How is China doing?

An Update

You may have heard that China is going through a bit of a rough patch. The economy is having some trouble, Xi has installed some friends in top roles, zero Covid is still going and there are a number of environmental problems. China is in a lot of trouble, to put it lightly. Luckily they're not on /our side/, but a chaotic Chinese state could have global impacts.

The Economy

The Chinese economy is going through a little turbulence at the moment. China doesn't have property tax. Instead, they rely on "public land leasing" as a significant source of revenue. This has been pretty great as long as people kept flooding into cities, but China has already hit the Lewis Point, and the incentive to keep selling more land (to get more revenue) has meant that property developers have way over-developed. And they're now reaping the reward of their zeal: you may have heard of Evergrande and its slow collapse; this is happening across virtually every city, to virtually every real estate company, in the entire country. The Chinese economy has been built on sand. Local government financing vehicles (LGFVs) are running out of money. Developers are defaulting. The debt poison is spilling into the banks. China has some solutions. But the debt burden in these LGFVs are worth...$7.2 trillion. Xi is going to have to do some real magic to get out of this one.

Xi's Appointments

The Politburo Standing Committee of the Chinese Communist Party (you can't beat a good Chinese name) is effectively the Cabinet. These are the top officials in the country. Up until a few weeks ago, the PSC had some pushback against Xi. Li Keqiang, number 2 under Wen Jiabao, number 2 under Xi, was an architect of many of the good plans of Chinese economic expansion (and... maybe some of the bad ones, above). He is now gone. In his place is Li Qiang, a Xi "close ally". Li Qiang is a big fan of zero Covid, and - strangely - big business. He likes Jack Ma and Alibaba. We shall see if he mentions them again now that he is hanging out with Xi a little more.

The most interesting appointment, however, is Wang Huning. This guy is the eminence grise behind Xi's decision making, probably for the past decade. Belt and Road? Wang. Decrying western liberalism as effeminate? Wang. Ethnic nationalism? Wang. Wang did a "Tocqueville US Tour" and wrote a book called America against America. It highlights how and why America is a failing state. Wang is a US / Western expert, and in many ways, kind of nails what is wrong with the country. This piece on him is excellent.

Zero Covid

It may be common knowledge, but China just today confirmed that they are doubling down on Zero Covid. This policy is obviously exacerbating the above economic troubles - but it is also driving out a lot of the companies that made China rich. Apple is diversifying away from China. Other companies are following suit. What is going to happen when the Chinese economy sputters out? They aren't rich yet, like Japan or Korea. They still have 600 million people who earn 1000 yuan ($140) a month. This is not a country that has "made it" and can afford to lose global manufacturing.

The Environment

China is not exactly environmentally in a great place. The US wildfires and hurricanes are pretty bad... But last year in Zhengzhou, for example, they got 8 inches of rain in one hour. The water in the subway trains was up to peoples' necks. They're also, ironically (though not really, these things often arrive together), running out of water. Arable land might suffer soon, causing famines. China also continually has border disputes with India - we could see geoengineering projects to divert Himalayan rivers into China.

This is not a country that is doing well in the medium term. I kind of hope it continues, as a regime change there would be globally a good thing, and if China collapses before the Thucydides Trap with the US gets sprung, that could also be good.