Why China’s Heading for a Hard Landing, Part 1: A. Gary Shilling - Bloomberg

 

Jesse McKay 3 days ago 6 comments collapsed CollapseExpand

I tend to agree with the author on China's future from an economic standpoint.
China presents today as a primarily agrarian country of 1300 million people.  Claims that it manufactures most of America's goods, or is the principal manufacturing country of the world, are false: that title rests with the United States and her heavily mechanized factories.
Fearmongers in the USA point to China and in shrill tones proclaim she is sweatshopping us to death; but, in reality, this is nonsense.  Such a plot needs two acts -- in Act I, the country sells so many goods so cheaply as to wreck the production and capacity of its buyers (check the books: this is not happening.  The USA produces more goods today than it did in the heyday of 1970 but with far fewer workers).  In Act II, the country breaks off exports and turns against its former customer.
My friends, there is no such Act II on the horizon.  China's industrial rise of the past 40 years has lifted it from Afghanistan-poverty into Mexico-poverty, and there it shall stay.  Assembly workers building plastic toys or steel tools do not generate USA-style wealth and they never will. 
Americans make toys, but they are more than manufacturers.  Americans are designers.  In this category, China lags far, far behind and their pitiful gains are not enough.  "Hello Kitty" is not going to eclipse Disney or even Ronald McDonald.
Ladies and gentlemen, China saw a world where she was too big to fail and has simply become too big to succeed.
China's military buildup is cause for concern, yes, but they are pushing a bamboo ceiling they won't be able to crack.  Could China invade its neighbors -- India, Russia, Japan, steal their wealth, and become the new superpower?  No.  Any such plan is foolish, self-defeating, and insufficient.  China can field millions of soldiers but it cannot feed them.  To war with her customers is to lose them, and she certainly cannot afford to do that.  America doesn't relish a war with China but it will not shrink from one and it is prepared for one.
We should worry about China joining with Muslim terror groups.  We should worry about China trading nuclear technology with less visible actors who believe in national suicide (China doesn't).  We should worry about Chinese spies.
We shouldn't worry about 21st century capitalism breaking down before 19th century communism, because that is not going to happen.  Everything they steal, we'll make 10 times better in the next generation.
To sum-up, China makes 10 percent of our stuff.  We buy it because it's cheap.  That, my friends, is an arrangement made in hell.  They'll never get rich from it, and their power over us is centered on the idea that Americans need more and more cheap stuff... but the dynamic is, people who have cheap stuff want good stuff, and those goods are not Chinese.  So.. bamboo ceiling.

Why China’s Heading for a Hard Landing, Part 1: A. Gary Shilling - Bloomberg