Like a bull in a China shop: China's future is broken

Politics & Elections
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I’ve been saying for years that the stock price of Tesla - essentially giving it a market cap of more than all the other car companies in the world combined - is insane and unsustainable. I still think it is, but the world’s investors continue to prove me wrong.

I’ve also been saying for years that China’s incredible growth has to end, because the base it’s built on has evaporated over time and that it’s going to hit a wall. So far, so nothing.

But some guy I’ve never heard of, Joe Tauke, over at Salon, not only agrees with me, but lays the future out in charts.

The short story. China’s one-child policy has crippled its growth. The replacement rate in cities like Shanghai is the lowest in the world at 0.7. 2.1 is needed to maintain constant population without immigration, which China doesn’t allow. Official Chinese estimates has the population shrinking under 700 million by the end of the century, about half of what it is today. China is already seeing ghost cities. Subtract half the population. Imagine a country filled with Detroits and Buffalos.

And the really eye-popping chart is about debt. The U.S. has increased debt by 220% since 2007, which has everybody jittery although two major crisis precipitated that. China’s debt has increased by 5000%. Try maintaining that with a shrinking aging workforce and increasing antagonism to the rest of the world’s trade.

China is a Potemkim village. Something awful will happen to it sooner rather than later. Add that to your oversupply of worries.

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(PDF link follows.) Technically, China does permit immigration and naturalization. It’s just incredibly severely limited.

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Thank you for posting that, @Exapno_Mapcase . Fascinating.

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I’m not sure I agree with all the pessimistic statements in the article or thread title. It is true demographics have become much less favourable, but this is true of many countries. There are some economic concerns, including real estate and various foreign relations. It is good for much of the US if they continue to use American dollars.

But Malthusian predictions might not fully account for China’s innovation, educated diaspora, ability to mandate change and enact focused policy, nor the basic inaccuracy of forecasts and unknown factors and experts. Immigration policies can change and if so excess housing might have uses. True, after astonishing growth it is natural to plateau and hard to sustain. China has some advantages: rare minerals, influence in places like Africa and South America, technology and fewer restrictions on uses both good and concerning. It needs to improve its reputation quickly, though, and this might take more compromise and humility. There are a lot of other countries that can compete on wages alone. The article makes some good points but it would be hard to be confident nothing else will change as a reaction.

Tesla has always seemed highly valued. The company did get a big win when several big conventional automakers wanted to use Tesla charging stations. A lot depends on future advances in battery technology and whether legislation will force people to buy the electric cars that many don’t currently want.

Japan was shattered in 1945. If at that time, you would have (correctly) predicted its subsequent phenomenal growth, innovative business and America’s role in that - at best, no one would have believed you.

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Many of those advantages are basically artificial. For example, the only reason why it’s so influential in terms of rare earths is because the world economy has collectively been willing to allow it to be. There are plenty of major mineral deposits around the world that could be developed, but haven’t been, because pretty much everybody has been content to buy from China.

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There have been many similar articles written. Here’s one, probably paywalled: The End of China’s Rise | Foreign Affairs

Like @Dr_Paprika I am a bit skeptical of the worst predictions of imminent collapse or doom-spiral. Then again, the idea the Chinese are destined to inevitably conquer the world with their numbers, their ever-increasing collective wealth, and their focused power, is equally specious.

Russia gives us a useful example of on-going decline. They apexed not long after the Soviet Union came apart. It’s effectively been mostly downhill since for 30-40 years. And certainly all downhill demographically with little immigration to offset the local birth dearth.

And yet they certainly matter on the world stage. Yes, mostly as a malign influence, but malign influences have a nasty habit of setting the world’s agenda. The only thing worse than an angry, grasping, declining Russia is an angry, grasping, declining China at the same time.

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The May 13th issue of The Economist was themed around “Peak China”. ALso probably paywalled: Peak China? | May 13th 2023 | The Economist

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A friend of mine is convinced China will soon invade Taiwan, primarily to capture its semiconductor production (but also, of course, to satisfy its longstanding cultural and political beefs). I have no idea if this is remotely likely, but potentially triggering WWIII sounds like something an “angry, grasping, declining” superpower would do.

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They could totally fling open the doors to immigrants, but where can they get enough immigrants from to make a difference? They’re facing a population decline in the hundreds of millions. India’s really the only country that could even start to fill that hole, and there’s no love lost between India and China.

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Speaking of Japan, thirty years ago, “Japan, Inc.” was supposed to be on the verge of taking over the world. But they also got hit with the problems of an aging workforce. They’re not about to take over the world, but they still seem to be doing OK. Any lessons there?

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On account of the thread title, I must link to:

Beethoven’s Wig, “Please keep your bull outside the china shop”

It’s the rule, the way it’s always been, your bull cannot come in!

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Hmmmmmmmmmmmmm… That thread title might in fact predict a different future for China:

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To me, the lesson to be learned from the impending (hypothetical?) crises in China, Russia, India, and Japan, wrt their aging workforce and low birthrate, is diversity of the population. Having an ethnically diverse society enables migration of foreign ethnicities. Japan seems to be very highly racist, if you aren’t full Japanese. China is the same way, but with specific Chinese ancestry. There are ethnicities in China that have lived under Chinese rule for hundreds, if not thousands, of years and are still not accepted in their society. And India, well India has a caste designed specifically to keep the poor people poor, and the entitled ones elite. A system that puts the Jim Crow South and/or apartheid to shame, based on longevity alone.

None of those societies are likely to accept an influx of foreign immigrants (or even some locals) into their society as being equal to existing members. Yes, the USA also has a problem in that regard, but the USA is making great strides (at least, comparatively). Yes, conservatives fight the progress. That’s what conservatives do. They don’t want to change. Unfortunately, the world is changing, with or without them. It’s either change or get left behind. To be a global leader, you have to lead that change, not follow it.

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I don’t think China is going to take over the world or be an unbridled success. But that’s not the contention of this thread.

It is true a difficult language, tradition, complex culture and perhaps a soupçon of arrogance might make immigration more difficult, but people go where there are jobs. It isn’t an impossibility.

There are communist countries where people become exceedingly wealthy. Sometimes through innovation. Other times through corrupt means. I don’t know to what extent this complicates issues like real estate. This might be a danger in China. Foreign policy may yet prove another problem as it could have diplomatic and economic repercussions.

What percentage of the world’s electric cars are made in China? Almost 58%. Is China well-known for prestigious luxury cars? It is in some countries. Are there bright spots in China’s situation? Absolutely. I’m not saying the article just picked darker topics. But the Economist article on peaking China was somewhat more objective. Predicting the future is tough. It doesn’t take much to muddy the waters, make false assumptions, miss important truths or put too much confidence in political phrenology. And sometimes forecasters have their own agenda.

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The best counterargument to the decline of China is to look at the United States. How many times in recent decades have we heard people prophesize the crumbling of America? We lost our manufacturing clout. We lost world respect. We have the worst healthcase system. We’re in an internal war with ourselves. Millennials are too lazy to work. Or Zoomers are. Or Boomers stole everything. What happened to America?

It didn’t happen. Just to tick off a few reasons. America is fantastically wealthy. We lost trillions in ruinous Middle Eastern wars compounded by a completely avoidable banking crisis and got it all back in less than a decade. America attracts more high-skilled immigrants than anybody, back up over a million in the last year. America is the financial capital of the world, and still the core point for venture capital and entrepreneurialism unfettered by the government. America has the best and largest school system, especially at the graduate level, and brings in people who tend to stay in the country. America changes policies with the times, going from globalism in the 1990s, when that worked, toward more protectionism today when that appears to be necessary.

How does China rank on these? It’s wealth in GDP equals America’s but is spread over 4 times as many people. Even so its Gini Index is only a point or so lower. It is not a financial capital, even though it keeps making demands that other countries use the yuan. Instead, it “invests” trillions of dollars into African and Asian countries with the notion of taking over their infrastructure and economy, although it has seen small returns. Moreover, government interference is slowing growth of domestic companies and scaring foreign companies away. What will happen to Tesla’s huge Shanghai plant in the future? China has greatly improved its school system at all levels, but need to do much more, especially if they continue on the present path, which is considering those who go to America for grad schools potentially unreliable. Immigration does exist of course but has been a net negative every year since the Communist takeover. Policy change is slow and gives every indication of becoming more conservative and paranoid.

America has huge troubles of its own, especially a broken healthcare system. China’s does not seem to be better, though, and damages itself by denial as it did throughout Covid. America has a housing crisis, but the problem is too little affordable housing. China has far too much housing in places where nobody will willingly go and far too little in major cities. A shrinking population can ironically alleviate an excess of housing but only at the cost of lost investment and loss of trust in government planning. America contains rich material stores but not enough of the ones needed in the future. China does. Big advantage, although the world will shift over time to narrow the gap.

Nothing would seem to prevent China from settling down to a long-term growth of 2-3% annually, about where the U.S. aims for. That would increase its wealth nicely, especially over a smaller population. But that would never give it parity with America. It would not let China become the world’s foremost superpower, dominate the Asian sphere, and call the shots in other countries. I believe that China has a mindset similar to American exceptionalism, that it must be first in all things no matter the costs or damage that ensues. Looking inward I can see all the American mistakes and see China replicating them.

A broken China is a dangerous China. A paranoid China is a dangerous China. A China without friends is a dangerous China. An anti-capitalist China is a dangerous China. A totalitarian China is a dangerous China.

I’d love to see a China that is recognizing its problems and working to fix them. I see what appears to be the opposite and that’s frightening. None of the analogies given above work for me. I’ll give one you may not like. Israel. A two-state solution is impossible and a one-state solution is impossible, without massive changes in everybody involved. Wishing for massive changes in set minds is no basis for policy.

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The semiconductor industry would most likely be destroyed by an invasion. I would hope that the Chinese leaders would realize that. They might invade for other reasons, but not that one.

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Another factor with rare earth elements is that they are very messy and dirty to refine and many places are reluctant to refine them due to either ecological damage or the expense of preventing that damage while refining them - which would also drive up cost. China doesn’t seem to mind rendering the areas immediately around smelters into wastelands.

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Is this true? China could intentionally avoid targeting the semiconductor plants.
I agree that China will definitely attack Taiwan some time soon-- because it is deeply, deeply ingrained in the DNA of the communist leadership that they must re-conquer Taiwan. (for comparison: Putin believes something similar about Ukraine) But the Chinese are much more fanatical, and have a much stronger sense of pride and much deeper feelings of national destiny.

But during the fighting, China would avoid targeting the semiconductor factories.
Does Taiwan have any plans to destroy them before surrendering?

It would make sense to publicly announce so in advance . as a way to possibly win support from western countries. Let’s face it, from a moral point of view, nobody in Europe or America cares if Taiwan falls, and the public won’t support sending American or NATO troops to die for Taiwan.

But if everybody realizes that they won’t be able to buy a new iPhone for the next 20 years because the chip-making factory is in ruins…well, that might make them mad enough to fight.

But I’ve never heard any public discussion of blowing up the factories.

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Do these scenarios imply a belief that continued growth is good? I am reminded of Edward Abbey’s adage, to wit, “Growth for the sake of growth is the ideology of the cancer cell.” Is growth the only winning scenario?

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A great post overall. Thank you. And one with which I largely agree. Surprise! :slight_smile:

Ref the snip just above, it’s instructive and sobering to substitute “USA” for “China” in there. Either one of us could become the world’s worst nightmare if enough goes wrong upstream to drive us down that path.