Tan Ah Tiu...Your Boss warned on the 100yr Storm Cuming...but here jin hot leh, why hah?

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https://sg.yahoo.com/news/china-challenged-100-storm-205810921.html

How China Will Be Challenged By a 100-Year Storm​

Ray Dalio
Sat, 30 March 2024 at 4:58 am SGT21-min read

People look at an exhibition featuring Chinese President Xi Jinping at the Military Museum in Beijing on March 3, 2024. Credit - Greg Baker—AFP/Getty Images

A few years ago, President Xi Jinping started warning that a 100-year big storm is coming. As is typical of the early days of a hurricane, one can now feel it. The circumstances and the mood in China have indisputably changed to become more threatening. These changes are mostly due to big cycle forces.

The most joyous and productive environments are ones that have freedom, civility, and creativity, and ones in which people can make their dreams into great realities with prosperity that is shared by most people.

This happened in China from around 1980 until around five years ago. It is quite typical for such booms to produce debt bubbles and big wealth gaps that lead the booms to turn into bubbles that turn into busts.

That happened in China at the same time as the global great power conflict intensified, so China is now in the post-bubble and great power conflict part of the Big Cycle that is driven by the five big forces that have changed the mood and the environment.

In this piece, I will first describe in brief how the Big Cycle has transpired over roughly the past century, and then I will explain the current picture of what is happening today, with a focus on the challenges that China is facing.

This history and these dynamics are complex and important to world history and the global order—everything I write here is how I see it based on my own experience, relationships, and research

 

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How the Big Cycle in China Transpired to Create the Conditions from the Beginning of the PRC Through the Current Conditions

In the 1930-45 period, there was the last 100-year big storm, which was driven classically by the confluence of 1) a debt bust that triggered a global depression, 2) a civil war in China between the rich rightist-capitalists and the poor leftist-communists (which ended in 1949 when the Communists won), 3) an international great power conflict-war that ended in 1945 when the United States (and, to a much lesser extent, Great Britain and Russia) won, creating the American-led world order, 4) many disruptive acts of nature, and 5) big technological changes.

That period ended in the classic ways they end, with a debt and economic collapse, one side winning over the other in the great international war and the new world order beginning (in 1945), and one side winning over the other in the civil war and the new domestic order beginning (in 1949).

 

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From 1949 (the year the new domestic order was created via the PRC being formed) until 1978 (the year Deng Xiaoping came to power), there was a typical post-war consolidation period led by Mao in the way he wanted via a domestic economic policy that was communist, a domestic political policy that was oppressive (dictatorial and designed to purge the opposition), and a foreign policy that was isolationist.

That and big disruptive acts of nature led to many big challenges and big bad periods and few economic and technological advances. Mao and that era died in 1976.

When Deng Xiaoping came to power in 1978, he reduced the one-man control and repressions, increased collective leadership, replaced hardcore autocratic communism with more free markets and increasingly larger doses of capitalism, and opened China up to foreigners to learn and earn from them. It was like sprinkling water on fertile ground that led to a great blossoming. From 1978 until Xi came to power, there was a classic capitalist rejuvenation that led to a boom in which the economy, living standards, and debt all grew greatly.

At the same time, China was not perceived by other countries to be a threat to the leading great power (the United States) and its world order. As a result, China had a joyous and productive environment in which there was a relatively large increase in freedom, civility, and creativity, and in which people could make their dreams into great realities and most people benefited, though the rich benefited more than the poor.

As is typically the case, these policies also produced greater wealth gaps and greater amounts of corruption. That began to end when Xi came to power, not because he came to power but because of where China was in its Big Cycle and how the new leadership approached it.

 

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When President Xi came to power in 2012, a roughly 11-year transition began that brought China from what it was like in 2012 to what it is like today. I was lucky to see it up close.

At the start of his presidency, Xi and the leadership’s main goals were to reform the economy and eliminate corruption.

For most of Xi’s first five-year term there was a) still an openness to outside thinking, b) a strong desire to further reform the economy by making it more market-driven and building and reforming the capital markets, and c) strong actions taken to eliminate corruption.

The senior leaders chosen were the ones who were inclined to do those things. Of course, how to do these things was debated and some people benefited from the changes while others were hurt by them, so in Xi’s first term there was a movement to consolidate power via a move to “core leadership.”

This became most clear in the leadership changes that accompanied the shift from the first to the second five-year term under Xi. In 2015, Xi put out his bold 2025 plan, which was viewed as aspirational by the Chinese and threatening by Americans. China could no longer “hide power.”

Americans viewed the Chinese as a threat. By the time Donald Trump came to power in 2017 and Xi began his second term in 2017, the great power conflict had begun. In 2019-20, COVID-19 emerged.

At the same time, the debt bubble and the wealth gaps had grown—so the classic convergence of forces led to the formation of the “100-year big storm.” In 2021, about halfway through Xi’s second term, China’s domestic debt bubble burst and the international great power conflict intensified.

At the beginning of Xi’s third term in October 2022, China’s leadership changed from reform-minded globalists to loyal communist nationalists, and purges and crackdowns ensued, which brings us up until now. I will soon describe what things now look like, but before I do, I want to drive home the point about how the Big Cycle is playing a big role in driving what has happened.

 

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The Hand Xi Was Dealt and How He Is Choosing to Play That Hand

A Chinese leader, historian, and friend of mine told me several years ago that the conditions of the times create the type of leader that emerges because the evolutionary process pulls out the leader who suits the environment. In other words, how the times are transpiring determines the leader even more than the leader determines how the times are going.

He gave me the book The Role of the Individual in History by the Russian political philosopher Georgi Plekhanov, which you might find interesting. When Henry Kissinger was writing his book on leadership and we talked about what makes a great leader, he made the same point—that what made a great leader at the time depended on what was needed at the time.

For example, Konrad Adenauer (Germany’s chancellor immediately after World War II) was a great leader for a country that was defeated after a war because he knew how to be both deferential and pushy enough to deal with both 1) the dominant powers that Germany had just came out of a horrendous war with and 2) a domestic population that was defeated and destroyed in most ways.

My point is that what is happening now and Xi’s leadership must be looked at within the context of the Big Cycle.

In other words, it is important to distinguish between the hand that Xi was dealt and how he has been choosing to play it.


It is also important to understand what is happening now and how Xi is playing his hand without judging these things, because judging them can stand in the way of understanding them.

My goal is only to understand what’s happening and what’s likely to happen, and I don’t want to let judgments stand in the way of doing that.

 

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The Current Picture of What Is Happening in China

I will describe this in terms of what I see as the five big forces that drive the changing world order and tend to evolve in big cycles. They are: how well the economic system works, how well the internal order works within countries, and how well the world order works between countries, along with acts of nature and technology.

1. There are big debt and economic problems that are depressing economic activity, prices, and psychology. Domestically, it is a very difficult time for China financially because many people are suffering the negative wealth effects of falling a) real estate prices, b) equity and other asset prices, c) employment, and d) employee compensation. Also, there are debt and financial problems that exist in many companies and many local governments that are drags, which, if not properly dealt with, will have bad consequences for a long time. These things have contributed to the mood having become more dour.

 

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How should these problems be dealt with?

To me, as a macroeconomic thinker who approaches such debt and economic problems more like a doctor than an ideologue, the leadership needs to have a debt restructuring, which it should do via engineering a beautiful deleveraging (see my book Principles for Navigating Big Debt Crises, which I’m giving you here for free if you’re interested in delving into what that looks like) or it will have a “lost decade” like Japan’s.

While many people think policy makers should ease monetary policy to create more credit, I think they correctly view creating more credit and debt like giving an alcoholic a drink to help ease withdrawal problems. I believe that they should engineer both 1) a deleveraging (which is deflationary, depressing, and will reduce the debt burden) and 2) an easing of monetary policy (which is inflationary, stimulative, and will ease the debt burden) so that the deflationary ways of reducing debt and the inflationary ways of doing it balance.

This is what I mean by a “beautiful deleveraging.” In my opinion, this should have been done two years ago and if not done will probably lead to a lost decade. I think some of the economic leaders, especially those who did this under Zhu Rongji, understand how to do this, but it is very difficult and politically dangerous to do because it engineers big changes in wealth, which is politically challenging, especially during a difficult time because people squawk.

In my opinion, if the leadership doesn’t execute a beautiful deleveraging, China will have a Japanese-style lost decade with Marxist characteristics.

 

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The aging population issue is a heavy weight for those who are old, for their children, and for the government’s finances and social issues. The average age of retirement is 53 and the average age of death is 84, so people without incomes have to be taken care of for 31 years on average.

This is made more difficult because the previous one-child policy means that one person has to take care of two parents. This has been a depressant in the mood and the financial situation.

While the retirement age should be raised and a social support system including old-age care should be improved, neither is happening at an adequate pace.

That is mostly because people don’t want their retirement ages to rise so doing that is politically untenable and because the government bureaucracy is moving very slowly, especially now that most government officials are reluctant to take bold actions because those can be politically disruptive (as they were in other countries, most notably France) and people squawk, so it takes courage.

Also, with the workforce declining and old people getting ill and passing away, this is burdensome and depressing. Once again, this is likely to remain a burden unless the government deals with it in a more forceful way.

 

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The internal wealth gap and the resulting conflict over wealth and values are intensifying, which is fear-inducing.

The internal wealth gap has led to the government’s push for common prosperity and government-directed, seemingly arbitrary rather than rule-based actions.

These moves appear to some people to be anti-capitalist, while to others they are simply the government’s messages to people to stay out of politics and do what the leadership wants them to do to help society. In any case, it’s fear-inducing and oppressive, especially for the capitalist elites.

On a recent trip to China, my Chinese friends reminded me that throughout Chinese history, it’s typically been the case that you can’t be rich and be a government official.

The merchant-capitalist who sought financial gain was traditionally assumed to be dangerously greedy and easily corruptible, and not allowed to be in government.

It wasn’t until 2002 that these merchant-capitalists were allowed to become Communist Party members. That was during the reformist period.

Now it is no longer as “glorious to be rich.” As is increasingly the case around the world but more so in China, there is a greater inclination to think that the rich are selfish and corrupt.

Purging and rooting out corruption is also going on in most areas, perhaps most notably in the military.

In other words, it’s a time of big policing and strict enforcing of what should be done and how people should behave that has become threatening to some.

 

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[The Crow]

@tanwahtiu :"Mai Kong Lan Jiao Wei lah!" ...

 

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[k1976]

@tanwahtiu :"Mai Kong Lan Jiao Wei lah!" ...

No worries, we must do public awareness for benefits of all fellow bros and sisters mah


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