China’s Further Vulnerabilities

China’s Further Vulnerabilities, by David Archibald.

China is facing increasing economic headwinds over the next decade as its coal production tops out and then goes into steep decline. That will increase the cost of doing everything in China, and the country will become a less formidable trade competitor. Evidence that the Chinese economy has already topped out comes from ExxonMobil’s recently released energy outlook which contains the following figure:

Heavy industry energy consumption in quadrillion BTUs.

.. The revenue from China’s high technology exports peaked five years ago in 2013. As the world economy has kept growing since then, that means that China has lost market share to the likes of South Korea and Japan. …

The number of potential mothers in China peaked nearly 30 years ago. While that has been declining, President Xi decided to undo that work by allowing parents to make applications for a second child in order to increase his popularity. … Recent data show the beginnings of an uptrend, which might take Chinese population growth above the replacement level. …

A great proportion of the population is still very poor and backward, and there is a structural reason for that. For example, most of China’s rice crop of 144 million tons per annum is planted and harvested by hand in wet paddies. To be lifted out of poverty, those rice-growers have to find something else to do, and grain to replace the lost rice production would have to be imported instead. That is not going to happen, so at least 20% of China’s population will remain very poor, indeed. China has given up on feeding itself entirely from its own efforts and is importing nearly 100 million tons per annum of soybeans, but that is to provide some meat, via pigs and chickens, to the Chinese diet. …

China may still have problems with poverty, childhood malnutrition, sanitation, pollution, and water quality, but the country’s number-one goal remains conquering the rest of the world. Thankfully, there are probably fewer than 300 million who could make a contribution to that effort. …

Half of China’s population makes less than $6,000 per annum … The government has to make sure these people are fed and controlled. Until they stopped publishing the statistics, China was spending more on internal security than on defense. China’s poor are more of a drag on the economy than a source of cannon fodder.