Will China Destroy Itself Before It Destroys the US — 3 Reasons Why

Key Takeaways:

  • Much-anticipated population decline posts challenges for CCP.
  • Collapsing real estate sector in China could deepen the economic crisis.
  • Radical Post-Covid measures did nothing about the general healthcare crisis.
Elderly people sit in front of a social welfare home on July 8, 2013 in Dali, China.In China there is a shortage of elderly care with thousands of applicants on the waiting list.
Will China Destroy Itself Before It Destroys the US — 3 Reasons Why

YEREVAN (CoinChapter.com) – According to the NPR, China held almost a trillion dollars in US Treasuries outstanding as of Q3, 2022. While China is NOT US’ largest creditor, the number raised concerns about the Chinese Communist Party’s (CCP) intentions to wreak havoc on the US economy, adding to the strain in US-China relations.

However, China has several monsters to deal with before that happens. Here are the largest concerns CCP faces.

#1 Much-anticipated population decline posts challenges for CCP

China implemented its one-child policy between 1980 and 2015 to curb population growth by restricting many families to a single child. That initiative was part of a much broader effort to control population growth that began in 1970 and ended in 2021.

The half-century program included minimum marriage and childbearing age, two-child limits for many couples, minimum time intervals between births, heavy surveillance, and stiff fines for non-compliance. 

The program was effective, too. As reported earlier this year, China’s population is in decline for the first time in the previous 60 years, joining several other countries in the Asia-Pacific region.

According to the Council of Foreign Relations, Japan’s population peaked in 2008 and has been steadily declining since, with the total population falling by roughly half a million annually. Similarly, Taiwan tipped over into negative growth in 2020 and South Korea in 2021.  

Meanwhile, the negative demographic trajectory raised a different concern. Is China ready for a rapidly aging population?

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Will China get old before it gets rich?

While it’s too early to talk about a ‘demographic crisis’ per se, Beijing might not be up to accommodating a rapidly aging population with appropriate pensions. Chinese officials have regularly made noise about raising the official retirement age.

The officials claimed that the “unsustainably low” levels of 55 for women (50 for blue-collar female workers) and 60 for men were set back in the middle of the 20th century and needed to be rethought in light of impending financial pressures. 

However, the suggestion faced public opposition from urban elites who benefit most from existing policies. As a result, Beijing failed to take meaningful reform. Meanwhile, China had roughly 280 million people over 60 years old at the end of 2022, up from 267 million people at the end of 2021.

Cheung Kong Graduate School of Business (CKGSB) agreed that the negative demographic trend might harm the economy more than good.

China’s current GDP is USD $10,000. Its theoretical fertility rate should be as high as 2.3, yet its real fertility rate is only 1.3. China has emerged as one of the nations with the bleakest population prospects, experiencing a shrinking population before it reached a high level of wealth. There are many reasons for this.

read the research.

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#2 Collapsing real estate sector in China

The global attention focused on the Chinese collapsing real estate sector in Q3 2022 when the Evergrande scandal came to light. In short, some experts believe CPP is sitting on a “ticking debt bomb” that could erupt soon enough.

Moreover, sources report that the crisis is far from over, and the International Monetary Fund (IMF) agrees. In a briefing, Thomas Helbling, deputy director of the IMF’s Asia Pacific Department, said that the “authorities’ recent policy measures are welcome, but in our view, additional action will be needed to end the real estate crisis.”

If you look at the measures, a lot of them address financing issues for the developers that are still in relatively good financial health, so that will help. But the problems of the property developers’ facing severe financial difficulties are not yet addressed. The issue of the large stock of unfinished housing more broadly is not yet addressed.

he said.

Moreover, the mentioned “large stock of unfinished housing” is called a ‘ghost city,’ with hundreds of empty housing complexes. According to experts, these sold-out houses, buildings, neighborhoods, and cities sometimes remain vacant for years.

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Authorities don’t hurry to tackle the problem

One of the reasons behind the Evergrande crisis and the ghost cities is the supply-demand imbalance in the housing market caused by excessive urbanization in China. A recent report revealed that there could be as many as 50 ghost cities in China.

Chinese authorities subsequently emphasized the need to help developers finish building those pre-sold apartments. Still, residential floor space sold in China dropped by nearly 27% last year, while real estate investment fell by 10%, according to official numbers.

Thus, the collapsing real estate sector threatens the country and is responsible for approximately 30% of the Chinese economy. Anarchonomicon, a substack publication with thousands of readers, agreed, forecasting a bubble pop soon enough.

If this sounds like the worst housing bubble ever, it is. The raw force of the demographic decline will inevitably destroy this bubble. EverGrande was a huge scandal , but now citizens are striking and refusing to pay mortgages on condos that stopped mid build.

read the substack.

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#3 Radical Post-Covid measures did nothing about the general healthcare crisis

If the rising population age and the real estate bubble weren’t bad enough, China could face a dditional threat from the Zero-COVID policy fiasco. Instead, the Chinese Lockdowns were vastly more effective than western ones, partially due to the authoritarian regime and population compliance.

However, the Chinese might still be more vulnerable due to poor air quality, poor healthcare, and the growing average population age. Additionally, while the country was laser-focused on Covid-19, the wave of non-communicable diseases strengthened.

According to the Guardian, the deadly impact of non-communicable diseases is much less well understood. Without tougher public health policies, it threatens to kill tens of millions of Chinese in the coming decades.

True, China’s rapid industrialization lifted millions of people from poverty. But along with higher wages and urban living have come “western” diseases such as cancer linked to very high rates of smoking (25% of the population), diabetes, and heart disease thanks to a richer diet, lack of exercise, and high blood pressure.

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