Broken China/Paper Tiger: Capital Flight, Corporate Militias and Famine Signals

Are famines a thing of the past? It seemed like pandemics were too, not so long ago. Today, we see many pressures bearing down on China, which could bring potentially catastrophic outcomes such as famine. But China has made such incredible strides. Surely this is not possible. It now has the fastest supercomputers in the world. It is a tech and military superpower. It has assembled diplomatic alliances worldwide. It has raised a record number of humans out of poverty. Yes, all this is true. But the one problem China has never been able to fix is food. They can source food from abroad, but only if they can pay for it. They simply can’t grow enough food at home. There just isn’t enough water or arable land to sustain the population.

The problem now is that the losses in the property sector are so severe that there is no money for people to buy anything except whatever is essential. The property losses are killing all other consumer-led sectors in the economy. The Belt and Road Initiative should have brought in debt repayments and commercial revenues, but it isn’t. More and more nations can’t and won’t pay China back fast enough, thanks to devaluation, inflation, and their over-indebtedness. Few are enchanted with whatever infrastructure China has already provided, thanks to shoddy construction and cut corners, and are unlikely to buy more. Chinese nationals are now fleeing the country. Money is running away, too. Against that backdrop, the US is about to begin hitting China with sanctions for supporting Russia. But what if China breaks? Really breaks?

What would that look like? First, how would we know? The Great Digital Wall blocks our view of reality in China. China banned the top several thousand Western websites and tech firms long ago. So, there is little independent data about the true situation. No one trusts the Chinese Government’s data, including the Chinese Government themselves. We used to be able to guess the state of the economy by measuring the flows of ships in and out of China or the electricity usage rate. But, one by one, China turned off the transponders on their ships. Much data has gone dark, especially since China restricted which data sets could be used for training AI. The data blackout means the world is flying blind on what was the most important global engine of growth only a few years ago. China is said to be the world’s leader in AI, yet it is increasingly clear that the authorities will never allow the AI community to access the data, let alone run the society with AI. China’s leaders don’t want AI to figure out how bad the economy really is.

We know that the demographics in China are seriously bad. The WSJ writes, “Researchers from Victoria University in Australia and the Shanghai Academy of Social Sciences predicted that China will have just 525 million people by the end of the century. That’s down from their previous forecast of 597 million and a precipitous drop from 1.4 billion now.”  The one-child policy created a zero-growth rate. It took Westerners a while to clock this because China insisted that nobody question their official demographic numbers. FDI now stands at a 30-year low. But foreign money would have stopped flowing into China long ago, had anyone truly understood how