Quote:
Originally Posted by RecentGrad1
China is playing the long game. They are very long-term focused. They wouldn't dream of starting a war they weren't certain they couldn't win, so they are doing the economic buildup first. That and they love money, and there's more money to be made from peace than war right now.
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The long game isn't going to work for them. There's a popular saying going around right now that China will get old before it gets rich.
It's quite true. At this very moment in history, China has the highest working-age population that it ever will. If the UN's demographers are indeed correct, China will lose 250,000,000 workers between now and 2050 as its population rapidly ages. In the meantime, the United States will gain close to 50,000,000 works. So what we're looking at is a rapidly shrinking working population desperately trying to support an enormous senior population.
In fact, if you really want to get a glimpse of coming attractions, look at Japan. Remember in the 80s how everyone predicted Japan was going to be the dominant world economic power? It hasn't happened. Well, now, Japan has a Debt/GDP ratio of around 200%, more than twice that of the United States. More disquieting, Japan's population is projected to actually shrink 25-33% over the next several decades.
In China, conditions are actually worse than those that have created the Japan of today. Japan had a sophisticated banking and credit system, while China's is the wild west with shadow banks, corporatism, and lending that bears no resemblance to good underwriting. Do yourself a favor and Google "ghost cities china" and be shocked at what you see. Cities built from scratch to accommodate populations of a million that are simply vacant and with little prospects to fill them. This is malinvestment on a staggering scale, made even more disturbing when you realize that construction is roughly 25% of the Chinese GDP. What happens to one-fourth of the Chinese economy when the credit markets inevitably collapse and there's nothing to build?
What's more, it's also important to remember that China is a commodity economy. While the Saudis sell oil, China has grown due to cheap labor. But with labor costs rising 20-25% a year, lots of foreign manufacturers are now moving to places such as Indonesia, Vietnam, and India. I know three different manufacturers who have done that in the past couple of years.
Further, unlike Japan, China's tech industry simply lacks staying power. It's important to note that, of all the high tech manufacturing that takes place in China, it is almost all assembly only. With roughly 95% of all technology exports, parts are shipped in and finished products are shipped out.
Finally, evidence abounds that the Chinese have been cooking their economic books for years, wildly exaggerating GDP numbers in order to fit the demands of the Party. Lester Thurow, the Nobel economist, wrote an analysis in the New York Times a few years back that pointed out one simple problem: Chinese electrical production has grown at a rate one-half of that stated rate of Chinese GDP growth. This is an economic impossibility, for you need a roughly corresponding amount of electricity to power machinery, computers, and consumer goods that this uptick in GDP brings.
In short, the contradictions of the Chinese economy are already being seen in a careful reading of the headlines. I would not be surprised to see a cataclysmic meltdown there in the next few years. In fact, I will be surprised if it doesn't happen. In fact, when you realize that a recent poll of Chinese millionaires shows that more than half are making plans to exit China in the next few years, that should tell you everything you need to know. They are quietly buying up real estate wherever they can in places like the United States, Singapore, Canada, and Australia. Plutocrats don't flee countries with a solid economic future.
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