History
For most of the past 2000 years, China and Bharat remained the world’s two largest economies till the colonial powers came by in the 18th and 19th centuries. After they emerged from the colonial yolk, both nations had similar growth levels till the early 1990s. In 1990, Bharat had a $320 billion GDP, while China had $395 billion. Cutting the story short to the present, China claims to be an $18 trillion economy (Chinese numbers are always suspect though), while Bharat is struggling at less than $4 trillion economy. While the growth of China is spectacular and seems to have brought in prosperity, it adopted policies and models that not only seem to have run their course but seem to give it a negative trajectory from here on.
Demography
The Chinese population grew exponentially till the mid-1970s with a TFR (Total Fertility Rate) of over 6.1. The great famines of the early 1960s, their great Cultural Revolution, the disruption of their society, and harsh dictatorial policies brought down the TFR to about 2.7 by the mid-1970s. Not satisfied with that, the `one-child policy’ was aggressively implemented resulting in the TFR falling below 1.2 by 2022. China being a typical Asian society, preference for male child resulted in female feticide on a large scale. The gender inequality has grown to alarming proportions now. The `one-child policy’ finally ended in 2017 and was replaced by a three-child policy in 2022. However, the damage done to the demographic balance is not improving. Currently, 14% of China’s population is above 65 years, and the old-age dependency is about 20%. In comparison, 7% of Bharat’s population is over 65 years old and has less than 10% old-age dependency. It is projected that China would have 52% old-age dependency by 2050, while Bharat would only have 22% old-age dependency by then. This is putting an enormous burden on China as its working population shrinks and dependencies grow exponentially. The growing cost of living and unbearable costs of child care and education are scaring couples away from having more children, and definitely not more than a single child. The government’s efforts to subsidize the second and third child have spectacularly failed. These trends are irreversible and cracks in the Chinese throne cannot be repaired.
Economy
- GDP Race Madness: The Chinese Communist Party’s (CCP) frenzied race to overtake the USA as the world’s largest economy, on the face of it, seems to have given spectacular results. However, a closer examination of the Chinese model and its numbers tells us a totally different story. Their focus on real estate and construction has been a significant part of their GDP story. The frenzied construction in the last three decades, which is largely debt-driven and not based on principles of commercial viability, resulted in more than twenty fully-built ghost cities, bullet trains without any passengers, stadiums without any players, and several roads whose cost can never be recovered from their volumes of vehicle movements. China has pre-spent the money of a couple of decades resulting in unbearable debt which has come to bite it hard now. The pressure of GDP numbers pushes the provinces to create real-estate deals which are colorful devices at best, resulting in those governments’ piling up an estimated $23 trillion unaccounted debt. Several provinces are unable to pay the salaries of their staff and have imposed salary cuts across the board. The workforce that was hired to handle civil unrest and impose strict lockdowns during the period of the Wuhan virus majorly went unpaid. Medical benefits and subsidies to the elderly were drastically cut. If this is the state of the elderly-care now, one would shudder to think of what would happen to them when their numbers double in the next two decades and more.
- Externalizing internal problems in BRI: Realizing the extent of their excess spending and the fear of sitting on idle capacities, XI Jinping came up with the concept of the Belt and Road Initiative (BRI), where he wanted to utilize his excess capacities of construction material and labor across the globe, while also gaining influence in those countries. The BRI contracts were shady and opaque and were all to the benefit of China sucking out the host countries like a parasite. The political leadership, influencers, and troublemakers were all bought off in those countries. The Chinese model invested in the leadership and not the people. They could hide their exploitation as long as pliable leadership was in charge in those countries. Where non-pliable leadership takes over in those countries, the Chinese model gets exposed, like Italy walking out of it. The debt-trapping has spectacularly blown up in China’s face in Sri Lanka, Pakistan, and a few African countries. The quality of its construction has been exposed as cracks appeared in some dams in Baluchistan and Latin America. Their multi-million-dollar road in Kenya ended up in a barren uninhabited area. Having spent more than $100 billion till date, China is under severe stress to further fund most of these projects, as their own economy stumbles and their banks are under severe stress.
- Real-estate bubble bursts: More than 30% of the Chinese economy depends on real estate. Some of the major players like Evergrande, Country Garden, and Sino-Ocean have all defaulted in their debt servicing, and Evergrande has filed for bankruptcy protection in the USA, fearing massive international litigations. Its CEO and CFO are arrested as the Company’s debt balloons to over $300 billion. But there is no relief for the victims within China, with no bailout from the govt.
- Anti-espionage policies: In the recent past, China has implemented an anti-espionage policy which resulted in targeting several Western consulting firms, which are doing routine data gathering and analyses for their investors. Simple activities like background checks of prospective employees or gathering market data could be deemed as espionage activities and people could be arrested and businesses shut down. This has resulted in the mass exodus of Western expats and a significant flight of capital from China. Last quarter saw only 52000 foreigners visiting China, half of them from Hong Kong and Taiwan. This is less than a trickle, compared to the 3.3 million foreigners who visited China in the corresponding period before the pandemic.
- Gloomy data: The official GDP growth rate for April-June 2023 is 0.8%, their exports fell by 8.3%, imports fell by 2.6%, their retail growth fell by 8.6%, and deposits grew by 18%. If the official figures are so alarming, one can imagine the real situation, as China is notorious for falsifying its numbers. Joblessness of youth between 16-24 years was approximately 22% in June 2023. This doesn’t include rural youth unemployment but includes student internships; the numbers have grown so alarming after that, and the Chinese have stopped issuing these statistics from August 2023. There is more than 40% unemployment among graduates who have passed out two years before, so one can imagine the fate of people graduating this year. While all these things are going on, Xi Jinping made a statement asking people to `swallow bitterness’, indicating that the central govt in Beijing is either unwilling or unable to help the economy.
- Frenzied Urbanization: The Chinese Communist Party pushed for urbanization at a feverish pace to man its industrial machines. From 13.3% urbanization in 1953, it now has 64.7% urbanization by 2022, and is projected to cross 80% by 2035. This excessive urbanization has brought in several problems including housing, cost of living, medicare, and social cohesion. CCP’s unpredictable policy regime has seen the flight of more than $ 2 Trillion as several investors are either de-risking or de-coupling from China. The unprecedented shutdowns and zero-covid policies have seriously shaken investor confidence.
- Three major weaknesses: The Chinese economy also has three major weaknesses that it is unable to overcome. They are heavily dependent on Western industrial technologies to run their manufacturing. Despite blatantly plagiarizing and stealing technologies, they are still unable to match up to Western superiority. This is especially stark in terms of engine technologies, that power its air force, army, navy, and civilian aircraft programs. The second major weakness is chip technology, in which Taiwan, USA, and Europe are way ahead. One of the motivations for China to take over Taiwan is to get access to the high-end chip technology that Taiwan can offer. The third major weakness in the Chinese economy is its food insecurity. It has one of the lowest per-capita cultivable lands among the top large countries. Anything between 20-25% of its food needs have to be imported. China has been stealing fish from the waters of several countries by bullying them into submission or buying off the leadership there. These actions have resulted in severe social problems in those countries. Pakistan is a typical example whose fishermen are left with next to nothing after the large mechanized Chinese boats have looted their best. It is customary for traditional fishermen not to fish for 2-3 months during the breeding season, to allow the fish population to grow. The Chinese trawlers haven’t spared even these months resulting in severe depletion of marine life. The unsustainable food habits of a recently affluent society are causing untold damage to the environment. They are farming exotic animals for food, like tigers, bears, elephants, and other wild creatures. These food practices are resulting in newer and newer health hazards arising out of that country, the Wuhan Coronavirus 2019 is the largest of many such diseases that are being produced in China due to their environmentally unsustainable food habits. In spite of building more than 22000 dams, the largest in numbers and per capita, the cultivable lands of China have been facing natural disasters continuously. Floods and droughts are repeating in cycles thus devastating their internal supplies. The obsession with food security has driven China to horde more than 60% of the world’s wheat, more than 50% of the world’s rice, and other major food items. China constantly fears that the USA and its allies could impose crippling embargoes on its food supply chains in the event of an active confrontation.
- Back to Mao’s days: Xi Jinping has largely overturned the free market, and open economy of Deng Xiaoping and is going back to the centrally controlled economy of Mao Zedong. His slogan of common prosperity resulted in unprecedented extortions from the likes of Jack Ma, Ten Cents, the Private education industry, etc. In his desire to have better food security, he is destroying forests and commercial crops against the rules of the environment. In his quest for Green Energy, he has taken over vast stretches of land from the farming sector. His takeover of Hong Kong and Macau has greatly impacted his ability to access Western capital. His major wolf-warrior diplomacies and bullying tactics are fast becoming a pariah in his own neighborhood and beyond. The cracks he is creating in the dragon throne are irreparable.
Culture
Chinese civilization along with Bharat’s civilization is one of the oldest surviving civilizations. The Chinese Communist Party systematically destroyed their own culture causing irreparable damage. With its own version of communism and a one-party dictatorship, the CCP systematically eroded the morals and ethics of the society. Their persecution of religious sects like the Buddhists of Tibet, the Uyghur Muslims, and Falangong practitioners has disconnected their society from spiritualism. A society bereft of spiritual and moral values could just become a soulless machine, which is exactly what the CCP wanted.
- Westernized lifestyle: The urge to compete with the West has imposed excessive Westernization in their day-to-day lives, from the way they dress to their grooming to their choice of interests, the society copies from the USA. A drive down through the major cities like Beijing and Shanghai, one would hardly find any shops of traditional Chinese clothing. All their advertisements show models wearing Western clothes or accessories. This urge to match and compete with the West, especially the USA has caused severe damage to thousands of years of Chinese wisdom.
- Weaponizing Chinese culture: The CCP is weaponizing and commercializing aspects of Chinese traditions. The Confucius Institutes opened in foreign universities are not there to spread the wisdom of Confucius but are there as propaganda machines of the CCP. These Institutes are notorious for their bullying tactics in universities against anti-CCP voices. These Institutes were also actively involved in stealing technologies and Intellectual Properties from those universities.
- Meddling in religion: CCP decides what verses of Quran and Hadiths Muslims should follow and what they shouldn’t. Buddhist monasteries cannot have the photograph of HH The Dalai Lama but have to mandatorily teach the virtues of the Communist Party. The Falangong practitioners are routinely arrested and their organs are harvested without any consequences. The Cardinals and the Pastors would be appointed by the atheist CCP and not by the respective churches. Except for loyalty to the CCP and its leadership, no other cultural or civilizational aspects are allowed to flourish. Or at best, they have to be subservient to the CCP and its leadership. When the soul of the society is destroyed it becomes a mechanized robot.
Politics
While the CCP has always been a ruthless totalitarian expansionist and intolerant force, it still had several internal checks and balances. Several critical decisions were collectively taken. Multiple levers of the govt were controlled by multiple people. It was the case even during the regimes of Mao Zedong and Deng Xiaoping. For the first time in the CCP’s history, all the levers of govt and power are vested in a single person. Be it the party, the govt, the military, the police, the internal security, or external affairs, every aspect is directly controlled by Xi Jinping. This has resulted in the complete erosion of dissent and alternate ideas in political space. This is typical of all dictatorships and after a point, they will be surrounded by only yes-men. A lack of awareness of reality would lead to decisions that are not based on logic and strategy but purely based on the whims and fancies of the dictator. In such an environment, the people manning various ministries are chosen for their loyalties and not for their talents. The previous Prime Minister of China Li Keqiang had some understanding of the economy, whereas the current Prime Minister Li Qiang is a complete novice and his only credentials are that he imposed a two-month zero-covid lockdown on Shanghai with all sincerity and loyalty to Xi Jinping. Qin Gang was a junior diplomat handpicked by Xi Jinping and made the Foreign Minister because of his loyalty, despite other eligible candidates being present. So are the other ministers in his cabinet. No one has the stature to give a counter-view to Xi. Since he is surrounded only by yes-men, his decision-making process is severely crippled by his own thoughts and emotions, resulting in wrong decisions taken about covid handling, Taiwan matters, bullying the neighbors, the trade war with the US and the West, and most importantly, actions against his own ministers and his commanders. Be it the release of maps claiming neighbors’ territories or replacing ministers of his own choice like Qin Gang and Li Shang Fu, or replacing Li Yuchao, Commander of rocket-force, his decisions are not tempered with consultation and alternate views. Sacking his own protégés and appointees in less than six months has created a sense of insecurity in the entire govt and the forces. Xi is obsessed with fears of PLA rebellion, coup, and assassination attempts.
No one in China seems to have the courage to tell the emperor that he is naked. When everyone fears the emperor, there will be no one to protect and maintain his throne. Not before long, the crumbling throne will bring the emperor crashing down.
Note:
1. Text in Blue points to additional data on the topic.
2. The views expressed here are those of the author and do not necessarily represent or reflect the views of PGurus.
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He has visited 30+ sites associated with the Mahabharata and Vedic period, especially Harappan sites in India. Of special interest is traveling along the course of the extinct River Saraswati. Understanding and rediscovering the forgotten Hindu past of Kashmir has been an abiding interest and he has extensively visited kashmir including militancy affected areas.
Giridhar Mamidi is a trained Chartered Accountant with an additional degree in Law. In his long career, he has worked as CFO in Punj Lloyd Saudi Arabia, Unibeton Ready-mix UAE, as group head at ERP Al Faraa group and in DLF Offices and IT Parks Delhi. Prior to that, he has worked as Finance Head in Google India and ADP India.
- Crumbling throne of the Dragon - November 4, 2023
- Saving the Hindus of Bangladesh - August 14, 2023
- Time for Bharat to take over from India - May 24, 2022
Fully, wholly, agree with Giridhar Mamidi