China: The Myth Of Might

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April 21, 2009:  While China may become the largest economy on the planet in the next few generations, it will also suffer from some catastrophic demographic problems. To control population growth over the last four decades, most couples are restricted to only one child. This has been widely enforced, to the point where the average number of children per couple has been 1.7.. But many of those couples aborted a child if it is a female, because much more importance is attached to having a male heir. Thus there are 30 million more males than females, and the number is growing. These surplus males are coming of age, and the competition for wives is causing problems. Women are taking advantage of their scarcity, but men are also going to neighboring countries to buy, or even kidnap, young women to be wives. This is causing ill will with neighbors.

The biggest problem, though, is the growing shortage of workers. As the population ages, all those one child families means there will be more elderly than the economy can effectively support. Currently there are 13 working age Chinese for every retiree. In 40 years, there will only be two for each retiree. At that point, retirees will comprise 30 percent of the population (versus 12 percent now.) Traditionally, children cared for their parents in multi-generation households. That model is dying out, and China is faced with huge pension cost increases at the same time they expect their economy to be the mightiest on the planet. But at that point, the largest single government expense will be the care of the elderly, and this will impose crushing taxes on those of working age. Many working age Chinese are worried about this, for there is no easy solution in sight.

The government is giving the navy's submarine force (ten nuclear boats, and 60 diesel-electric) more publicity, and more money. The Chinese see submarines as a potential equalizer in any future naval war with the United States. Currently, most Chinese subs are of poor quality. But several new designs are entering production. These are not as good as Western boats, but appear good enough to pose a real threat.

Russia may no longer be a communist police state, but it retains its paranoia about the United States, and thus feels united with China. Russian media is currently pushing the accusation that the U.S. base in Kyrgyzstan (for logistical support of operations in Afghanistan) is also an electronic listening post concentrating on Russia and China. There's no evidence of this, but the accusation is widely believed in Russia and China. The two nations also continue to unite in opposing international moves against Iranian and North Korean nuclear weapons programs, or to punish particularly nasty tyrants (as in Sudan and Zimbabwe). Sort of another Axis Of Evil, but in reality the ancient tactic of weakening your enemy by causing trouble for them whenever possible.

Despite the danger from cell phone use (and uncontrolled spread of information), the government is not interfering with the expansion of cell phone service into rural areas. Over half the population lives in more than five million rural villages. This is where the poorest people live, and those that are angriest at the corruption of local officials. But over $10 billion is being spent by cell phone companies to get service to every corner of the rural villages. Part of the demand is from those corrupt officials and police in rural areas, who feel safer with cell phones (the better to call for help if a mob of angry locals comes after them.)

China has suffered five straight months in export declines. All this has put over 25 million Chinese out of work. But because exports are only a small component of the economy, there will be over 5 percent GDP growth this year. This is continuation of a nearly decade of declines in the annual rate of GDP growth. Most of that growth now comes from internal consumer decline. The creation of a Chinese middle class has become the cornerstone of Chinese economic growth. The Chinese "upper class" (defined as a family making more than $36,000 a year) has grown to two million households. These families are on a buying binge, and the less affluent (anyone making more than $10,000 a year is doing well) are doing even more buying because of sheer numbers (over 100 million "middle class" families). All this, even with a high savings rate. Exports are not only being hit by recession caused decreases in demand, but more product quality scandals as well. The latest one has to do with drywall board from China. No one is sure how it happened, but large quantities of drywall exported to the United States has the tendency to release corrosive (to metal, and to human health as well) sulfur fumes. Thousands of American homes and commercial structures were built with the "sulfur board" before the problem was realized. The lawsuits are piling up, and Chinese product quality has taken another hit.

In Taiwan, several dozen retired generals and colonels are being investigated for corruption. The charges involve senior officers taking bribes to approve promotions, and civilian suppliers bribing generals and procurement officials to obtain military contracts.

April 16, 2009: Chinese military officials announced that they were open to talks with their Taiwanese counterparts. This would be as part of an effort to ease tensions between the two nations (or, according to China, between them and a renegade province protect by the imperialist United States).

 

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