For the democrats the climate is the existential threat. For the rest of us it is China. China, like Russia, is a bully. Both countries are poor, third world with bravado stemming from an inferiority complex. China, like Russia, would rather squander its resources trying to buy and/or curry favors throughout the world than tend to its own domestic problems. Both countries fund foreign terror cells, academic think tanks, student radicals, political organizations, politicians, environmental zealots, other dissident groups and social misfits around the globe. Their objective is to sow discontent and social upheaval with no objective other than being destabilizing. Although the money could be better spent dealing with problems at home, both the Russians and the Chinese would rather run their own economies into the ground, oppress their own people if it means sowing discord abroad. Russia is a Potemkin village and now we are seeing that China is one also.
The Chinese economy is a mess. It is currently in the throes of a deflation. The economic planners stimulated the economy by massive amounts of spending. Keynes would be proud. The result is a vastly overbuilt economy with ghost cities full of crumbling estates and 80 million vacant housing units. China’s population is contracting as a result of its inane one child policy and its not allowing workers from the rural areas to bring their families into the cities. Those workers are also denied full rights as citizens as well. The result is a shrinking of population even in the rural areas as adults do not want their children raised by relatives left behind. Those children have lower social status than children living with their parents. China’s population is projected to decline by half by 2100.
China’s real estate mess is compounded by its price controls. Officials have put price floors on apartments and new homes and will not allow developers to offer lower prices. The government is afraid that loosening price controls will cause the bottom to fall out of the housing market precipitating a larger crisis. This crisis is only part of the failure of China’s industrial policy – that America’s left loves so much. The CHIPS bill throws $50 billion of our dollars at semiconductor manufacturers to better compete with China while China is busily throwing billions of yuan at their industries to churn out more and more manufactured goods for export. So the Chinese throw their money at their firms and we counter by throwing money at our firms. Genius. It seems to me that if China wants to waste its resources and bankrupt itself we should let it. If China is headed over a cliff the question is why do we want to follow them?
China is saddled with the wrong leader who is threatened by the forces that have moved China from an economic backwater to a third world standard of living. Those in the west who want to emulate China are misguided. What is there to admire? Certainly not innovation. The Chinese are notorious for stealing technology rather than innovating. On the Global Innovation Index, China ranks twelfth. The United States is third (Switzerland is first and Sweden is second). China’s track record does not demonstrate that government industrial policy works better than one of relative laissez-faire. Rather it shows the opposite. China spends in excess of 5 percent of its GDP on inefficient state run industries, on cronies and wasteful ventures.
Yes China is a world leader in electric vehicles. However, it is manufacturing too many vehicles. Some estimates are that half of the cars produced go unsold and are being dumped into foreign markets. It is also producing too many goods period and has resorted dumping them at a considerable loss. Yes, it is the world leader in the rare earth minerals used in batteries, solar panels and other components of “green energy.” It should not therefore be surprising that the Chinese uses its financial resources to ensure that western competitors are crippled in their efforts to compete by funding organizations like environmental groups and even federal government agencies. China’s dominance in “renewables” would vanish were it not for the green energy mandates of western governments. Those governments bray that the climate change is an existential threat. I wonder how many are in reality mainly influenced by Chinese money flowing into their coffers?
If the Chinese are really behind the West’s push for “green” energy, then they are succeeding beyond their wildest dreams. Germany seems on the verge of collapse. Its automakers forced to make unprofitable vehicles are contracting. Germany energy costs are three times that of America. The government has just collapsed. They have shut down coal and nuclear plants and are dependent upon costly and erratic energy from “renewables”. American automobile makers are also losing billions of dollars. Energy costs are up. All this in the name of climate change. The Chinese in the meanwhile keep building coal plants and laughing at the foolish West that is intent on destroying itself to save the planet. Does anyone not think that the Chinese are aiding the process by spreading around a few billion dollars to Western politicians and environmental activists?
But China’s bullying is leading to some countries reducing their exposure to China. Production is moving out of China and into Viet Nam, Thailand, the Philippines and India. Some in the US and other countries are actively seeking to rein in China and to limit its acquisition of technology and components that it needs to fuel its manufacturing sector. As economic indicators in China have worsened the Chinese have resorted to hiding the data. They simply stopped publishing bad economic statistics, perhaps in hopes that the bad news would not scare off new investment. However, any company foolish enough to invest in China deserves whatever it gets. As one businessman said “worsening transparency in data and policy-making in China “adds another layer of risk” to investing in the world’s second-largest economy”. China’s economic statistics show high rates of youth unemployment, slow or no economic growth, low foreign investment, and falling consumer prices. The government remedy is to do more of what got it in the mess in the first place, more government spending and interest rate cuts from the Bank of China. Currently debt is 300% of GDP and growing.
China shows the folly of being a mercantilist country – something Donald Trump should heed. Here are the words of Adam Smith in the Wealth of Nations:
Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer. …. But in the mercantile system, the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce.
China ignores these words but more importantly so do Trump and his cohorts. Trump with his tariffs is seeking to isolate China but at the expense of the American consumer. However, that China is becoming more and more isolated due to its own policies. China’s president Xi has shown to be more interested in ideological control than in economic growth. He has emphasized military growth at the expense of economic wellbeing. I don’t think that there is any doubt that Xi is scared of his own people, Around the world, the Chinese are the capitalist innovative entrepreneurial class everywhere but in China. Getting rid of Communism would unleash this giant that would easily surpass the United States as the world’s largest economy. But this will never happen with Xi in power. The question is whether Xi will try to salvage his failures by becoming more aggressive militarily.
haroldblackphd.com 