China Syndrome

On September 12, 2015 by Phil Champagne

 

Jim Rogers has said that just as the 19th Century was the UK’s Century, the 20th Century the US Century, that the 21st century will be China’s Century.

I already had some minor doubts regarding this prediction for the 21st century, however those doubts became major after watching several video reports from China Uncensored. This person, Chris Chappel, reports on various ridiculous situation happening in China that all have a common factor for most of them – the country is still run by a Communist party after all. Granted, they have liberated a lot of their economy to the free market, but it’s only a portion. Civil and economic liberties in China pale in comparison with those in Western countries, which too could seriously improve by the way. For a sample of China Uncensored, check out this report about their pollution level:

Just the recent laws that have passed “banning” selling of stocks when the Chinese stock market experienced a crash in August is quite indicative of the power of the state over their citizens.  But another factor regards the impact of the one-child policy on their demographics. This policy impacted the demographic structure on 2 parts:

  • The gender imbalance
  • The population pyramid (or what should be a pyramid actually)

Many european countries share the issue of an unbalanced population pyramid but as many know, Japan is among the leader in this. A side note, there are more diapers for adult being sold in Japan than are diapers for babies. But China is not far behind, just 2 decades or so behind according to this picture:

20150325_china1

Now, if you watch many of the other video reports from China Uncensored, you will learn to avoid taking any statistics coming from the Chinese government at face value. A good practice is to always doubt any statistics coming from any government. There are only 2 conditions in which government statistics will be accurate – either they show a neutral or positive scenario or either it’s a negative scenario that the government can avoid the blame or at least can deal with it.

For more from China Uncensored, check out:  https://www.youtube.com/user/NTDChinaUncensored

China however has experienced a tremendous benefit from their positive trade over several decades and have a stash of currency reserve and a solid manufacturing base across many field. In addition, many are suspecting they have quite a lot more gold reserve than the 1 ton they currently state. Another advantage that China has over Japan and many Western countries is in the government social programs which are quite smaller in China. If the demographics cannot support it, scaling back will not be as impacting for them as in the West. Below is the demographic pyramid for China in 2015:

china2015demographic-pyramid

As you can see, it’s unbalanced on the male/female and a unbalance youth/older generation. But at least it’s not as worst as Japan:Japan-2015-demographic-pyramid

The UK is just slightly better off than Japan, just slightly:
UK-2015-demographic-pyramid

Now, in case you are wondering why they call it a pyramid when it never looks like one, we have to understand the important changes in the Western countries for the past few decades. Ecuador presently below shows what the USA pyramid used to look like. Wars of course, particularly WWI, have put a serious punctuation in many of the European countries so they have never had a perfect shape. You can play with the link at http://populationpyramid.net/united-kingdom/1950/ and change the year and country.

Ecuador2015-demographic-pyramid

Unless the Chinese government intends to relax its grip on their citizens on multiple level, I cannot see how China could continue their growth, particularly with this demographic headwind. From its semi-liberalization of its market in the 1980s to today, China was able to grow from a 3rd world communist country to one with a strong manufacturing base and important trade surplus. It had a lot to catch up to Western countries the easy way: copying or purchasing the technology to improve its capital structure which allowed for such rapid growth. Now, that the catchup is nearly over, China must innovate along with the West. It is tied to rate of discoveries by other nations of new technological advance and discoveries. The country with the best environment for such (ie: most economic liberty) has the best advantage. Will they respond to this need? Time will tell.

As for the recent crash, since the financial system is the same as the West (fractional reserve banking, etc), it was just obvious to me that it will suffer the same booms and busts as the West.

 

 

 

 

Leave a Reply

Your email address will not be published. Required fields are marked *