Keeping an Eye on the Long Game: Part XCVIII

what if "we" get lucky?

Some time around mid-summer, I almost put out a post ending “The Long Game” series about the dawning threat (now fully realized) of the People’s Republic of China (PRC) series we’ve been running for over 18-yrs starting at the OG Blog and now here.

True, the “Long Game” has manifested itself in to “today’s challenge” - but as the Chinese people have a history of thousands of years longer than our little North American start up …she isn’t going anywhere. That begs the question, where will she be in another 18-yrs, 2041?

We have to get there in one piece to find out.

I still subscribe to the “decade of concern” school that runs through 2032 or so. We are about 5-yrs late and running for a proper response, but we have to create a stronger military capability west of the International Date Line for both ourselves, our allies, and nations who may not be allies but share a concern with an expansionist PRC.

If our collective strength is enough to deter the PRC - especially in what will most likely be their first move - Taiwan, then all the better. If war does come, our deterrence force will hopefully be robust enough to have what we need to push the PRC back inside her borders.

The first part, which is preferred, can if acted on properly, buy the international community time for other factors happening inside the PRC to continue to act to decrease her threat to the international order. These factors should cause the PRC to return to what is their primary concern, internal stability, and be less interested in foreign adventures not directly related to food and fuel.

If we act accordingly, we might just be lucky enough to get through this without a Great Pacific War in the next decade or so … that is the goal, isn’t it?

The Wall Street Journal has a whole bevy of articles from this weekend that give us hints that the Long Game in the PRC might just be from 2023 a story of the down slope of the almost premier power.

We should not get ahead of ourselves, a lot of hard work remains to be done - but not all trends are in the PRC’s favor.

In the 1970s and ’80s, we were told that first Japan and then Germany were supposedly on track to displace the U.S. as the world’s fastest-growing economy. Economists and social-policy experts studied the advantages Japan gained from tight relations among government planners, banks and leading manufacturers. In a similar vein, these experts examined how Germany used its apprenticeship system and networks of medium-size businesses to grow its exports of advanced-manufacturing products. America’s failure to adopt these practices, some argued, would reduce our capacity to meet the challenges of an emerging order no longer defined by the unchallenged pre-eminence we enjoyed after World War II.

We know what happened next. After a period of rapid asset inflation, the Japanese stock market crashed in the early 1990s, initiating what became known as the “Lost Decade” of deflation and slow growth. Then Germany suffered a period of economic stagnation and high unemployment.

Is China next?

…China’s population, which now stands at about 1.4 billion, will drop below one billion by 2080 and 800 million by 2100. China’s working-age population, which peaked in 2011, is projected to decline nearly a quarter by 2050. Meanwhile, the number of elderly Chinese will rise from 200 million to 500 million at midcentury, and providing for their needs will be a mounting challenge for China’s workers and policy makers.

…

Last week, Country Garden, one of China’s largest remaining developers, missed interest payments on debt with a face value of $1 billion, sending new shock waves through the sector. The monthly value of new home sales by China’s 100 largest property developers has fallen more than 80% since late 2020. Looking forward, annual housing demand is estimated at between nine million and 10 million units, well below the peak (much of it speculative) of 14 million purchases in 2021.

How about the PRC’s GenZ? Wars are fought by the young and revolutions are fought in the streets by the young. In the decade of concern … they will be the tool of any military adventure external to the PRC, or a concern to stability inside the PRC?

The unemployment rate for China’s youth reached an all time record of 21.3% in June. China’s National Bureau of Statistics responded by ceasing publication of the rate.

The move calls attention to the lengths to which Beijing will go to suppress unflattering information, in this case the economic distress facing China’s young people.

Yet burying the data doesn’t fix the problem; it doesn’t even hide it. Rather, it reveals something endemic to autocratic societies: an inability, or unwillingness, to produce genuinely accurate and unbiased statistics.

Anyone who has money invested in the PRC really needs to reevaluate their portfolio.

While we have some worries in the West about our demographics and “elite overproduction,” we have a lot more safety valves for the resulting societal pressures than the PRC.

…the official statistics may actually underestimate young people’s struggles—particularly for university graduates. A spring 2023 survey by job-search platform Zhaopin found that, for the second year in a row, only about 50% of graduating university students had an offer in hand by late spring—down from 63% in 2021 and about three quarters in 2018. Moreover, nearly a quarter of those surveyed hoped to enter the information-technology and internet sector, where salaries have traditionally been among the highest on offer. That industry, although recovering now, was hit hard by the regulatory crackdown of 2021 and 2022, with major job cuts among key employers such as Alibaba, Tencent and Didi.

Whatever the true level of youth unemployment is, what does seem clear is that it has marched much higher over the past four years. This is also what official statistics show.

China’s draconian zero-Covid policies punished the service sector, the main source of employment growth for most of the past decade, particularly for young people. In contrast to industry, which experienced strong employment growth in both 2020 and 2021, the service sector added just 620,000 net positions in 2021, according to official statistics—the slowest growth this millennium. Service-sector employment fell outright by nearly 13 million positions in 2022.

Meanwhile, young people are underrepresented in sectors such as manufacturing, healthcare and public service, which held up relatively well during the pandemic, according to Oxford Economics. They are overrepresented, the consulting firm notes, in sectors such as retail, hospitality and the IT sector—all of which were particularly punished by Covid-related restrictions or the regulatory crackdown.

The future is not going to be a stable place. Really, it never has been.

What will make this so hard to try to get a read as to which direction things will turn is the simple fact that we have no template with how to deal with the demographic collapse in most of the world that is already baked in the cake.

We will just have to keep an open mind, be intellectually flexible … and humble.

Also, chaos and instability bring war more often than peace.

Prepare for that … and then perhaps chaos and instability will find some other nation and its interests to bother.