypage.com recently observed that corruption and mismanagement “cripple” China’s armed forces. __ Source
China’s greatest vulnerability is a growing inclination of party leaders to “go full Mao,” and nationalise its private enterprises, reversing Deng’s economic reforms from the 1970s.
China rose in economic might for four decades because of Deng’s economic liberalisation. During that time it enjoyed almost unfettered access to western investment funding and advanced western technology. China invariably stole every bit of intellectual property and advanced technology it could get its hands on, grew wealthy, then set a course to become the world’s most powerful nation. But communist henchmen do not necessarily make the best capitalist profit-makers, and a certain amount of corrupt buggery seems to have brought much of this grand project into question.
US President Trump understands a large part of the “China Swindle Game” and seems determined to change some of the rules of the game in order to spank the cheating swindler named Xi.
One Reason Trump Was Elected in the First Place
As seen in the graphic above, allowing China to cheat on trade with the US since it joined the WTO in 2001 directly caused a massive loss in US manufacturing capacity and US manufacturing jobs. Bush Jr. and Obama told Americans that this would be “the new normal,” and to get used to it. Displaced manufacturing workers were told to “go take some programming courses.” Skilled trades workers do not have fond memories of either Bush or Obama and were receptive to Trump’s campaign pledges to bring jobs back to the US.
Trump Wants Fair Trade Not Free Trade
As a result of Donald Trump’s gradual ramping up of tariffs against China in response to Chinese cheating/pirating/theft/espionage, companies are already beginning to move away from China.
A good friend of mine has a small business in Manhattan designing and selling high-end raincoats in the US. He has been manufacturing them in Vietnam. He stopped making them in China a few years ago because labor costs have been rising there, while they remain low in Vietnam. He told me he was shocked recently when his Vietnamese vendor had to lengthen delivery schedules from four months to six months because it was swamped with orders that used to be filled in China prior to Trump’s trade war. __ http://blog.yardeni.com/2018/10/chinas-syndromes.html
Vietnam is one beneficiary of China’s “day of trade judgment” under Trump, but there are many other poor nations in Asia — and less poor nations such as Mexico and Canada — who are likely to benefit. As noted in the above excerpt, this manufacturing trend to move out of China was already underway before the election of Donald Trump, but has accelerated since Trump began evening the trade playing field with China.
China Workforce Shrinking, Pushing Cost of Workers Upward
China’s demographic transition under the “one-child policy” guaranteed that eventually China’s workforce would shrink — and that process has already begun.
With rising costs of labour plus the addition of Trump’s leveling tariffs, Chinese manufacturers will be squeezed in the new global trade milieu in the quest to make a profit.
Xi is Betting that Trump Will Blink First
China’s Xi understands that his dreams of global domination rest upon economic projections that are ten years old or more. After the 2007-2009 global slowdown, China was forced to rely more and more on internal economic stimulus — the notorious “China Bubble” — in order to maintain a facade of growth. This massive ongoing internal stimulus has exploded along with Chinese debt over the past ten years, and is likely to continue until both internal turbulence and external pressures bring about a horrific deleveraging for China — and for all nations and corporations that have tied themselves too closely to China.
In the US, most of the media, political opposition, deep state, activist groups,and academia, have been working in treacherous fashion to destabilise the Trump administration — which heartens Chairman Xi very much. But the US government is very large and carries a great deal of clout and momentum, which President Trump seems to understand well enough to push through many of his economic and regulatory reforms. The early success of some of these reforms accounts for improved US economic performance overall, and for Trump’s ability to achieve trade reforms with Mexico and Canada — among others.
Now China’s prosperity is being challenged from both inside and out:
China grew to prosperity in part by embracing market forces, said Wu Jinglian, the 88-year-old dean of pro-market Chinese economists, at a forum last month. Then he turned to the top politician in the room, Liu He, China’s economic czar, and said “unharmonious voices” were now condemning private enterprise. __ https://www.nytimes.com/2018/10/03/business/china-economy-private-enterprise.html?
Trump’s leveling tariffs would not hurt China half as much as China abolishing its private enterprises.
China Wants the World More than the World Wants China
China’s economy has provided a significant boost to raw materials exporters in both the third world and in the emerging markets. But an artificially boosted economy such as China’s can only play such a global role for so long.
The One Belt One Road initiative is just another artificial economic stimulus — this time using loans to failing nations to gain economic leverage outside of China. It is a tricky game, leaving much anger and a growing sense of betrayal in its wake.
As Trump continues to step up the leveling tariffs against China, he may eventually reach the tariff that breaks the Xi-dragon’s back. China’s elite is not united behind Xi on this issue. They do not wish to go down with Xi and his cronies. The new age of Chinese warlords may be almost upon us.
Remember: China is dependent on outside interests for most of its vital supports: food, energy (esp. oil), clean water, materials, etc. That is on reason for its militant attitude toward its neighbors in the South China Sea. Militarisation of the illegal S. China Sea artificial islands, and attempts to limit sea navigation in international waters, have put China on a fast track to military confrontation. Obama could be easily bluffed by Xi, but a stronger president in the White House may have a stronger spine. Putting pressure on China’s thieving path to global power is just one play in the game which might insert a harsher reality into the evil Dr. Xi’s fantasy plans for global domination.
Japan is Moving Toward Robots
This story about a new Japanese humanoid construction robot provides a small hint about the future of the Japanese workforce and military force. Japan has been investing heavily in robotic technologies for several decades now — since the 1950s. The same transition seems to be happening in South Korea and Taiwan in response to their shrinking workforces.
China’s need to provide a semblance of economic prosperity for large numbers of Chinese — to prevent internal civil unrest — makes it more complicated for China to transition to a mixed human-robotic workforce.
Hope for the best, prepare for the worst. Believe nothing in the media, since Chinese investment and influence have grown significantly within that rotten sector.
Practice being Dangerous. It is likely to come in handy someday.
More: For an interesting look at US mistakes in trading with China over the past 30 years, see here
Tradeable shares in Chinese manufacturers, such as Lenovo, fell by double-digit percentage points on Friday after the allegations of infiltration of the manufacturing chain by the country’s government. __ https://www.thenational.ae/opinion/comment/the-russian-hacks-were-a-joke-but-china-s-are-no-laughing-matter-1.777713