China - Geostrategic & Geopolitical.

[John Fedup]

Certainly lots of interesting discussions concerning demographics and the resulting economic consequences. China’s internal security during COVID certainly was a wake up call wrt supply chain issues as well. However at the end of the day the biggest concern will be a possible Taiwan invasion. Everything falls apart and it will take decades to put things back together, perhaps never if things go nuclear.

 

[Musashi_kenshin]

Whose saying business are keeping the eggs in one Basket?

There's no such thing as "business". All companies are different. Some outsource virtually all their production to China and only design in-country. Others have far less exposure to China.

That's why I said "there's a lot of denial". Some people accept what is happening, others less so.

Are China already in the level of aging demographics like Japan and South Korea? No, China demographics now is what Japan face in the 80's and South Korea in 90's.

That is incorrect. You can compare China's population pyramid for 2023 with Japan in 1985 and South Korea in 1995. China's is significantly worse than either of them.

And these charts probably don't take into account that China overcounted it's working population by 100 million.

Even Japan with their aging and birth problem, still very much in manufacturing value chains ecosystem.

Because Japan became wealthy and had the technological sophistication to become involved in high-end work. China does not have that luxury as things stand. It still wants technological transfers and resorts to industrial espionage when it can't get something legitimately (both of which is becoming harder). It's highly unlikely it can get to the position of Japan or South Korea.[/QUOTE]

 

[Ananda]

However at the end of the day the biggest concern will be a possible Taiwan invasion. Everything falls apart and it will take decades to put things back together, perhaps never if things go nuclear.

Yes, if China goes to war by Invading Taiwan or other hot conflicts with Japan, South Korea and US then all business decisions can goes in different calculations momentum. However we are not in that yet. All traction even with Yelen last meeting results shown political tensions and powers competition will be there, but commercial business interaction still also there.

So far the biggest trigger not politics, but more business consideration to diversify their holdings in China due to risk on over reliance on one supply chain environment. The trigger more cause by Xi's drakonian COVID policy.

There's no such thing as "business". All companies are different.

What do you mean there's no 'business', everything that build China as global manufacturer is done by this 'business' communities. Whether overseas OEM that work in China or original Chinese OEM that become larger due to this supply chains ecosystem. All work on this one supply chains ecosystem.

Off course everyone doing by their own calculations. However 'business' communities is there to interact with each other. That's interactions create their own calculations that can influence each of them decisions.What seems you can't accept that these 'business' can influence each other more despite all politicals momentum.

That is incorrect. You can compare China's population pyramid for 2023 with Japan in 1985 and South Korea in 1995.

Take a look again on those pyramids, the shape about the same, means the situation about the same. That pyramids time line shown China will face demographics situation of Japan between a decade or two from now.

However again, they also have more numbers then Japan and South Korea. That's also means the momentum can also be slow down not as fast what happened with Japan now. Japanese can't slow down their demographics momentum, and this doesn't mean China can't also.

Because Japan became wealthy and had the technological sophistication to become involved in high-end work.

Really? Are you that underestimating China tech situation? Don't get me wrong as part of a nation that potentially going to be in front line if something hot happening with China, personally i have much more to lose if Chinese become hot.

However because of that, most Asians are more realistic on looking to China momentum including their tech. Why do you mean they are not involved in high end work? All this relocation shown that increasingly the low-mid end part of supply chain ecosystem are leaving China but the upper mid-higher end still in there.

If the trend continues, what's left is not the final assembly which is part of lower-mid part of ecosystem, but those in design, RnD and manufacturing essential parts, all of which are the higher end ecosystem. That's not just from overseas OEM, but increasingly domestics OEM. That latest part is shown they are already have domestic capabilities to move to high end work on their own.

This is not China two decades ago, and seems you still think that China's. Everyone still want tech transfers or tech "interactions". Everyone involved in industrial and tech espionage, but that's not means they are not already in upper end of value chain ecosystem.

China still have numbers in their workforce, means even tough in percentage wise is lower on those that play in RnD and Innovations of tech compare relative to then Japan or US, but actual numbers is higher. Combined with the money they are pouring on that area, it will result on higher numbers of 'patent' that come to them.

Do you think Chinese OEM rising in Global value chains only because they are working with other people's tech? When you are still working with others tech, then you will not rise above middle players. Chinese own OEM rising because increasingly they're using their own tech.

This is why 'businesses' still want their presences in China, as their workforces are still relatives complete in numbers whether for those who work in lower end parts, mid parts or higher end parts of ecosystems. The trend will make them leave China more on lower to mid end, but doesn't means they will leave China, no matter some in the West hopes. Off course unless everything goes hot, and that's another calculations altogether.

Again this and other factors that I have mentioned before, which makes them want to still be part of Chinese ecosystem. In the end yes there's such a thing as 'business' as ecosystem communities. Saying that there's no such thing as 'business' is not reflecting on realities. They are interact and influencing each other, despite in the end everyone will make their own decisions.

 

[ngatimozart]

I think that we have to be cautious when we discuss PRC demographics because of Mao's one child policy, that has only recently been revoked. In Chinese Confucian culture males are regarded as more important than females and as much as the CCP has tried, it has failed to eliminate the Confucian belief system within the PRC. There are various accounts of femicide where girl children born to couples after the one child policy was introduced, were aborted or killed because of the mere fact the child was a girl. Sons are expected to support their parents when the parents reach old age and girls are perceived as being not able to do that. This in turn has distorted the PRC demographics, with far more males than females who have reached breeding age.



Conversely young educated Chinese women now have a choice to breed or not and some put their careers first. Another problem is that young couples are finding it more difficult to afford a child or children because of the cost of living. Of note affordability in raising children isn't a phenomena restricted just to the PRC, because it is occurring in OECD countries as well.

 

[swerve]

Are China already in the level of aging demographics like Japan and South Korea? No, China demographics now is what Japan face in the 80's and South Korea in 90's. They are begin facing aging demographics. Remember they are much larger in population then South Korea and Japan. Quantities matter for demographics slide down process on aging population as whole.

As Musashi Kenshin said, this is wrong. China's in a worse state. It's more short of young people than either Japan or S. Korea was back then.

Japan's fertility rate (births per woman) is currently slightly higher than China's, & Japan doesn't have the same skewed sex ratio, which makes China's effective TFR even lower. The usually quoted 2.1 births per woman for long-term population stability assumes a standard sex ratio: China is short of women, & would therefore need more births per woman for a stable population until the sex ratio improves.

South Korea's much worse off in one way though: it has extraordinarily low fertility, perhaps the lowest in the world, & isn't doing anything about it. Government policy ignores the real reasons.

 

[seaspear]

But how reliable are Chinas statistics this article suggests otherwise
How Reliable Are China’s Statistics? – The Diplomat
China’s population census data has become the worst-kept state secret | South China Morning Post (scmp.com)

 

[Ananda]

Musashi Kenshin said, this is wrong. China's in a worse state. It's more short of young people than either Japan or S. Korea was back then.

I'm sorry it is not wrong, as first the trend are similar and secondly the China still have much higher number compare to Japan and ROK. So yes what China face today is what Japan face in 80's and ROK in 90's. Again quantitative number also means different momentum slow down still potentially can be done. Also China is much bigger then Japan and ROK, which enable them to move industrial momentum from region to region.

China's Population by Province - Analysis of Regional Demographic Trends

We discuss China's population by province, including varying birth rates, aging populations, urbanization, and domestic migration patterns.

www.china-briefing.com

Yes China population is facing aging and decreasing trend, however the situation is differ from region to region. At first many thinks the interior region will still have positive natural growth rate increase (means only birth minus death), but turn out some coastal region in the south including Guandong and Guanxi still have positive natural growth rate increase.

This shown western hope on Chinese population dooms day, is not as simple as that. Again don't get me wrong some Asians like me also hoping for China loosing momentum. However turn out the situation not as simple as that.

How Guandong for example as one of China richest, developed and also most expensive province manage (at least now) buckle the trend, shown some momentum can be potentially slown down. This is natural growth rate, so Migration is excluded. Will other coastal regions up north able to imulate Guandong and Guanxi ? Is Behaviors on Southern Chinese toward having babies different then those on other region ? Time will tell.

Demographics trend in interior also one of reasons why China business relocating toward interior. Especially those that need cheaper labour. Thus the relocation not only happen to outside China but also from Coastal to Interior. Something that Japan and ROK and other OECD's does not have that kind of luxury.

So only see Demographics trend and claiming dooms day for China industrial development? Sorry that's whats wrong.

 

[SolarisKenzo]

With the amount of Tomahawk missiles that will be pointed at China... I really wouldn't worry about demographics being the first eventual reason of a possible Chinese industrial regression...

 

[ngatimozart]

But how reliable are Chinas statistics this article suggests otherwise
How Reliable Are China’s Statistics? – The Diplomat
China’s population census data has become the worst-kept state secret | South China Morning Post (scmp.com)

I have always worked on the principle that the all statistics emanating from the PRC are unreliable. In this case it's a matter of the level of unreliability.

With the amount of Tomahawk missiles that will be pointed at China... I really wouldn't worry about demographics being the first eventual reason of a possible Chinese industrial regression...

Really??? Tomahawks are unstealthy subsonic missiles and they can be defended against. They are just a tool and no more. You are taking a short termist view and not considering the wider implications of China's unique population distribution. For any society to increase its birth rate it has to have a suitable number of breeding age women. The norm for an individual woman is to have one child at a time; meaning that she can only have one full term successful pregnancy once per year. The PRC society has a significant imbalance of more males rather than females. If the imbalance was the other way, one male could father more than one child per year by breeding with multiple women. However the PRC has the imbalance the wrong way and that is now impacting upon their population distribution and society. Less working age people means less productive people in the economy who have to fund an increasing number of elderly people for their living, health costs etc., as well as providing personnel for the military and security forces. Such people do not produce wealth for the society and in the case of the PRC, their internal security budget far exceeds their defence budget.

There's a significant quantity of young males in the PRC who can't find a mate and that's important because they can't pass their genes on. Remember that we, like all living things on this planet, have an inbuilt requirement to procreate for the survival of the species and that's something that we don't have a lot of control over; it's part of our genetic makeup. So these males unable to find a mate will become frustrated and that frustration could turn into social disorder. That would be a challenge to the CCP's rule and challenges and threats to its rule is something that the CCP takes very seriously. Hence in the case of the PRC, the demographics are a very important factor when assessing its current and future capabilities. In the case of the PRC ignore demographics at your peril.

 

[koxinga]

Back in the early 2010s, we had plenty of articles about China hitting their "Lewis turning point" with various scenarios putting it between 2020 - 2025. So that in that sense, what we are discussing today is but those points coming to roost.

https://www.imf.org/external/pubs/ft/wp/2013/wp1326.pdf

We can quibble about the extent of the issue with @Ananda and @Musashi_kenshin on the opposite ends of the spectrum, but in my opinion, these are long tail issues that have no easy answers. Japan and South Korea has been grappling with the aging population longer than China, having reached first world status much earlier. If we are not expecting their ageing population to lead to a collapse of their economies and backsliding to third world, should we expect the same of China?

The second point I would make the moving to low cost jobs from China to low cost countries in SEA would happen soon or later, whether China is a communist country or a democracy. Again this is something not new because costs will go up. Political risks is of course a factor now, but it is unlikely the main factor.

Ravi Menon: China at an inflection point - what does it mean for Asia?

Speech by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Official Monetary and Financial Institutions Forum (OMFIF) City Lecture, London, 5 May 2016.

www.bis.org

 

[John Fedup]

Back in the early 2010s, we had plenty of articles about China hitting their "Lewis turning point" with various scenarios putting it between 2020 - 2025. So that in that sense, what we are discussing today is but those points coming to roost.

https://www.imf.org/external/pubs/ft/wp/2013/wp1326.pdf

We can quibble about the extent of the issue with @Ananda and @Musashi_kenshin on the opposite ends of the spectrum, but in my opinion, these are long tail issues that have no easy answers. Japan and South Korea has been grappling with the aging population longer than China, having reached first world status much earlier. If we are not expecting their ageing population to lead to a collapse of their economies and backsliding to third world, should we expect the same of China?

The second point I would make the moving to low cost jobs from China to low cost countries in SEA would happen soon or later, whether China is a communist country or a democracy. Again this is something not new because costs will go up. Political risks is of course a factor now, but it is unlikely the main factor.

Ravi Menon: China at an inflection point - what does it mean for Asia?

Speech by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Official Monetary and Financial Institutions Forum (OMFIF) City Lecture, London, 5 May 2016.

www.bis.org

One important difference between Japan and South Korea versus China however, the male/female ratio distortion caused by Mao’s one child policy. Neither this or jobs moving to lower cost markets will cause China to slide back into third world status. although economic output could decline. Since internal security is paramount for the CCP, reduced revenue will mean less for their external adventures (bigger blue water navy, debt trap loans, etc.).

 

[Musashi_kenshin]

Japan and South Korea has been grappling with the aging population longer than China, having reached first world status much earlier. If we are not expecting their ageing population to lead to a collapse of their economies and backsliding to third world, should we expect the same of China?

I know less about South Korea so will put it to one side. But Japan has a few things in it's favour that China does not have:

1. It is much wealthier than China and has well-developed medical, educational and social care systems.

2. Many Japanese people retire and then (strangely) keep working whether part-time or volunteering. In contrast there's much less voluntary work in China because the CCP views civil society with suspicion and cracked down on most charities a while ago. When Chinese people retire, they're much less likely to do unpaid work.

3. Japan's population size and higher living standards means that it realistically can import more workers if it makes the decision to rely on immigration. China is unlikely to be able to attract tens of millions of workers even if there was political will to do so (I don't think there is, because the CCP is suspicious of foreigners).

4. As others have said, China has a significant sex imblance.

Let's be clear, it's unlikely China's economy will simply "collapse". There are very few examples of countries collapsing in the last 30-40 years. Yugoslavia was the exception, not the rule, and even then the collapse was a political fragmentation. Even Peter Zeihan has said that the CCP may compensate for all of this by simply making Chinese people incredibly miserable. It won't stop an economic decline but it will keep the CCP in power by avoiding total collapse.

 

[Ananda]

The real Vietnamese housewives of central China – The China Project

With more men than women left behind in China’s countryside, the practice of buying a bride from the Mekong region has spilled over from border provinces into China’s rural heartlands.

thechinaproject.com

There's no denying that gender imbalance becomes one factor of declining natural growth rate in China. Other factor like in many OECD countries and also upper-middle developing countries is the factor of increasingly gender closing gap in educational and professional sector. Both factor reducing the natural growth rate everywhere.

However this doesn't means some communities not going to do their own adjustment. This is happening in China where bachelors importing brides. Rich ones can import from West (this literally talking countries West from China whether East European or Central Asian or Chinese Western Region). Those with lower incomes importing from countries South of China with Myanmar, Laos or Vietnam provides most of supplies.

Is this means this resolve gender imbalance in China? Not at all, but it will dampen the effects and momentum. Only time will tell whether import brides will restore gender balances. It is long shoot, but I will not going to count it out.

This is the realities of China. It is large enough country with already large enough population, and also large enough economies to create their own adjustment.

"Measurement Problems: China's GDP Growth Data and Potential Proxies": A Big Data China Event

In this event on July 5 at 9 a.m. EDT, the CSIS Trustee Chair in Chinese Business and Economics and the Stanford Center on China’s Economy and Institutions (...

www.youtube.com

This is Video discussion from CSIS, that talking about reliability of Big Data from China. This one talk more on economics data. In sense there's always tendencies for China data being 'smoothing' out. However not enough to really fabricate facts. In the end overall trend will not going to be able being cover up. Not in the country the size of China, and with economics as big as China.

Demographics problem is already there in China for the last couple of decades actually. It is going to adjust Chinese Industrialization, but talking on saying it is going to hold China momentum is just far too early. China still can make their own adjustment, because unlike Japan and ROK, they got numbers in hand already, and quantities do make difference on potential adjustment in momentum.

Data on Natural Growth by provinces also give conflicting pictures. Some in interiors with less development and economics size do still have positive numbers, but not all of them. Just like in relatively much richer coastal provinces, some still shown positive numbers. This is also potentially give China some times for adjustment in momentum. Not saying they will successful on all area, but chances successful on some area do shown potential.

This in the end means they will still able to diversify within their own industrial ecosystems, or countries around China. Which means the abilities for China Industrial ecosystems holding their edge still potentially there. Again they already make complete industrial ecosystems for this last two to three decades. Something that no other relocation countries so far able to copy the ecosystems as whole, including India.

Many Western politicians and media seems putting big hope for India to take over from China. Perhaps they're thinking India going to be more 'friendlier' to West then China. I'm not going to discount India, but they are still long way to replicate China industrial ecosystems. Personally I also don't see much different thinking on Chinese Nationalist and Indian Hindutva. Those Westerner that feel India will be more "tame" then China, can face big surprises.

 

[Musashi_kenshin]

Demographics problem is already there in China for the last couple of decades actually.

I'd be very interested in seeing some empirical evidence for that statement.

Whilst China's population pyramids for the last few decades showed that a demographic crisis was potentially brewing, the actual effects of that crisis couldn't be felt at that time. As ngatimozart showed you, even China's pyramid for 2010 shows lots of workers supporting a small retired population. From an economic point it doesn't matter if you have people in their 20s or 40s doing a job, so long as that job is filled and being done properly that's all that matters.

Move forward to 2023 and the population pyramid is clearly hitting danger territory because there is a huge chunk of workers in their 50s and an ever narrowing base underneath it - which is not going to suddenly recover. So you can't say China has already somehow experienced the problems of a demographic crisis. If anything for the last couple of decades it's only been reaping the benefits of a surge in the working population.

The rest of your post is largely just waffle about opportunities to diversify and adjust. Sure, maybe the CCP will roll a double 6 a couple of times in a row. But it's had it easy for the last 30 years, so there's little reason to believe these problems will be resolved through prudent government policy. Especially when you consider things like hidden debt in the public sector and the effects of climate change.

Personally I also don't see much different thinking on Chinese Nationalist and Indian Hindutva. Those Westerner that feel India will be more "tame" then China, can face big surprises.

That seems like a bit of a strawman argument. I've never heard someone saying they think India will be "tame". Rather the view is that India is a more reliable partner. It's not governed by a single political party that both believes it has a mandate from Heaven to dominate Asia and is simultaneously hyper-xenophobic and paranoid. The BJP has some unsavory things about it, but it doesn't lay claim to Bangladesh or Sri Lanka, let alone a country that's a key part of the global economy.

 

[Vivendi]

Many Western politicians and media seems putting big hope for India to take over from China. Perhaps they're thinking India going to be more 'friendlier' to West then China. I'm not going to discount India, but they are still long way to replicate China industrial ecosystems. Personally I also don't see much different thinking on Chinese Nationalist and Indian Hindutva. Those Westerner that feel India will be more "tame" then China, can face big surprises.

Intelligence services of Norway in their latest report name the just a few countries as posing a threat to Norway (often related to cybersecurity, terrorism, espionage) including:

1. Russia
2. China
3. Iran


India is never mentioned as a threat or potential threat in any of the Norwegian intelligence reports I have seen. I believe intelligence services in other Western countries make similar assessments.

This may change, but this is the current situation.

 

[SolarisKenzo]

No one in West perceives India as a threat...for one simple reason:
They aren't a threat.

 

[John Fedup]

Intelligence services of Norway in their latest report name the just a few countries as posing a threat to Norway (often related to cybersecurity, terrorism, espionage) including:

1. Russia
2. China
3. Iran


India is never mentioned as a threat or potential threat in any of the Norwegian intelligence reports I have seen. I believe intelligence services in other Western countries make similar assessments.

This may change, but this is the current situation.

I would insert North Korea on that list, not sure on the order but they are very capable and don’t have to concern themselves with retaliatory blowback like China or Russia so they would be higher than number four.

 

[Ananda]

be very interested in seeing some empirical evidence for that statement.

The present population pyramid in begin to take this shape in late 90's. I used this pyramid compilation from wiki, that even tough it is wiki, but make good link on official population data. So this is matter of perception when the demographics problem begin. Do you think present pyramid come from nowhere? Or are you contradict yourself?

you can't say China has already somehow experienced the problems of a demographic crisis. If anything for the last couple of decades it's only been reaping the benefits of a surge in the working population.

China populations problem is not something coming from nowhere just like any country having demographics problem, is a momentum building for decades.

You claim my argument waffle about opportunities? Well so does yours also waffle around the dooms (or call it negative trend) scenarios on Chinese problem. Who doesn't face global climate change? Who doesn't in large OECD facing demographics and public debt problem? However doesn't means they are not working on to solve that, and so does China. That's why I don't put population pyramid projections, as that's base on assumptions. Most of them assumptions build up in West.

Not saying it's wrong assumptions, but under present circumstances it is assumptions that's increasingly influences by some Western need to tone down Chinese momentum. Who say CCP will lost on their efforts to rebalance their economics (and this also means their demographics) problems? I for one not going to underestimate CCP abilities to rebalance China momentum. They manage to build up Chinese momentum so far. It's just too early to say their efforts will fail to rebalance China. It's still can work both ways.

That seems like a bit of a strawman argument. I've never heard someone saying they think India will be "tame". Rather the view is that India is a more reliable partner.

I get "Tame" is bit hyperbole statement, but four decades ago when uncle Deng come first to US, wearing that cowboy hats and eat hamburger, suddenly all Western media, politicians, business even intelligences see China is "Tame" communists alternative from the dreaded USSR. Partner as alternative against USSR rivalry to US/West value and system. This is communist power that come to embrace West. Thus using "Tame" even bit hyperbole, but it is not anything a strawman argument.

Just like China, India also have their own agenda and that agenda is independent against West. Just like China always has. China wants to have control on the sea lines coming to them. India also has their own agenda on Indies Ocean sea lines coming to them. China four decades ago, their agenda for SCS also already there. Their agenda for Taiwan is always there. But since US still needed China against USSR, and China Navy has not got enough money, tech, and momentum to challenge mighty USN, then it is not a threat.

Asian Neighbors are more realistic looking at China or India. Both always big power even centuries ago before European power strong enough to disrupt that. Doesn't means they are now having less ambition to dominate the regions.

India is never mentioned as a threat or potential threat

Rather the view is that India is a more reliable partner.

So when will India become threat? When China power demise? When Indian Navy are not useful anymore against China Navy build up in Indies? Geopolitics is politics anyway. There's no permanent bedfellow or partners.

If someone else doing what Indian done against US/West interest in Ukrainian war by keeping Russian exports float (as China does), then already classified as threat. Still, as India is useful against China threat, then let's keep it down for now, and let's treat Modi as we treating Deng decades ago. That's seems what US and Western political leadership see India now.

 

[koxinga]

I know less about South Korea so will put it to one side. But Japan has a few things in it's favour that China does not have:
....

To be honest, I don't think the points you raise (bar the gender imbalance) makes any difference on the long run.

Japan has a much smaller population than China which is both a pro (magnitude of problem is significantly smaller relative to China, higher wealth means ability to cushion or delay the onset of issues) and a con (decling population numbers means reduced consumption on the long run, along with declining wages). There is no political will to adjust their immigration policies or to improve their legislative framework. In that area, they are no better than the CCP.

The irony is I will be retiring there as the other half is my family is Japanese.

 

[koxinga]

So when will India become threat? When China power demise? When Indian Navy are not useful anymore against China Navy build up in Indies? Geopolitics is politics anyway. There's no permanent bedfellow or partners.

Well, my personal opinion as India, being English speaking and a democracy (albeit flawed) is seen as a closer cultural/value fit than China (putting aside geopolitical issues) and will never be seen as a threat.

They are good at speaking the right things to the West, while getting what they want (tech transfers) / Make-in-India. Certainly, I don't see India have state funded hacking groups trying to penetrate western companies as they see China and Pakistan as their immediate threats.

As a East Asian person, I can see a clear difference in the corporate world. Indians are seen as very skillful in navigating Western corporate structures and intergrating (or ingraiting, depending on how you see it) into their societies, while the rest of us continue to struggle with the bamboo ceiling due to various cultural reasons.