Monday, March 11, 2013

Four Reasons Why I Don't Think China Is On The Rise

Outside of Ancient Rome, and American Culture, I write about Geopolitics, specifically China, since the worlds, and most importantly America's focus is shifting away from the Atlantic and to the Pacific. A lot of individuals think China is going to surpass the United States as the worlds premier super power. I disagree, and I have explained why in the past. I have noticed that the blogger sphere that I follow has gradually become more aware that China's rise isn't in stone and that they don't have America by the balls. But some individuals still think that's the case, and it isn't surprising, even with the Internet it takes a while for information to disseminate across the web. I'm putting this post together as compendium of my posts on China. As always, I could be wrong, but here are my arguments.

First and foremost, demographics. Demographics is destiny, it always has, and it always will. China has a population replacement rate far below the replacement, while the United States hovers around replacement levels, and also, unlike the US, China has people migrating from their country. There is of course debate on the cultural affects of migration, however, I am looking at longer term trends. And considering that the world's fetility rate is decreasing, which means that in the future there will be a competition for human capital, China is not positioned for long term economic growth or power projection. For the last 400 years our economic system has been geared around continued population growth and while technology could break that need in the future that point hasn't happened yet.

China is still an incredibly poor country, with a GDP per capita around $ 8,000, the US has a GDP per capita a little over 6 times that amount. Or to put it in other terms, China ranks around 94th in terms of GDP per capita, and the US could see it's GDP per captia halved and still rank no lower than 40th. This also plays into China's demographic situation, considering that they have elected to continue their demographically suicidal one child policy, as there will be fewer workers to support their elderly. Already it looks like China's workforce has peaked. China is going to get poor before it gets old.

This also brings to light a very serious issue for the Chinese. The Chinese have been acquiring vast reserves in order to sequester enough funds to help them deal with the gradual social instability that an age top heavy society will have. The problem for the Chinese, most of them are in dollars. This is where the concept that China is buying America is exposed for an empty fear.

Even discounting the fact that America has a military that far outstrips China in terms of military ability, the US possess 10 career fleets in active service and two in reserve, the largest nuclear powered submarine contingent, and a web of military bases around the world and the pacific. On the other hand China has only one modern aircraft carrier, only 10 nuclear submarines, and 138 combat vessels compared to the US 260 or so and this doesn't count the 244 Coast Guard cutters responsible for near shore defense.

Why do I mention all this? Because it points that China can't force the US to pay it's debts, or not pay them with depreciated dollars. There is no way China can bring it's army over to our shores and then take what is owed them.

Lastly, while a lot of individuals point out the flaws of a Keynesian influenced, or state directed economy, in the West, they fail to see these same flaws in China. There isn't something magical about the Chinese technocrat that makes their central planning any less likely to end in disaster than when we, the French, or the Russians do it. And like all technocrats they are make short term decisions which will have disastrous long term effects. This has lead to an economy that is severely over reliant on exports, government spending, and real estate. Not only is there some evidence that China has already faltered due to decreased global demand, resulting in them turning away materials imports in some cases. There are reams and reams of documentation and research indicating that China is not as strong as people think, here is a blog called Crisis Maven which hasn't been up to date in a while but lists out a lot of China's underlying economic problems.

So while I could very well be wrong about China not being ascendant but having already peaked, the research I have conducted has convinced me that I am right in my assessment. Ultimately time will tell.


  1. I agree with most of what you said. Demographics are against them, and we currently surpass them in (current book value) military capability. Furthermore (reasonability test, this) most everything made in China is basically crap. If their exported plumbing (copper pipes laden with impurities) is any indication every new piece of military kit they produce should rust out within a couple years when subjected to sea air.

    I lived in South Korea and spent some time in China, back in the late 1990s. They aren't happy people. Being a child in China is a dismal existence, there is extreme pressure to do well in school and they spend all of their time toiling away with no time to either dream or create. As a result, their math scores are high and they are (when they choose to be) first rate copiers. But very low on original ideas. But they don't need original ideas if we're the ones inventing the rope and then handing it over to the proverbial hangmen.

    From a security standpoint consider that during WWII the US virtually brought German industrial production to a halt by bombing the ball bearing factories in Schweinfurt Germany. Today, American industrial production depends on parts made overseas that could be simply cut off. Markets informed by the internet and low cost shipping allow companies to prosper or fail based on a 0.5% cost difference half a world away.

    We are entirely reliant on China for technology. This includes our department of defense which imports the majority of its computer hardware from China. This isn't unforeseen, the Pentagon’s Defense Science Board addressed this issue back in 2005 and made an assessment on its misgivings related to cyber sabotage via hardware. Apparently even the software solution to the cyber sabotage problem is manufactured in China also. They don't need military bases around the world, we've invited them into ours, and that is the next weakest link (following the outsourcing of our industrial capacity, even an ostensibly American company like Boeing imports the majority of its parts). It's so kafkaesque we need a new word for kafkaesque that sounds more mandarin.

    1. Point 1) Agreed. I have an older cousin who does contract work for NASA. At one point they were looking to chinese companies to maufactur their items, however, 95% of what they recieved was garbage. When they finally found a company that could meet their standards they realized it was no cheaper than us home grown manufactuering. They now used a USA manufacterer.

      2) I have seen this as well. One of the saddest moments I experienced when I was talking to a young chinese grad student, who was our translator, and I was talking about how she should visit the US one day. I was then informed about how that would most likely be an impossibility for her. Not because of her test scores, she was bright, but because she wasn't connected. It was a sobering moment indeed.

      Your third point is a very good one. I wouldn't say we are entirely reliant on China for technology, admittedly I find it hard to believe we cannot find US alternatives at all, but it is a major weakness. This is something I expect the US will reverse over the years. But that remains to be seen.

      For the US to maintain it's position it's imperative that we maintain hegemony over space and the sea. Many advanced economies are utterly reliant on global trade, and provided we can be the steward that should act as a buffer. But if we loss our dominance of space and sea, even to the point of parity, then the US will be extraordinarily exposed.

    2. I forgot to also add in my article that 90% of all of Chinas oil imports sales through the Malaca straight, and the vast majority of their material imports sales through the south China sea. The US has the ability to entirely cut off China trade since they have access to only one major body of Water. The US has two.

      The one thing that would through my prediction off base, besides my being wrong about the utter failure that state driven economies end up being, would be if the US either partitioned or experienced major insurrections within it's borders. At this point and time I don't see it, but things can change over the course of decades.


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Seattle resident whose real name is Kevin Daniels. This blog covers the following topics, libertarian philosophy, realpolitik, western culture, history and the pursuit of truth from the perspective of a libertarian traditionalist.