China’s Lost Decade

… China’s economy is the slowest it has been in decades. It had to slow, just the way Japan’s economy doubled every ten years from the ashes of World War II to become the second largest in the world, and then crashed in 1990 starting Japan’s “Lost Decade” (the Nikkei crashed more than 80%).

… The three drivers of immediate concern for this potential catastrophe are the following: their massive credit expansion, African swine fever, and a Fall Armyworm infestation. Longer term items that threaten a stable China are a rapidly aging population and soon to be shrinking work force, the inability to restructure bloated and inefficient companies, an asset/real estate bubble similar to what Japan experienced, and increasing competition in manufacturing driven by robotics. The restructuring issue is an interesting one, because the Chinese Government prevents companies from downsizing their labor force. Many companies have systemic and unsustainable fixed labor costs that can’t be restructured lest the companies be criticized and punished by political authorities. __ https://www.forbes.com/sites/christopherburnham/2019/07/19/chinas-lost-decade/#510fee9a4315

China’s “economic miracle” of the 1980s, 1990s, and 2000s, was based upon a unique set of circumstances that have long since passed away. Now is time for “the reckoning.” China’s lost decade — like Japan’s — can easily stretch far beyond a single decade to almost half a century or more.

Looking at alternative measures of GDP growth, China’s economic performance appears worrisome.

Foreign companies’ exports from China grew a tepid 1%, and power generation, an indicator of manufacturing strength, increased a moderate 3%. Cars and cellphones both saw declines in production, and output of robots, which were hit by additional U.S. tariffs, fell 10%.

“Investments in the industrial sector continue to be lackluste…” Car sales fell 12% in unit terms.

Uncertainty over the labor market is casting a pall over consumer spending. New hires in urban areas during the first half totaled 7.37 million, down 2% on the year. The declining birthrate is reducing the number of young people ages 18-30 by 10 million every year, also weighing on consumer spending.

__ https://asia.nikkei.com/Economy/China-slowdown-pressures-Xi-as-goal-of-doubling-GDP-fades

The inbred sickness of China’s economy has been papered over until now by foreign direct investment and technology transfer — along with a massive government misallocation of resources into the zombie enterprises.

… by resorting to piling on the debt in the past to avoid a reckoning, technocrats have made the debt situation now too big to solve.

Technocrats, at this point, have run out of options. There is only one way out for them: create GDP faster than debt. That is not something they have been able to do in years, however.

If the defaults are at all significant, which they appear to be, then it is a signal that China’s economic managers are losing control. __ https://nationalinterest.org/feature/chinas-debt-debacle-68417

Bad investments and rotten loans can be hidden for only so long — even in a totalitarian economy such as the communist Chinese dictatorship. Slowly China is closing the noose around its neck.

Internet censorship has been tightened. Those voicing unacceptable thoughts on social media are admonished by a call or visit from security officials. Publications have been transformed or closed and the media has abandoned any attempt at independence. Oversight of book publishing has gone from the government to the CCP’s propaganda department. Religious persecution has risen as Beijing seeks to forcibly “Sinicize” different faiths. Party cells are being established in businesses and political education is being reinstated in schools. A million or more Uighurs and members of other groups have been forced into harsh reeducation camps. Beijing is slowly squeezing the civil and political freedoms long accorded residents of Hong Kong.

Taken together, these actions suggest an extraordinary agenda, seemingly recreation of the sort of totalitarian state last seen under Mao. __ https://nationalinterest.org/feature/1984-china-edition-68082

Overseas Chinese in Hong Kong and Taiwan (Republic of China) can see how the tea leaves are blowing in the wind. And they do not want to submit their bodies and minds to the abject and oppressed state of decline which the mainlanders suffer.

For those of us who live in or work in Taiwan, the link between Beijing’s hardened stance on Taiwan and Hong Kong’s extradition law proposal is quite obvious. Most Taiwanese, including those who vote for the KMT (now in opposition), enjoy the freedom and protection of rights that comes with the democratic system, and there is no desire to give that up. __ https://asia.nikkei.com/Opinion/Hong-Kong-protests-inspire-Taiwan-to-amp-up-resistance-to-China

Mainland Chinese can sometimes get their families and their money out of China, if they have connections. Of course, 90% of China’s millionaires are children of high officials, so the nepotism in the middle kingdom is severe. But capital flight and brain drain also operate among outsiders who can manage the obstacles.

China has big problems

Hong Kong knows China better than almost anyone

Trump may be the first US president to see through the smoke screen.

China’s shadow system of global debt slavery haunts large part of globe. Remember, 90% of China’s millionaires are children of high party officials. This is bad enough when practiced inside China with zombie enterprises and ghost cities. When applied to the rest of the world the resulting misery will be incalculable.

Stepping on China’s House of Cards

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4 Responses to China’s Lost Decade

  1. JerryO says:

    Great article, as always

  2. Dave says:

    You blog a great deal about China’s human-rights abuses, and I’m sure most of what you’ve heard about their treatment of dissidents, religious minorities, etc. is true. Saddam Hussein committed far worse abuses in Iraq, which is why I vocally supported the 2003 invasion — why not give freedom and democracy a chance?

    Well, now I know better. Sometimes a brutal regime is only doing what’s necessary to maintain some semblance of order in a nation full of immensely stupid, evil, and insane people. Now I can’t even be sure that our ancestors burning witches and heretics at the stake wasn’t a net good for society. Perhaps some people are so toxic that only a fiery death can put them out of our misery.

    • info says:

      @Dave
      Perhaps. But proper enforcement of justice along with use of the death penalty for the most insane and evil people like serial killers and so forth will do the job over time.

      • Dave says:

        If those “insane and evil” people are few in number and poorly organized, you can remove them from the gene pool “over time”. If they are numerous and belong to powerful tribes, you have to wipe them out before they slaughter you and your whole tribe.

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