Thanks glee’. China’s population is topheavy, meaning, inside of 25 years the only growth industry will be guest workers coming in to care for childless geriatrics, or geriatrics who outnumber their offspring 2:1. Many of their children will be unmarried men.
Meanwhile, the Chinese economy relies on exports, and most of that reliance is its trade surplus with the US. In order to maintain that surplus, China has to keep the Yuan stable against the US dollar, and one major part of that strategy is to buy federal gubmint debt. Interest rates in the US were deregulated 30 years ago, and floating rates have been around much longer than that — you probably recall the 22-23 percent money market rates during the Carter disaster. Like the Japanese before them, the Chinese are rats on a wheel, not in the driver’s seat.
With persistently low interest rates there’s little capital formation. Offshore investment is also driven by offshore investors, significantly lower labor costs, and no environmental impact rigamarole. The Demagogic Party leftists have been undermining employment to overload the system by fostering dependence and breaking down the family, and the economic tactics are part of that strategy.
In China, there’s a significant disconnect between factory production jobs and being able to afford the products produced in those factories. The Chinese have tried to build in other parts of the world (Latin America, Africa) in order to get even lower production costs and feed their own domestic demand for products. The Japanese went through the same crisis, shipping domestic production to the US market, while feeding their own demand with plants in South Korea, Taiwan, etc, until it was obvious that those offshore plants could just as easily sell to the US and undercut the Japanese.
Meanwhile the Chinese, like their Soviet predecessors, are blissfully unconcerned about environmental poisoning (hydroelectric projects salting up fields for miles around; heavy metal toxicity; air quality), while idealogically they pursue their hopeless dream of worldwide domination and overspend on military stuff.
They are probably going to implode, just as the USSR did, and in a similar timeframe; there were 69 years from Lenin’s to Yeltsin’s respective year ones, and since Mao took over China in1949, adding 69 is 2018, or a mere three years off. IOW, 69 is just an approximation. :’) OTOH, if Obama’s project of destroying the Middle East comes to fruition before he leaves office in 2017, the price of OPEC and other world crude is likely to rise again to $100 and beyond — imagine the impact on the Chinese, even worse than the impact on us.
I agree that China has some serious structural weaknesses, and I think that they have had their big run.
Some of their bad practices are catching up to them, and the main things that propelled them seem to be running out, or in danger of reversing (e.g. they are not the low cost labor providers any more, and new money is going elsewhere to set up new business).
One big difference between them and the Soviet Union, is that the Soviets (like the Russians today) were hugely dependent on oil for the lion’s share of their economy and income. Many have pointed to the collapse in oil prices as the shot that finally killed the ailing Soviet Union.
Although China is extraordinarily dependent on export of manufactured goods (and import of raw materials and oil) as you point out, they are also exceptionally dependent on infrastructure investment. To keep high economic growth numbers, the government there has pumped out stimulus after stimulus for “shovel ready” jobs.
They have been building roads, bridges and tunnels like never before in the world. Whole cities have been built, that no one seems interested in occupying. These “ghost cities”, and their “zombie factories”, also propped up with gov’t stimulus past the point where their business case had died, has produced a mountain of debt, secured by assets that are often decaying away without producing a return. That debt will have be written off at some point.
In addition to malinvestment in projects that will never pay themselves off, these programs were rife with corruption and outright theft, which funded a diaspora of low-level Party functionaries fleeing the country with their families and new fortunes. The California real estate market is booming, driven by Chinese paying cash.
The Federal Gov’t in China just put restrictions on local governments to prevent them from issueing new debt for most types of this “stimulus” (i.e., no new project starts). Just these restrictions on local governments, are estimated to take 4% off of GDP, starting to hit this month.
It is interesting to see the timeframes that you pointed out, for the life of the Soviet Union, and that of Communist China. Even though many factors seem different, maybe there are some underlying commonalities, like the rate of corrosion - how long does absolute power take to corrupt a system absolutely? Maybe it is human lifespan - how long until the skills and spirit to really get things done dies out of the workforce?