China is in dire straits, mirroring Japan’s decline into stagnation; but so are all of us…

Paolo ask, in DPA Chat:

“Hey Wyatt, Can we get some more info on the Chinese economic slowdown signs?

I wish i could read more about it, but as you said there are zero official sources

And I’m South American so i can’t speak Chinese to save my life. My girlfriend is Chinese though, but 2nd generation here so she doesn’t speak it well

But obviously I’m very interested in China. Because it’s the industrial powerhouse of the world, and because i have ties to the country through my girlfriend now

Anyways i read your whole discussion with Andrew and the other guys

And what you said about deflation sounds quite interesting
Because indeed, oversupply can’t really be solved if there’s a tariffs war ongoing. They could in theory print more money and dilute the yuan, which would suddenly make everyone really rich and explode internal demand

But the earning of the industry go negative. The assets cannot be replaced because they are being paid with “fake” money
*earnings

Only by receiving foreign currency at higher than zero operational margins can the Chinese model be sustainable

Otherwise the entire manufacturing sector in China has to be restructured from scratch to initiate/stimulate real local growth, to build an internal market, which they have done only partially. As of now, there’s no way the manufacturing bubble doesn’t pop unless they spread the oversupply over to other countries at cost or near cost prices

Maybe in exchange for natural resources or whatever

My reply:

this is what USA wants China to do – and its what the Chinese govt (or rather the CCP) cannot do.

That would entails tanking the entire export sector, printing money to give to the poor (directly – which somehow, given this is a communist country, they had resisted strongly against doing it) and improving workers rights to make sure people can actually earn a living wage (which would tank export sector as I said)

The core problem is political. The political system, as all communist systems, are very corrupted in nature – as you need to buy access from the party leaders. (the same is happening in Vietnam, I heard so much from my father whom worked there for more than a decade)

What is likely to happen eventually, would be like Japan. In fact, their path looks very very similar: hyper growth, debt bubble, bubble explode…. China dont have that “explosion” because of centralize govt and state intervention – but the real estate, and a multitude of sectors already largely considered collapsed.

Japan then went into a deflation spiral – which China just starting to enter.

Lending falls to the bottom as no one borrows, banking start to fail. People spend years repaying existing debt (no borrowing) – causing stagnation. China’s banking is now facing this problem now as well, people only save money, no one wants to borrow. In China, all the banks are facing this issue and salary cuts is happening in the banking sector.

So after this, Japan was in full fledge economic stagnation. However, they have strong foundations, people do earn good money, GDP is still amongst the highest in the world – so people dont really suffer at all. Things just dont grow much if at all. I call this the “reach level 99 problem”.

China in my opinion, is following the same path, not to mention both countries have demographic problems at around the same time of the trajectory.

As China export will likely continue to shrink and get roof-capped, jobs situation will continue to stay bad. Most of the people bought housing get stuck, regardless they keep or sell it at a loss, they will spend the next 20 years paying it with low salary poor economy. Construction/real estate sector is dead as a result. Banking/leading is dead along with it. Thus stagnation (after some recession) will likely take hold… and for a long long long long time.

They have a broken pension system, and with increasing percentage of old people, the young struggles to get good jobs/good salary, they wont be able to support the increasing older population…. the future looks very bleak.

In my opinion, China must pump money directly into normal people’s bank account (like some sort of universal income) to drive consumption. That looks like the only way out now, while they figure out proper economic reforms that prevents oversupply problems as well as cutting state support/grants to industries entirely (as this is one of the reason causing oversupply problem).

Not hopeless for China yet, but that glimmer of hope is dependant of the CCP swallowing their pride and do some painful reforms.

---

Just to add further, eventually, with the AI and Robotic revolution, almost every country will face the same problem of job loss / unemployment with no sectors to throw your population into to work…. As most goods and services will be done by robots and AI.

Be it farming, mining, line factories – even logistics, transportations, etc…. You already seeing it happening with driverless taxis, increasing automation in factories….

Eventually, we will reach a point where, there is just too few jobs for too big a population.

Then universal income may have to enter the picture.

However based on some futurescaping by some movies/dramas – this could be bad for normies who cant find work and depend purely on universal income – everyone is going to resemble more like those americans that survive entirely on food stamps / welfare.

So, the only “path” that is sensible and logical, for continued “capitalism” – is that everyone will start to produce novelty goods/designs at home with the help of AI, 3D printing, robotics ; and many people might go into arts and media (like DPA is in now) – so that economic activities continues for everyone.

On the brightside, that means we gonna see further fracturing of the centralize manufacturing model into even smaller pieces – while we get limitless creative/innovative product choices for literally every single product and services: from food, to cars, to decorations, etc….

Youtube style content creation may also expand further (but not sure if there is revenue in that if it expands too much – like in China, content creation is over saturated until they are mostly making below living wage… minus the top ones that earns good money)

Anyway, for the young ones here, be prepared – be more creative. You gonna lose your job soon. LMAO!

Originally Posted on DPA Telegram: https://t.me/defensepoliticsasia/12950