Picture this - China has reached the end of its economic boom cycle. Transition to a truly market driven economy is proving to be a distant dream. Unemployment/Under-employment could lead to social unrest carrying with it the real threat of a 'Beijing Spring'.
Question: What would China do?
Answer: Colonize
Chinese economy is too big to fail. Even a minor speed bump could spook international markets.
But something has certainly spooked the Mandarins of the Communist Party of China (CPC). Hitler lost his war cause he opened too many fronts. China is doing the same. The usually cautious and deliberate Chinese leadership is flailing, throwing everything and the kitchen sink at the global wall, hoping something will stick.
Pakistan and North Korea are the only real 'allies' China can count on. Their status as International pariahs has left the two dysfunctional nations with few options. Even a country like Australia whose economy is dependent on China's insatiable appetite for Australia's natural resources is openly maneuvering to counter China.
But within China's ham handedness lies a strategy. One driven by
a) a well known desire to replace Uncle Sam as the preeminent super power
b) fear
China is getting hit by a double whammy - rising unemployment and an aging population. The one child policy has created a social dynamic which a much smaller and more prosperous Japan has struggled with for years i.e. Younger couples having to support and care for up to 6-8 parents + grandparents.
China lacks the resources to create a social safety net that can support a large restless population. As the Great Recession hit its primary export markets in 2008, China opted for the only solution at its disposal. A massive Quantitative Easing program which as a percentage of GDP would be the largest program launched by any nation.
The debt was channeled through local govts. to state owned enterprises to keep the wheels turning i.e. Keep workers employed. One estimate suggests that 70% of Chinese companies are state owned. While the Alibabas of the world garner attention and provide Beijing with a veneer of free market, the CPC through the Chinese govt. controls most of China's companies and its economy.
China's massive borrowing binge resulted in the creation of Ghost cities and industrial over capacity. Local govts. were given quarterly targets and provided with unlimited funds to achieve them. It did not matter that there were no takers for the 'products' produced by these efforts. Growth for growth sake was the only objective. It kept citizens employed and a restive population in check.
A normal free market economy would allow (even encourage) failing enterprises to fail and the natural process of creative destruction to play itself out. Using the resulting reallocation of resources to create new profitable enterprises.
China's command/control economy does not allow such a restructuring to occur. It is simply fraught with too much risk. In democracies disgruntled citizens/laid off workers take to the streets and replace their rulers.
China has no such outlet. They are on a treadmill and must continue running just to stay in place.
Additionally, a free society is a prerequisite to creating an innovation driven economy. If the thought of 5 strangers assembling in a friend's garage threatens Beijing, the chances of an Apple or Microsoft emerging out of China are slim to none. Is it any surprise that most Chinese goods are knock-offs of ideas generated in other parts of the world.
Enter Colonialism.
As with European Colonial conquests, China is sending out missions to explore and occupy small patches of space within target countries. No third world country is safe.
The strategy is as follows:
1. Offer financial assistance as part of a grand program - One Belt One Road
2. Co-opt local leadership with a combination of shiny infrastructure monuments and corruption
3. Inflate the bill to bribe aforementioned local rulers
4. Flip ratio of 'Investment to Loan' and impose the loans at unsustainable interest rates
5. Draw recipient nations into a debt trap
6. Allow only Chinese state owned companies to implement projects
7. Import Chinese labor to execute the project
8. Convert project workers into settlers
9. Use debt burden to subdue any local resistance to Chinese settlers
This strategy kills many birds with one stone.
1. Expands China's unviable 'Ghose city' strategy to an International scale
2. Gets foreign govts to finance China's Colonial expansion
3. Migrates Chinese labor from the mainland to foreign shores easing some of the local social pressures
4. Begins the creation of local Chinese assets available to do China's bidding in the future
China's desperate attempts to simultaneously intimidate all its neighbors points to several short comings of this strategy.
1. China's own debt may be much higher than estimates suggest. Limiting its room to maneuver out of any economic crisis
2. Social unrest may be at a critical inflection point
3. Time may be running out
4. OBOR could be the only way for the CPC to stave off impending doom
5. With nations (latest being Kenya) wising up to China's imperial ambitions, China may be running out of runway
Ideally, a confident, secure China would have waited for an aging, fatigued West to wear itself out. With Islamism eviscerating western societies, another decade would leave China with easy pickings. The rush to implement OBOR suggests Chinese leadership has seen something we havent.
OBOR is CPC's attempt at self preservation. It may already be too late.
Question: What would China do?
Answer: Colonize
Chinese economy is too big to fail. Even a minor speed bump could spook international markets.
But something has certainly spooked the Mandarins of the Communist Party of China (CPC). Hitler lost his war cause he opened too many fronts. China is doing the same. The usually cautious and deliberate Chinese leadership is flailing, throwing everything and the kitchen sink at the global wall, hoping something will stick.
Pakistan and North Korea are the only real 'allies' China can count on. Their status as International pariahs has left the two dysfunctional nations with few options. Even a country like Australia whose economy is dependent on China's insatiable appetite for Australia's natural resources is openly maneuvering to counter China.
But within China's ham handedness lies a strategy. One driven by
a) a well known desire to replace Uncle Sam as the preeminent super power
b) fear
China is getting hit by a double whammy - rising unemployment and an aging population. The one child policy has created a social dynamic which a much smaller and more prosperous Japan has struggled with for years i.e. Younger couples having to support and care for up to 6-8 parents + grandparents.
China lacks the resources to create a social safety net that can support a large restless population. As the Great Recession hit its primary export markets in 2008, China opted for the only solution at its disposal. A massive Quantitative Easing program which as a percentage of GDP would be the largest program launched by any nation.
The debt was channeled through local govts. to state owned enterprises to keep the wheels turning i.e. Keep workers employed. One estimate suggests that 70% of Chinese companies are state owned. While the Alibabas of the world garner attention and provide Beijing with a veneer of free market, the CPC through the Chinese govt. controls most of China's companies and its economy.
China's massive borrowing binge resulted in the creation of Ghost cities and industrial over capacity. Local govts. were given quarterly targets and provided with unlimited funds to achieve them. It did not matter that there were no takers for the 'products' produced by these efforts. Growth for growth sake was the only objective. It kept citizens employed and a restive population in check.
A normal free market economy would allow (even encourage) failing enterprises to fail and the natural process of creative destruction to play itself out. Using the resulting reallocation of resources to create new profitable enterprises.
China's command/control economy does not allow such a restructuring to occur. It is simply fraught with too much risk. In democracies disgruntled citizens/laid off workers take to the streets and replace their rulers.
China has no such outlet. They are on a treadmill and must continue running just to stay in place.
Additionally, a free society is a prerequisite to creating an innovation driven economy. If the thought of 5 strangers assembling in a friend's garage threatens Beijing, the chances of an Apple or Microsoft emerging out of China are slim to none. Is it any surprise that most Chinese goods are knock-offs of ideas generated in other parts of the world.
Enter Colonialism.
As with European Colonial conquests, China is sending out missions to explore and occupy small patches of space within target countries. No third world country is safe.
The strategy is as follows:
1. Offer financial assistance as part of a grand program - One Belt One Road
2. Co-opt local leadership with a combination of shiny infrastructure monuments and corruption
3. Inflate the bill to bribe aforementioned local rulers
4. Flip ratio of 'Investment to Loan' and impose the loans at unsustainable interest rates
5. Draw recipient nations into a debt trap
6. Allow only Chinese state owned companies to implement projects
7. Import Chinese labor to execute the project
8. Convert project workers into settlers
9. Use debt burden to subdue any local resistance to Chinese settlers
This strategy kills many birds with one stone.
1. Expands China's unviable 'Ghose city' strategy to an International scale
2. Gets foreign govts to finance China's Colonial expansion
3. Migrates Chinese labor from the mainland to foreign shores easing some of the local social pressures
4. Begins the creation of local Chinese assets available to do China's bidding in the future
China's desperate attempts to simultaneously intimidate all its neighbors points to several short comings of this strategy.
1. China's own debt may be much higher than estimates suggest. Limiting its room to maneuver out of any economic crisis
2. Social unrest may be at a critical inflection point
3. Time may be running out
4. OBOR could be the only way for the CPC to stave off impending doom
5. With nations (latest being Kenya) wising up to China's imperial ambitions, China may be running out of runway
Ideally, a confident, secure China would have waited for an aging, fatigued West to wear itself out. With Islamism eviscerating western societies, another decade would leave China with easy pickings. The rush to implement OBOR suggests Chinese leadership has seen something we havent.
OBOR is CPC's attempt at self preservation. It may already be too late.
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