Rise of an Eastern Superpower. I'm getting flashbacks. When I was in high school, everyone assured me we'd all be speaking Japanese shortly and every American company would be owned by Japan. It was not just inevitable, it was already over. Shortly thereafter, they caught the economic flu and stayed in bed sweating and shivering for over a decade. They're just now shuffling about in their bathrobe and feeling that empty hunger in the gut.

Likewise, China is now booming. They are voraciously hungry and making great strides. However, that growth is predicated on assumptions that are both changing and uncertain. Nobody knows what China's banking situation looks like. There have been hints that they are in very bad fiscal shape. They own a tremendous amount of American paper but that doesn't belie their problems. If they plan on WTO membership they have to open the books and that could be a major blow to investment and capitalization.

Additionally, they are moving their factories further and further west as the prosperity spreads from the east coast outward. Keeping those wages artificially low becomes more and more difficult. Narrowing that margin of production will make China unattractive in short order and other nations like India or Indonesia become more attractive. China has also been experiencing frequent unrest by workers at various facilities. They have been striking and the PRC forces have been unable to crackdown hard as they have in the past because of blogs and cell phones. News of strikebreaking spreads very quickly and the Old Men in Beijing don't like the waves so they quietly put a stop to it. Too much unrest can lead to serious problems.

North Korea is also making things difficult for them. They cannot go on much longer with Crazy Kim sabre rattling every time he doesn't get his latest bribe money. They don't want to force him out for fear of democracy taking over and they don't want him in because he's a pain in the ass.

Taiwan isn't going anywhere and neither are China's designs on them. They mean to retake Taiwan but don't have the means. Any attempt would be catastrophic for all involved.

Energy is fast becoming a major problem as well. Their energy consumption is projected to double in the next decade. Even with all their pebblebed reactors coming online the sheer cost of energy is going to narrow their margins further. They cannot put any more downward pressure on wages, cost or other overhead (like getting goods to market) so what to do? They need to sell those goods for hard currency.

China will grow and grow significantly but to think they are going to eclipse us as hedgemon is pure fantasy.

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