China’s economy is plunging into an unprecedented and dire phase, sounding deafening alarms that the Chinese government hopes to muffle, but they are growing too loud to ignore. This looming collapse is an ominous warning to America and the entire world as we are witnessing this unsettling unraveling in real-time. So, what do we need to know about this? China isn’t exactly transparent, most recently halting economic data releases to keep the world in the dark, which is just not a good sign. What they are hiding is that their state-controlled economy is unravelling due to debt, misguided investments, and eroding credibility. The question is, how bad could it get and what impact could it have on you? And most importantly, what can you do to prepare? Let’s talk about it.
3 REASONS CHINA COULD SHOCK THE WORLD
1) UNINFORMED POPULATION
China has ceased reporting economic data that could reveal its true economic health. For instance, they stopped publishing youth unemployment figures, citing a need to review their methodology. The most recent available data showed a record-high youth unemployment rate of 21.3% in June for those aged 16 to 24. It’s possible that it’s even higher now, possibly exceeding 25%, but we lack current information. In addition, China has limited access for foreign users to corporate registries and academic journals. They have also clamped down on due diligence firms, which are vital sources of information for overseas businesses interested in China. It’s evident that the Chinese government is actively suppressing information and engaged in extensive damage control.
The Chinese people don’t really understand how teetering their economy truly is because the government doesn’t want that to be known. Even today, if the ruling Chinese Communist Party doesn’t like data or it reflects negatively on them, they simply don’t report it. The world has to wonder what’s really going on in the people’s minds, what they actually know and don’t know, and whether their frustration level will ever be more potent than the government’s ability to hold them down.
2) OVERBUILDING & COLLAPSE
China has followed an investment-led economic growth model, heavily focusing on infrastructure and construction. However, this approach has led to significant overbuilding, with excess housing units that could house twice the entire Chinese population. Did you catch that? There’s two residences available for each of the 1.412 billion people. In China, home ownership for investment is favored over stocks. As a result, China has responded to this by building, and building, and building giving people to buy properties that are sitting vacant.
This has led to the citizenry purchasing homes enthusiastically as an investment vehicle leading them to invest in multiple apartments, accumulating second, third, and even fourth properties. As the economy suffers, however, they find themselves unable to make payments on some of these properties and unable to unload them to take a loss on them. Again, that’s two residences available for each person. This massive overbuild presents a problem that surpasses anything seen in the American subprime crisis.
This has been unraveling at a staggering pace, even as the government takes drastic measures to desperately try to stop the freefall. The collapse of Evergrande, a massive Chinese real estate company with over 1,300 projects in more than 280 cities, has sent shockwaves through China’s real estate market...
CHINA IMPLODES. NOW WHAT?
If the Chinese economy were to implode suddenly, the consequences for the rest of the world would be substantial and multifaceted. Individuals and businesses should prepare for several potential scenarios. First, a collapse of the Chinese economy would trigger a global recession due to its significant role in the world economy.
People should be prepared for possible job losses, reduced economic growth, and financial market volatility. If all the parts and ingredients in everything from medicines to Global Hawk unmanned surveillance drones carried labels as to where it was made, you would be shocked to learn that much of it still comes from China. Dependence on cheap Chinese manufactured items isn’t an addiction that is easily broken.
China is the world’s largest producer of pharmaceutical ingredients and produces and exports around 40% of the world’s active pharmaceutical ingredients (APIs). Those APIs predominantly flow to India, which is the world’s largest provider of generic medicines by volume, accounting for 20% of global pharmaceutical exports. India also manufactures 60% of all vaccines in the world. If China implodes, the world’s supply of medicines will immediately plunge to critically low levels.
China is a central manufacturing hub, and its production disruptions could lead to various product shortages. We caught a glimpse of that with the COVID lockdowns, but the country’s economic collapse would be magnitudes greater in impact. The U.S. imports massive quantities of manufactured goods from China, including 70 percent of Walmart’s store merchandise and 40 percent of the clothing sold domestically. It’s not just retail stores that would suddenly find themselves without inventory. In 2020, the United States imported machinery valued at $41 billion from China, making it one of the largest importers of Chinese machinery. Additionally, in 2021, the U.S. imported $13 billion worth of other electrical machinery, primarily sourced from China. These figures highlight the significant reliance on Chinese machinery and electrical equipment in the U.S. market.
Imagine farmers suddenly unable to repair or maintain their equipment. Imagine water companies unable to replace failing equipment. Imagine electrical companies without the necessary equipment and materials to maintain the grid. The quantity of these imports versus domestically manufactured products fluctuates yearly as these governments clash. However, they still find their way here to some degree, even if it is via India or some other intermediary country. No one is ready to see what happens if that supply suddenly seizes.
I have focused on the primary impact China’s economic implosion would have on the U.S., but emerging countries and trade partners worldwide will be impacted as well. Businesses, manufacturers, and distributors worldwide would immediately suffer to an extent large enough to perhaps even topple some countries.
This year, We have seen how economic pressures and the application of foreign government influence can directly lead to rebellions and the toppling of established governments. The global dynamics can change considerably when critical food imports to starving countries suddenly stop.
The geopolitical ramifications of a Chinese economic collapse could lead to significant shifts in global power dynamics. People should be prepared for potential changes in international alliances and trade relationships, which could affect their countries’ foreign policy and economic strategies. China, forced into desperate measures to sustain its power and economy, could seek to deflect attention and blame by sparking a conflict in the South China Sea or with Taiwan. China could sell lethal arms and armaments to Russia in exchange for a more significant stake in the resources in the Siberian region. Any number of odd, desperate, and unfriendly alliances could be openly and secretly agreed to in an attempt to stay afloat.
1 comment:
China's Cultural Revolution (1966) purged all vestiges of bourgeois values and restored a revolutionary spirit that shook the world. This revolutionary spirit manifested itself at Wuhan (2019) ending with a pestilence destroying bourgeois values worldwide and paving the way for a NWO led by egalitarian white liberals.
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