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It has been quite a while since I made a Broken China post. Some of the reasons have been personal. I will lay out what is going on with me in a separate post.
I could be doing daily posts on all the crap going on in the PRC but it would be terribly repetitive and y'all would rapidly lose interest. Most of what I am seeing is not objective and quantifiable. Suffice it to say that none of the things I am seeing would be present in a country with a healthy, functioning society with a functioning economy and a bright future.
You should take ALL of the following as anecdotal evidence. Enough individual points, when taken together, can paint quite the picture. That said, on with the show.
Item One:
The great problem with industrialization is that a county only gets to do it once. What took Britain seven generations, the US five, France four and Germany & Japan three, the PRC has done in less than two. It built a massive capacity for industrial production, housing for the workers coming to the cities, and road & rail systems to move people and goods. That drive for industrialization is OVER. They can NEVER get it back.
In the west, the purpose of a business is to make a profit for the shareholders. In China it is to provide employment for people and promote societal stability. If it happens to make a profit, all well and good.
The primary driver of economic growth for the PRC over the past two decades has been real estate and industrial construction. Construction accounted for about 30% of national GDP. In the process, the PRC overbuilt its housing capacity by about 100-200%.
The 2008 sub-prime housing crisis in the US occurred because we overbuilt our housing by about 5%. To get a measure of the societal dislocation, multiply the US subprime pain by 40-60 and apply it to a smaller, less resilient economy. Roughly 80% of construction workers in China are unemployed.
Real Estate has been the one area of the PRC economy the CCP has allowed citizens to invest in. They did it with a vengeance. Now over half of the people are seeing their sole retirement savings vanishing as the houses, apartments, etc, that many are still paying the mortgages on, are worth less than 10% of what they paid if they can be sold at all. This is NOT sitting well with the Chinese people.
Item Two:
The PRC produces approximately 55% of the world's steel. Until recently, about half that production was used in building and construction. No more. Now the PRC is trying to dump this steel anywhere it can. As a result they are facing rising protectionism.
The PRC is no longer the low cost producer in any manufacturing segment in any industry. All that it has going for it is a massive manufacturing capacity. As a result, unemployment is rising rapidly throughout the economy but led by construction.
Item Three:
What the PRC should have done, but couldn't for internal political reasons, during industrialization was to create an internal demand driven consumption market. It didn't. As a result there is no way to absorb much of this over capacity in production. That leaves exports and/or shuttering businesses. The former is creating increasing tariff protectionism among China's foreign consumers. The latter leads to internal societal discontent and revolt. This is the sum of all fears for the CCP.
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)