China is in really big trouble.
Trouble is a brewing in the middle kingdom, and for some reason not a lot of people want to talk about why. I actually spoke to someone not too long ago who said ‘Pretty soon, China is going to own us all’. I’ve heard similar messages from Jon Stewart, jokingly referring to China in regards to the debt ceiling crisis of last week. ‘What’re we going to do if China comes knocking on our door looking for us to pay their bill?’
China’s had a pretty good run the past little while. We are generally in a time period where China’s influence and power (which I would say is mostly perceived power, rather than actual ability to impose power) is going to decline. Like an old man getting into a bathtub, China is slowly going to sink away.
Let’s examine three types of power and see how China stacks up.
1. Military Power
China's One Air Carrier
And.. it’s ONE ship! It will take generations for China’s navy to rival Ecuador’s, and only if they pour a bunch of cash, research and development into it. Which they won’t, because they’re a very weak…
2. Economic Power
China is running a game plan of disaster at the moment. The entire stability of the country is dependent on the creation of jobs (for those 400 million people who do have a job) and economic growth. That’s the plan, to grow the economy. They’ve been doing that now for the past few years, sometimes at insane rates. 12 percent, 10 percent per year! That can’t continue forever, and perhaps the gravy economic growth train has expired already. China’s growth rate was 6.1 percent in the first quarter of 2009, down from 6.8 percent prior. It’s even been suggested that China’s growth rate was 0 or slightly in the negatives, but has been covered up by very sneaky banking practices. Stratfor lists three ways on how China is still a country at the moment:
- Supporting export industries;
- encouraging, via rewards or threats, the maintenance of employment levels by companies (even if this is unprofitable, contributes to overproduction, and delays or avoids the weeding out of the weak and inefficient in the Chinese economy), and
- large-scale state spending (directly from government coffers or indirectly through a loan surge from major state-backed banks) designed to boost infrastructure development and underwrite a rise in domestic consumption of large items like automobiles and major appliances.
Basically, they’re funding inefficient companies to keep their employees hired, even though the profit margins have evaporated. It’s now cheaper for Mexican workers to make stuff over Chinese workers. The government has been spending cash reserves, or worse, issuing loans through the three major Chinese banks at interest rates which are manageable, but only when the economy grows at 5 percent or higher… not at a 2 percent (or 0 percent) growth rate like it is right now. To cover this up, they mimicked the US Housing bubble plan and threw in a bunch of toxic debt together, guaranteed it to get investors to INVEST in the crap, even though it’s pretty much doomed to exist. But it looks good right now, and it’ll be fine so long as the Chinese economy keeps growing, which it won’t because the Chinese government is very weak with…
Political Power
Remember those billion people in the interior of China? They’re not very happy. London recently had some riots because of a bunch of unemployed and underemployed youths. Iran and the Arab world recently experienced riots, mostly by disenfranchised young people. You don’t want a country filled with young, unemployed men. It’s a recipe for disaster, which China has been brewing to… just the perfect amount. That billion people have already exhibited signs of discontent with the Chinese government, who has cracked down hard on them. If members of that 400 million start losing their job, which they should have already since China is running an economy based on a failing plan, then there’s real cause for concern. The Communist Party of China needs a new plan, since time has almost run out on their old one.
- Riots in NW China
These three weak components of the Chinese state are compounding. That, along with their strife with Tibet, Xinjiang Province and Taiwan are pusing the state to a brink. Most likely the Chinese state will collapse, but probably not in the next 20 years and not before their security apparatus has the chance to silence hundreds of thousands of people and their foreign intelligence steals as much as they can from other countries in order to keep their faulty economic engine chugging along.