China’s Economic Slump Less Dangerous Than Russia’s
Like the United States after the Great Financial Crisis in 2008, a Chinese financial crisis will lead to a nasty recession but not an economic collapse. GDP growth will likely recover after a year or two, cushioned by a weaker exchange rate, liquidity injections, and a large state-owned sector that will keep ticking over. __ S. Joske in War On the Rocks
China is on the path leading to an aging population that largely has failed to achieve wealth or security — growing old before growing rich. Russians, on the other hand, just want to survive.
Over two thirds of Russians are very concerned about constantly rising prices (up 11 percent since 2017), growing poverty and inflation. In addition to increasing unemployment many who still have jobs are not getting raises. With an inflation rate of over five percent that means those with static pay are getting pay cuts (less purchasing power). For ethnic Russians there’s another sense of loss. Since 1991 the number of ethnic Russians in Russia and former parts of the Soviet Union has declined by 17 million. __ Strategy
Because of western sanctions, Russia is forced into a closer alliance with China, but such an alliance is a double-edged sword. China has not renounced its claims on large swaths of Russian-held territory. As we have seen from China’s debt diplomacy in Sri Lanka and Pakistan, China is quite willing to take territory, infrastructure, and advanced technology in exchange for debt payment.
China… has a more powerful military than Russia (for the first time in centuries). The Chinese lead is growing and unlike the United States or NATO, has very real and recently (1970s) fought over claims on Russian territory (the Far East and parts of eastern Siberia). China has very deliberately never renounced these claims, not after the Chinese communists took over China in 1949 and not since. Now Russia is increasingly economically dependent on China, a condition that is getting worse for Russia and appears headed for China getting its disputed territories back via economic not military conquest. __ Source
China’s Internal Problems May force Party to Display Power on the International Stage
The Chinese stock markets are vulnerable to a large number of economic shocks. As US President Trump ratchets up the pressure on China’s many dubious trade practices, any number of dominoes may fall.
China has spent most of its history disunited, reflecting its geography. It has a number of widely dispersed economic centers. It was in outright civil war as recently as the 1960s. If competition between political factions remains unresolved, a civil war could develop, leaving China as a battleground where Russia, Japan, and the United States seek to influence the outcome. This scenario would stall or even end China’s rise as a global military and political power. __ WOTR
Problems with Dictatorial Rule
Both Russia and China are dealing with debilitating pollution and toxic buildups in the soil, groundwater, and air. Unlike in more representative forms of government, in dictatorships the environment is given a back row seat — if it is given any seat at all.
Another problem dictatorships tend to have is the inability to understand the true state of their economies, due to top-down economic policies and state (or crony) ownership of a large part of the economy. When a crisis arises in such an economy, the correct economic response may involve choices that conflict with overt or covert government policies.
Russia’s greatest resources are its energy and mineral wealth, at this time. China’s greatest resource is its intelligent and ambitious people. Neither nation is in immediate danger of collapse, but Russia’s growing dependency on China — and China’s growing dependency on debt — can make for a rickety ride with chaotic emergent effects. Many of these unpredictable effects would have global repercussions.
More on China debt bubble:
The unique aspect of the current global credit bubble is that China has emerged at its epicenter. Since 2008, China has created the world’s largest M2 money supply, the world’s largest and most grossly mismarked banking assets, the largest global trade with the rest of the world, the second-largest GDP, and the world’s largest credit-to-GDP imbalances. __ Valuewalk
Several more revealing charts at Valuewalk link above.
Before 2008, China grew its economy via exports, technology transfer, infrastructure buildup, and imports which directly fed the export economy. Since 2009, China has been a stimulus-led economy, relying on massive government stimulus — much of which has been misallocated to an overproducing state owned sector. As the “cat continues chasing its tail,” and the China debt mountain just keeps growing, increasingly bad options will present themselves — including the option of going to war.
HFTB-PFTW. It is never too late to have a Dangerous Childhood © .