Is China a paper dragon?

[Skywalkre]

This excerpt from a recent JRE podcast hit my feed a few days ago and it caught my attention.  Largely because this guy is the first person I've seen in mass media to address the coming issues of a shrinking and aging population on the future of the global economy.  This is the first thing he touches on, but... he touches on a whole lot more than that in the rest of the vid (less than 15m to watch).

I've never heard of the guest before.  Zeihan is apparently a 'geopolitical analyst' who does some work with the DoD, spent over a decade in the private sector intel world, and has written several books over the last decade+.  Given his background and education he likely has a lot of sources in key positions to come to the conclusions he does. 

Still... the conclusions in this brief excerpt are out there.  They seem too good to be true (I've been bringing up the West's failed approach to China for years here on TN).  There are also so many questions and thoughts raised from just this brief excerpt.

- If China's labor costs have risen that much and Mexico offers cheaper and more technically capable labor... why haven't companies across the world abandoned China?  Does initial investment in infrastructure lock down companies that hard?  What would it take to get companies out of China if the stats he throws out are remotely accurate?

- His take on the Chinese education system just sounds like an old cliche about China.  In recent discussions about various scientific topics I've seen China mentioned as the leader in some areas and quickly catching up to the Western world overall.  Are these advances just from Western-educated Chinese who have returned or how much is due to advancements in China proper?

- He seems to downplay the growing Chinese military that from every other source I've seen is drastically increasing in capability and, more importantly, the experience to use that capability.

- At the same time he seems overly confident in the West's leadership and capability in contrast to a deteriorating political situation here in the US.

- Does his analysis of the dysfunction of Xi's leadership and government match up with what other experts say?

- His analysis of the health of the Chinese population vs the US contradicts what experts in that area have said (in particular what Prof Osterholm said on the JRE podcast at the start of the pandemic).  I wonder if that hinges on this 'everything we get from China is a lie' idea that is common when discussing China?

For sure there's a lot of hyperbole in this excerpt... but at the same time I've seen several of these claims from time to time over the years.  In fact several of our European commentators have mentioned some of this stuff in recent memory when China has come up.

So... what do folks think?  Is this guy just really out there or is his crystal ball on the mark?

 

Edited January 10 by Skywalkre

[Ivanhoe]

He has a tremendous level of certitude in his own analyses. The vast majority of folks who make predictions about geopolitics, geo-economics, etc. turn out wrong regardless of certitude. That said, many of his observations are good, but extrapolating them is a fool's errand*.

One thing to ponder is, what is the working definition of "China" in this context? The "China" discussed and dismissed circa 1980 no longer exists, but one can still get a visa.

* Recall the predictions of Lester Thurow...

[lucklucky]

Not even viewing the video the basics are wrong. A 1B person country is never a paper dragon...

[Steven P Allen]

Just an observation on manufacturing:  as I understand things from a small, specialty manufacturing niche, when a company takes manufacturing to China, all the tooling/jigs/plans/methods become property if . . . some facet of the Chinese economic system.  This is supposedly true EVEN IF the whole apparatus pre-existed taking the manufacturing to China.  With trivial exceptions, none of is allowed to leave.

Therefore, taking manufacturing somewhere else requires a massive re-investment in the infrastructure of of the process.  There are points in the process when it might make sense:  new products, new and improved versions, and so forth, but, apparently, no one can pick up their property and ship it to Mexico (or anywhere else) to set up a new shop.

And the d@mned fools who signed these contracts need to be shipped to China to snuggle up to their tooling permanently.

[Burncycle360]

I've been hoping Rogan would have Zeihan on for a while now because his model covers aspects that a lot of people don't consider (demographic and economic), so I was excited to see this one.

If this is the first you've heard of him, I would definitely check out his other presentations over the years (available on youtube), because he explains some of the stuff regarding the demographic, economic and supply side situation much better with the aid of graphics that doesn't come across as well on this particular interview without those aids, and it's very compelling stuff.

He presents to various organizations, tailoring his overarching model and short to mid term predictions to their particular needs. As a result, you'll hear some of the same stuff but said in a different way, but it's still worth checking out because sometimes he'll make a comment in one and not another that provides useful insight.

He derives his model from first principles and then puts the pieces together, rationalizing the potential ramifications regarding the global situation and explains it very well.  You'll find his perspective is very "big picture" and he's not a military guy, so some of the stuff he goes into regarding that aspect may be a bit simplistic from our perspective, but he has a lot of esoteric information on the economic side of things and you need both if you're going to have a comprehensive picture of the global situation and where things are trending, so his perspective is a very useful tool to add to the arsenal, IMO.   Obviously predicting out into the future from these complex systems is like predicting the weather or climate, so things can change, but that doesn't necessarily neutralize broader trends but rather accelerates or decelerates them.

I'll have to take his word on a lot of it of course,  but he's definitely appeared to have done his due diligence,  and who else is publicly offering perspectives from a similar lens?  I haven't come across anyone. This is the sort of stuff you'd think is generally accessible only to gov as part of intel community or corporate think tanks behind a paywall, so it's great to have a glimpse into a this world.


Now if only Rogan could get Thomas Sowell on before the world loses him...

 

Edited January 10 by Burncycle360

[glenn239]

China the 4,000 year old society has 10 years left.  Thanks for posting that, good to know.

[Burncycle360]

13 minutes ago, glenn239 said:

China the 4,000 year old society has 10 years left.  Thanks for posting that, good to know.

You sure socked that strawman

[DB]

Saw a youtube short, can't recall if it was snipped from Joe Rogan and it may even have been from this interview which noted that China is potentially far more sensitive to sanctions than Russia is, specifically sanctions on staple foods. This was in the context of preventing Chinese adventurism is Taiwan, I think.

In short, a China that has its food imports stopped cold (it was claimed) could lose 500 million people in a year.

A report I found online notes that China produces about 620 million tons of "grains" and imports a further 165 million tons of all types (with soybeans being included as grains).

If one considers that grains are the majority of food calories consumed, then a 20% reduction seems large but would be far from catastrophic to us - given that we generally over-eat anyway - but it seems to be an insufficient shortfall to cause the world's biggest ever famine, and that's even before any notional sanctions collapse due to bleeding hearts.

[lucklucky]

5 hours ago, Burncycle360 said:

I've been hoping Rogan would have Zeihan on for a while now because his model covers aspects that a lot of people don't consider (demographic and economic), so I was excited to see this one.

If this is the first you've heard of him, I would definitely check out his other presentations over the years (available on youtube), because he explains some of the stuff regarding the demographic, economic and supply side situation much better with the aid of graphics that doesn't come across as well on this particular interview without those aids, and it's very compelling stuff.

He presents to various organizations, tailoring his overarching model and short to mid term predictions to their particular needs. As a result, you'll hear some of the same stuff but said in a different way, but it's still worth checking out because sometimes he'll make a comment in one and not another that provides useful insight.

He derives his model from first principles and then puts the pieces together, rationalizing the potential ramifications regarding the global situation and explains it very well.  You'll find his perspective is very "big picture" and he's not a military guy, so some of the stuff he goes into regarding that aspect may be a bit simplistic from our perspective, but he has a lot of esoteric information on the economic side of things and you need both if you're going to have a comprehensive picture of the global situation and where things are trending, so his perspective is a very useful tool to add to the arsenal, IMO.   Obviously predicting out into the future from these complex systems is like predicting the weather or climate, so things can change, but that doesn't necessarily neutralize broader trends but rather accelerates or decelerates them.

I'll have to take his word on a lot of it of course,  but he's definitely appeared to have done his due diligence,  and who else is publicly offering perspectives from a similar lens?  I haven't come across anyone. This is the sort of stuff you'd think is generally accessible only to gov as part of intel community or corporate think tanks behind a paywall, so it's great to have a glimpse into a this world.


Now if only Rogan could get Thomas Sowell on before the world loses him...

 

The fact that he is the only one to do it - taking your word - is not a valid point to consider it.

[Burncycle360]

Obviously his delivery is hyperbolic, but the logic checks out: China, as we know it, is coming to an end.

 

The bubble is bursting and we're looking at a population reduction on the order of hundreds of millions -- the coming food shortages (exacerbated by the global fertilizer shortage and swine flu) and energy shortage is just accelerating this  but it was coming anyway. He's not wrong that Mexico is being seen as the new source of cheap labor and companies are shifting away from China.

 

That doesn't mean they aren't still dangerous, whatever China becomes in the wake of this they're still a nuclear power, but Russia turned out to be a paper tiger conventionally and China must know any move on Taiwan would likewise be utterly one sided. That's dangerous, because with the internal unrest that is coming it means Xi will really want to make a falklands like move to distract the population with nationalism. Even if he can't win (and he can't) it doesn't mean they can't make Taiwan lose too.

 

Edited January 11 by Burncycle360

[TrustMe]

The above is why I intend to go live in a scotish island with a crossbow and six months supply of food and water.

[FALightFighter]

17 hours ago, glenn239 said:

China the 4,000 year old society has 10 years left.  Thanks for posting that, good to know.

I didn't watch this video, but I have read 2 of Zeihan's books and listened to a number of his presentations on Youtube. His assertion is not that Chinese society will fall apart, but that the economic participant in the current global economic system will not be able to maintain anything like its current status.

17 hours ago, Burncycle360 said:

You sure socked that strawman

🤣😂🙃

32 minutes ago, TrustMe said:

The above is why I intend to go live in a scotish island with a crossbow and six months supply of food and water.

Get where you can grow your own food, load your own ammo, and isolated enough that the barbarians won't easily find you!

[Murph]

Beware as China gets desperate watch out for more bioweapons being released but worse than COVID.  Also a desperate commie country is really dangerous, especially if they do have nuclear weapons.

[lucklucky]

8 hours ago, Burncycle360 said:

Obviously his delivery is hyperbolic, but the logic checks out: China, as we know it, is coming to an end.

 

The bubble is bursting and we're looking at a population reduction on the order of hundreds of millions -- the coming food shortages (exacerbated by the global fertilizer shortage and swine flu) and energy shortage is just accelerating this  but it was coming anyway. He's not wrong that Mexico is being seen as the new source of cheap labor and companies are shifting away from China.

 

That doesn't mean they aren't still dangerous, whatever China becomes in the wake of this they're still a nuclear power, but Russia turned out to be a paper tiger conventionally and China must know any move on Taiwan would likewise be utterly one sided. That's dangerous, because with the internal unrest that is coming it means Xi will really want to make a falklands like move to distract the population with nationalism. Even if he can't win (and he can't) it doesn't mean they can't make Taiwan lose too.

 

None of that makes any sense. Chinese society is far from being fully optimised. Technology improves and makes food and energy easier not more difficult. Less people will hit the growth that came from population growth or in case of Chinese stable population but nothing drastically, old people do not consume that much.

China might reach a plateau but not a catastrophe.     I am not dwelling with political and cultural changes that might put the CCP at risk and the reaction and or pre-emption to that.

[Ssnake]

I understood his remarks as an observation that China's position is fragile and that it depends on international shipping more than other regions of the world. At the same time nobody has a clear idea about the consequences of sustained global population shrinkage because we never experienced that in semi-recent history. But the shrinkage is coming, and it'll be coming sooner and more drastically than people think.

The current situation of the European economy may be a preview of what's to come - a population ready to consume paired with an industry that has trouble keeping up with demand (labor shortage causes supply chain disruptions); the result: Inflation (not the least because the ECB has purchased so many state obligations, it just can't dump them on the market, and as a result deficit spending will go on for a good while).

[lucklucky]

How  Europe without shipping? Or US?  The vulnerability of China to shipping is the US Navy SSN's and carrier groups but that has been a constant, nothing new.

Europe lost million of people in a short notice in I World War and Spanish Flu.    Then II W War.  Then China had their own losses in WW2 and then the Communist genocide of Great Leap Forward. Things are much better today to handle a natural draw down. Caveat are people expectations and the political/media class actions and that the draw down will be long.

You can say that inflation is the result of debt that elected political/media class made to propel growth in face of stagnating/dwindling population in West. An occurrence that is naturally anti growth. 

Edited January 12 by lucklucky

[DB]

In a US-China conflict, how much hope would China have of interdicting oceanic transport in the Atlantic?

This question is entirely rhetorical.

[lucklucky]

None. But the discussion is the coming "collapse" of China. 

Naval interdiction equation for both sides have not changed. US+EU have a much bigger navies and can control the seas. That was true 30 years ago and true today so it is not a new factor.

[TrustMe]

5 minutes ago, lucklucky said:

None. But the discussion is the coming "collapse" of China. 

Naval interdiction equation for both sides have not changed. US+EU have a much bigger navies and can control the seas. That was true 30 years ago and true today so it is not a new factor.

 

China has the biggest navy in the world by numbers. The USN still outnumbers it on a per tonnage basis.

[lucklucky]

Yes. But USN is an oceanic navy. China is only starting.

[Burncycle360]

China doesn't have nearly the ISR either, frankly after Russian performance in Ukraine it surprises me that anyone still thinks strength on paper means a thing. 

 

Best practice for planning purposes for sure, but in reality it would be over in less than a week.

 

The only wildcard is does China go unconventional after, just to make it a pyrrhic victory for the west.

[Ssnake]

6 hours ago, lucklucky said:

How  Europe without shipping? Or US? 

Neither depend on food imports as much as China does.

Again, I think the talk of an inevitable Chinese collapse is a strawman. The interview with Joe Rogan had a number of caveats, like, China trying to take Taiwan by force and the consequences of a following US naval interdiction campaign. He basically said, they won't do it because they know their own vulnerability, and this would be the consequences. He also said, with a single-man rule you never know if Xi might not act against the interest of his own nation.

[Ivanhoe]

3 hours ago, Ssnake said:

 He also said, with a single-man rule you never know if Xi might not act against the interest of his own nation.

Considering the periodic bloody nose China gets when they invade Vietnam, its to be expected.

 

[FALightFighter]

18 hours ago, lucklucky said:

None. But the discussion is the coming "collapse" of China. 

Naval interdiction equation for both sides have not changed. US+EU have a much bigger navies and can control the seas. That was true 30 years ago and true today so it is not a new factor.

You need to read Zeihan's books, and watch several of his long-form presentations. He talked for over an hour to the Maneuver Warfighting Conference in March 2022, its posted on Youtube. I'll admit that I didn't listen to his discussion with Rogan, but his overall argument is convincing.

To answer your question about the US and EU, he is also fairly negative on the EU. In his analysis, the US (really, NAFTA, including Canada and Mexico) could be much closer to self-sufficient with much less global trade. But he is also fairly negative there, too, at least in the short term. I can't quote, but he says something like it will take the US until the mid-2040s to get back to the situation of 2019, and that is best case scenario in terms of timing, making the right choices (and the Biden administration has already delayed self-sufficiency in energy, etc), and global conflicts. And that's for the US/NAFTA, which is in the best geo-demographic situation of anyone. Everyone else is worse off, to the point that Zeihan predicts that no one else will be able to return to the 2000-2019 peak of globalized productivity.

My summary, like I said, its better to read the book.

[lucklucky]

Predictions to mid 2040?! those usually don't work well...  what technologies he predicts for 2040 and what impact that makes?  materials, food production, medical - non human wombs -, robots, AI, transportation, space race- including industry, research in space - and unknowns unknows?

Cultural and political movements? Bionics?

Edited January 13 by lucklucky