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I have not been posting very many of my Broken China Updates as most of the things I am seeing are things I have already reported to you on but were just getting worse.
I am now at the point where I am going to go out on a limb and forecast the dissolution of the Chinese Communist Party as the ruling government in the People's Republic of China. I expect that this will happen within the next two years but may take as long as four. I could even see it falling before next summer.
OK, ok, calm down with the wild buzz and I will explain.
Item One:
The CCP has started arresting and prosecuting retired CCP officials. The officials are at all levels of the party. It is estimated that up to half of all retired party members have or will be prosecuted. The officials generally plead guilty after the CCP threatens their children who are most often CCP officials themselves.
The why is ostensibly a crackdown on corruption. The real reason is so they don't have to pay the pension and healthcare costs of the retirees. The deeper reason is that the CCP and hence, the government, is rapidly running out of money.
This is causing great panic throughout the Party. Retirees are fleeing the country if they can. Current officials are wondering if they will be able to retire without being arrested.
Item Two:
This next item is a bit wonky. I will try to explain it as well as I can. Xi Jinpooh pushed through a series of tax reforms at the Third Plenary Session of the CCP held recently.
Tax reform was and is desperately needed in the PRC. This will ease some of the strain in the short term but will be fatal in the long term. While there were a number of reforms, the one I wish to focus on is the Consumption tax.
Most countries only have one type of consumption tax, either Value-Added Tax (indirect) collected though businesses or Sales Tax (direct) collected at point of sale from the consumer. The PRC now has both. Depending on the item, the combination of the two taxes can run between 22% and 85% of the sales price of the item.
Until recently, there were three types of taxes in the PRC, National, Local, and shared. The direct consumption tax was a national tax but is now a local tax. The indirect (VAT) remains a national tax. Local governments were almost entirely dependent on real estate taxes. The collapse of the Real Estate sector in China has left local governments scrambling to find ways to pay workers and provide necessary services.
The problem is that the Sales tax doesn't generate nearly the amount of revenue the local governments need. They will be motivated to push the tax as high as they think they can.
The effect will be to crush economic innovation at a time when foreign investors and businesses are rapidly leaving China.
Item Three:
This is economic disarray topped by a recent OFFICIAL report that the CCP may have under-counted its population by an ADDITIONAL 8-15 million people. All of them would be in the under 20 decades. The CCP may have under-counted its population by 180-250 million people. Remember that this is what the CCP was willing to admit to at a time when they didn't have to admit to anything.
Any chance that the PRC could reverse its demographic decline and develop sufficient internal demand to maintain its economy is now pretty much gone. This means that the PRC is stuck with an export driven economy at a time when the rest of the world doesn't want to buy very much that China produces.
Item Four:
It is often useful to see what subjects are trending on Chinese social media and how the CCP is reacting to them. Previously I have mentioned the concept of "Tang Ping" or "lying flat". Novelist Liao Zenghu described "lying flat" as a passive-aggressive resistance movement. Those who choose to "lie flat" may lower their professional commitment and economic ambitions, simplify their goals, while still being fiscally productive for their own essential needs, and prioritize psychological health over economic materialism. This has been around for several years.
In sports, garbage time is the period toward the end of a timed sports competition that has become a blowout, when the outcome has effectively already been decided, and when the coaches of one or both teams will decide to replace their best players with substitutes. The latest buzz phrase in China is "Garbage Time" or "The Garbage Time of History." Here the implied meaning is that China has already lost and they are just playing out the required game time before an inevitable defeat.
While the CCP wasn't very happy with "lying flat" they positively HATE the use of "garbage time" where there is the implication that China has already been defeated. A defeat for China is a defeat for the CCP and for the CCP that likely means death for many of its members in the resulting social unrest.
There is more. I will try to expand on this as best I can. As always, questions and comments are welcome.
WWG1WGA
Garde la Foi, mes amis! Nous nous sommes les sauveurs de la République! Maintenant et Toujours!
(Keep the Faith, my friends! We are the saviors of the Republic! Now and Forever!)
LonePalm, le Républicain du verre cassé (The Broken Glass Republican)