Is China heading for a total collapse: political, economic and demographic?
Conventional wisdom says no way˳ It boasts a massive military and an iron grip on its people, and owns a whopping $870 billion in U˳S˳ debt˳
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What’s more, American consumers are addicted to its goods˳ Apple makes its smartphones there˳ Take a look at the clothes in your closet˳ Where are they made these days? Thought so˳
While that’s no recipe for demise, some people would argue that China will soon be hanging on by a thread˳ That includes geopolitical analyst Peter Zeihan, whose new forecast makes a case few would otherwise consider˳
Zeihan raised eyebrows in a January interview with Joe Rogan, in which he predicted the People’s Republic would collapse in 10 years˳ Rogan, though no stranger to controversy, was taken aback˳
Whether it’s stuff of astute analysis or souped-up hype — dire predictions can raise a pundit’s profile and Rogan’s ratings, after all — economists and international political analysts have begun to debate China’s future˳ Front and center is whether its trade and family-planning policies have undermined the goal of sharing the world’s economic stage with the United States˳
Whatever their stance or opinion of Zeihan, many analysts agree that a Chinese collapse would trigger unprecedented global volatility and a massive rebalancing of the world order˳ Many trends must expand or even explode for China to realize Zeihan’s predicted fate, but with so much at stake, it’s worth reviewing the numbers˳
The 9˳9% erosion: China’s struggling economy
From multiple and significant angles, China’s economy is under heavy strain˳ In particular, the nation has experienced rare civil unrest due to its strict zero-COVID-19 policy, which locked down vast sections of the economy, lowered industrial output and curbed consumer spending˳
Some important metrics offer evidence of an economic contraction˳ The country’s exports dropped 9˳9% in December 2022, while a slowdown in growth also weighs on the country’s outlook˳ That latter, experts say, stemmed from the nation’s excessive investment in metals like steel and aluminum˳
You could take the export drop with a grain of salt, though˳ Steep inflation in the U˳S˳, Europe and elsewhere has moved consumers to tighten their belts˳ So far, there’s no evidence to support another nation taking China’s place as a dominant source of cheap goods˳
That noted, the nation’s debt has risen rapidly over the past decade, particularly among state-owned enterprises and local governments˳ That could hinder China’s ability to limit future economic shocks˳ What’s more, ongoing trade tensions with the U˳S˳ and other countries have added to the uncertainty˳
But again, shoppers at Walmart and Target love low-priced wares and aren’t about to go on a long-term spending fast˳ (Nor will smartphone makers be moving out of China anytime soon˳) The International Monetary Fund, meanwhile, expects China’s economy to grow 5˳2%, an increase from its October forecast of 4˳4%˳
Still, China’s economic headwinds could lead to major impacts˳ Any slowdown in the Chinese economy will create new price pressures in the U˳S˳ if its export prices rise — and hurt the demand for U˳S˳ products˳
Read more: Rich young Americans have lost confidence in the stock market — and are betting on these 3 assets instead˳ Get in now for strong long-term tailwinds
The 800 million population puzzle: aging out
As for its population, China suffers from a disadvantage in its demographics˳
China’s population is getting older — fast˳ As its people age and retire, fewer working-age individuals are around to support them˳ The United Nations forecasts the nation’s population — now roughly 1˳42 billion — to fall below 800 million by the year 2100˳
The nation’s one-child policy, in place for more than three decades before it ended in 2016, exacerbated the problem and today threatens long-term economic prospects˳ Citing steep drops in birth rates, China in 2021 began to let couples have up to three children˳ Will it increase the workforce? Right now, it’s impossible to say˳
Is 20˳4% too much? Trade’s share of GDP
China’s economy relies heavily on international trade; exports accounted for more than 20˳4% of its nearly $18 trillion gross domestic product in 2021, according to the World Bank˳ That makes China the world’s largest exporter˳
But trade dependence makes China vulnerable to global economic fluctuations and trade policy shifts˳ The COVID-19 pandemic exposed that reliance when demand for Chinese products dropped˳
China is actively seeking to shift towards domestic consumption to drive growth˳ Its electric car manufacturers such as Nio and Xpeng have shown promise in leading the way˳ But a larger domestic shift overall will take time and require significant changes in China’s economic structure and policies˳
It might be a stretch, but you could liken China’s future to the recent controversy over its balloons˳ Will Zeihan’s theories be definitively shot down? Or will China’s trajectory drift off course? Either way, all eyes are on the horizon˳
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This article provides information only and should not be construed as advice˳ It is provided without warranty of any kind˳
