In 2008, the future looked bright for China. The traditionally reclusive country successfully hosted the Olympic Games in Beijing, following decades of unprecedented economic growth. That year seemed to mark the turning of a page. The start of a new chapter for one of the world’s premier up-and-coming powerhouses. And, some said, the beginning of the Chinese Century.
The rise of China seemed inevitable to many. It was seen as a foregone conclusion, a fairytale-like rags-to-riches story that would be told for generations to come. And no one seemed more convinced of this narrative than China itself. Within four years, the country’s sole political party, commonly referred to as the CCP (Chinese Communist Party), awarded its top position of General Secretary to Xi Jinping, making him the head of not only the party but of China itself.
Xi Jinping wasted no time in taking advantage of his newfound power. Unlike his predecessors, such as Deng Xiaoping, who encouraged a more moderate and conservative approach to ruling, Jinping aggressively pursued expansion both domestically and abroad.
China’s Aggressive Growth Strategy
Under Jinping, China began encroaching on international waters, filling the nearby sea up with fake islands and drawing up a so-called “nine-dash line” on maps (which has sometimes even been stretched to eleven dashes) that has expanded China’s territorial claims far beyond even the wildest imaginations of its previous leaders.
While these moves have rankled China’s neighbors, Xi Jinping looked to garner local support by pushing a “Made in China 2025” policy, a nationalist plan to achieve total independence from foreign technology and become a world superpower leading in everything from biotech to semiconductors by 2025.
Another pet project of Jinping’s was the Belt and Road Initiative, which aspired to invest in other countries in exchange for allowing China to build a rail transportation system through those territories that would permit China to more easily ship its products and circumvent international trade laws.
In order to see these ambitious plans to their ends, Jinping insisted on cracking down on party members who he deemed as insubordinate to the plan. Soon, many of Jinping’s critics, big and small, were imprisoned or terminated from their positions, or both, effectively taking them off the board.
He further consolidated power in 2018, as he changed China’s constitution to appoint himself “ruler for life”, free of any term limits.
This is just a brief rundown of how things have been going in China over the past decade. But has any of this aggressive posturing paid off for the Middle Kingdom?
To put things bluntly: no.
China’s Terminal Economic Stagnation
For starters, just a mere two years into Jinping’s leadership, major cracks began to show in China’s economy as growth stagnated. In 2015, things went from bad to worse as China not only experienced another year of economic slowdown but also its economy crashed with the Shanghai stock market falling 30 percent over three weeks.
Tragedy was seemingly averted as the government quickly regulated the problems away and threw enough money at the economy to keep it barely afloat and prevent further bubbles from popping, but keep in mind this was before Donald Trump was elected president of the United States.
This was a pre-Trump era when China enjoyed the most economic advantages it has ever had in history. This was before the trade war with the US was even a thing. This was when China could slap tariffs on all imports, while exporting its low-quality products around the world tariff-free. This was when China was allowed to flood the globe with its companies and brands, while not returning the favor and allowing other countries to even do business in China.
Without any of the training wheels given to China for supposedly being a developing country, China would have never become the world’s second largest economy. China’s success was a mirage. Make it play by the same rules as everyone else, and all of its power and success evaporate into nothingness.
In fact, you don’t even need to make China play by the same rules to cause its house of cards to collapse, because in 2015 it wasn’t playing by the rules and it still underwent a mini collapse.
Post-Trade War China
Now imagine how well China fares in a post-trade war world without any of those advantages baked in. Then add the coronavirus pandemic, which originated in China, on top of that. How do you see things playing out?
China’s economy is reliant on exports. Now, not only the US has become cold to China’s products, but so has Europe, the UK, Singapore, Canada, Japan, Australia, and recently even India whom China bizarrely has started military skirmishes with on their border.
Xi Jinping no longer touts his Made in China 2025 plan. It seems like his concerns are more short term now, as he seeks to hold onto power on a day-to-day basis while the bridges he has burned and fractures he has caused domestically have pushed him towards military conflicts with China’s neighbors in order to distract and shore up stronger support at home.
His Belt and Road plan, the centerpiece of his goals, has become an unpopular point of contention that has either put China into massive debt, or indebted countries that received Chinese investment, or both depending on who you’re asking – creating a vicious cycle of resentment on all sides.
China’s Massive Debt Crisis and Bank Bailouts
On the topic of debt, while China is notoriously secretive and misleading about any firm financial statistics coming out of the country, many analyses from insiders such as journalist Dinny McMahon have concluded that there are dozens of bubbles in China’s economy that are waiting to burst. And the longer the CCP artificially subsidizes these bubbles, the bigger the burst is going to be when it happens.
It’s no secret that shadow banking is a major problem in China, as well as their never ending construction projects of ghost cities, and the ever-growing list of banks that China’s government has had to bail out over the past few years.
Another measurement to consider is despite only being four times larger than the US population-wise, China spent more money on pouring concrete alone in three years than the US spent on concrete in the entire 20th century. Wrap your head around that fact. Without ever displacing the US as the top economy, China has already outspent the US by hundreds of magnitudes higher on concrete alone, despite not having a big enough population to warrant such spending. That is a microcosm of how much debt and wasteful spending China is generating in an unprecedented short amount of time, with economic stagnation in the backdrop no less.
While it’s true that the entire world has a debt problem, no country on earth has a bigger bill set to come due with as little to show for it than China.
But could China catch a break if Joe Biden becomes the next president of the US following the upcoming election?
Would Biden Shift US Policy Towards China?
The answer: not likely. In fact, a Biden presidency could prove even more disastrous for China as it would be his first term and he’d have to prove himself to the American voters by not going soft on the Red Dragon.
That said, in all reality Biden is still a wild card on the China topic. He could let off the gas a bit more than President Trump would, and we all know Trump has no qualms about decoupling entirely from China.
With either Biden or Trump in the White House, Xi Jinping should not expect a sudden change in America’s overall attitude towards China. The average American’s view on China has drastically dropped to historically unfavorable levels over the past year, and the same goes for the rest of the Western world too.
But beyond that, even if China was well-liked by Americans and the world at large, the forecast on its future fortunes would look much darker than anyone would have guessed in 2008.
Geopolitical analyst Peter Zeihan has frequently notes that China is completely reliant on a global system predicated on the support of the United States.
Historically, China has always struggled to break out of its region and expand economically. It is boxed in by many hostile neighbors, the majority of whom have only been playing nice due to the trade routes provided and protected by the United States.
China vs. the United States
Why can’t China provide and protect its own trade routes? Well, they simply lack both the military capabilities and the connections the US has to pull it off. Currently, the US even protects and secures the trading routes of its enemies. It’s due to US Navy patrolling the sea lanes that China’s products have been allowed to be shipped at such low costs without the risk of being plundered by pirates or detained by hostile neighbors.
Many of China’s fervent supporters would love for you to believe China is capable of going its own way and protecting its own shipment containers on the high seas, but reality does not lend credence to this belief. For starters, China only has two aircraft carriers compared to the 11 aircraft carriers the US has.
And to put things in perspective, as Peter Zeihan puts it, China’s first aircraft carrier is a repurposed floating Russian casino. Their second aircraft carrier is knock-off of the remodeled floating Russian casino. These are not state-of-art carriers that were built and designed from the ground up for their purpose. They wouldn’t last a month outside of China’s sphere, let alone be able to defend international shipping lanes. Heck, China doesn’t even recognize international shipping lanes except for the cases where they benefit China directly.
Supply Chains Are Relocating From China As Its Demographics Implode
Moreover, Zeihan notes “a few months ago I was told moving supply chains was impossible. Americans tend to think things are ‘impossible’ if they can’t be achieved that day. In reality, the US reduced its use of Chinese components in the US manufacturing process by 20% in 2019 alone”.
He’s right, the US is relocating and diversifying its supply chains at a rate faster than thought possible merely a year ago. And that rate is increasing exponentially by the second.
And nothing Biden or Trump does will change the fact that China’s demographics don’t bode well for its future. China’s population is not only one of the world’s largest, but also one of the oldest, and it is rapidly aging with each passing day. The average Chinese person is already older than the average American, and that trend will only continue as a result of China’s disastrous one-child policy.
China’s middle class is not big enough to sustain its aging population, and its aging population is not flexible or capable enough to compete in the future that is rapidly approaching. And if China can’t fix that, there’s no way an American president can.
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