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> But what I do know is China is ~1 billion people China built its massive manufacturing industry on vast quantities of cheap labor and a massive global consum

> But what I do know is China is ~1 billion people China built its massive manufacturing industry on vast quantities of cheap labor and a massive global consumer base. However, Chinese labor costs have been rising sharply for the past decade for many reasons but one major factor is that the one child policy was very successful and lead to a drastic hollowing out of their younger workforce and consumer base. Meanwhile the older experienced generation are aging out and China is entering a demographic winter which will lead to a 50-60% decline in population by mid to late century depending on whose numbers you trust. There is a similar hollowing out of the consumer base occurring all over the world with few exceptions. So it is highly improbable that China can fill in the most complex high tech supply chains by itself quickly enough to be useful while its workforce dwindles, it’s losing markets to sell to, and while its major trading partners are actively trying to thwart its progress.

ianai 4y ago
Very well said. And it doesn’t have to be this way. America would take a much different stance if the Chinese system were less “malignant”. Live and let live. Like the Japanese, Australia, UK etc.
- nyokodo 4y ago
  > if the Chinese system were less “malignant” China is a country with so much racial, linguistic, and geographical diversity that it would likely break up if it were less draconian. Historically this has occurred repeatedly. This is likely to happen anyway sometime over the next few decades given the geopolitical and demographic headwinds and in a much more devastating manner than it otherwise would, but it shouldn’t be surprising that the CCP won’t lie down and accept it.
  - Throwawayaerlei 4y ago
    Can't speak for ianai but when he said "malignant" that should certainly include its policies towards its neighbors and the rest of the world. "Wolf Warrior" diplomacy is pretty iconic in representing that, but note how the CCP has managed to get so many of its neighbors to ally with Japan of all nations. After the horrors of occupation by Imperial Japan which are still an issue in South Korea for example. Where Japan's replies including a licencing regime for several classes of specialty chemicals used in IC fabrication. The world also cares very much what happens with Taiwan if that results in one way or another it no longer exporting chips. That island also makes quite a bit of higher end stuff for many nations' and companies' supply chains, as well as finished goods.
dirtyid 4y ago
>one major factor is that the one child policy was very successful and lead to a drastic hollowing out of their younger workforce and consumer base IMO just the opposite. One child policy was also "very successful" in concentrating wealth and is largely responsible for why PRC is spitting out 11M STEM graduates a year, around all OECD combined. There will be generation wealth transfers once old folks start dying (many in tier1/2 own homes + have enough savings) and analysts are predicting increasing consumption when multiple inheritances get concentrated in the one-child gen households. > improbable 11M STEM grads per year = PRC has the LARGEST demographic divident of SKILLED LABOUR in human history trying to capture high tech supply chains by itself. They just started moving up Academic + S+T + R&D over last few years, will take another 5-10 years to filter way through industry. The chances are not only good PRC will succeed but it's likely PRC will eclipse west in medium term. As for internal market share, the point of moving up value chain is to produce wealthier consumers. Shedding 600M lower income who buys $1000 rmb phones while gaining 60M upper income who buys 10000rmb will increase the value of the consumer base. Meanwhile we're still looking at PRC with ~700M until 2100s, which is still a stupid large market to serve. It's the kind of scale that enables PRC to drive down costs in any industry state decides to focus on. > thwart its progress. Once PRC starts reaching parity, it will start to thwart back. Not only will western high tech lose 1/3 of PRC revenue, they'll start losing market share from emerging economies, meanwhile PRC could turn on that industrial policy valve to ensure western high-tech become permenantly loss making unless supported by huge industrial policy.
- nyokodo 4y ago
  > 11M STEM graduates a year, around all OECD combined. There will be generation wealth transfers once old folks start dying (many in tier1/2 own homes + have enough savings) and analysts are predicting increasing consumption If STEM graduates alone could increase a country’s wealth then India would be the global superpower. You need a consumer base in proportion to your production which China lacks, and your production needs to be focused on high value add production which China’s is not. Wealth transfer between generations only works if there is a large enough number of people to buy or at least value the assets being transferred. When your population is going down sharply then there are too few people chasing too many assets which leads to an asset price crash so that wealth will go up in smoke to a significant degree. Similarly, a surge in spending based on concentration of inheritance is inflationary which leads to a loss of wealth. This is not a recipe for economic strength.

ianai 4y ago

Very well said. And it doesn’t have to be this way. America would take a much different stance if the Chinese system were less “malignant”. Live and let live. Like the Japanese, Australia, UK etc.

nyokodo 4y ago
> if the Chinese system were less “malignant” China is a country with so much racial, linguistic, and geographical diversity that it would likely break up if it were less draconian. Historically this has occurred repeatedly. This is likely to happen anyway sometime over the next few decades given the geopolitical and demographic headwinds and in a much more devastating manner than it otherwise would, but it shouldn’t be surprising that the CCP won’t lie down and accept it.
- Throwawayaerlei 4y ago
  Can't speak for ianai but when he said "malignant" that should certainly include its policies towards its neighbors and the rest of the world. "Wolf Warrior" diplomacy is pretty iconic in representing that, but note how the CCP has managed to get so many of its neighbors to ally with Japan of all nations. After the horrors of occupation by Imperial Japan which are still an issue in South Korea for example. Where Japan's replies including a licencing regime for several classes of specialty chemicals used in IC fabrication. The world also cares very much what happens with Taiwan if that results in one way or another it no longer exporting chips. That island also makes quite a bit of higher end stuff for many nations' and companies' supply chains, as well as finished goods.

dirtyid 4y ago

>one major factor is that the one child policy was very successful and lead to a drastic hollowing out of their younger workforce and consumer base IMO just the opposite. One child policy was also "very successful" in concentrating wealth and is largely responsible for why PRC is spitting out 11M STEM graduates a year, around all OECD combined. There will be generation wealth transfers once old folks start dying (many in tier1/2 own homes + have enough savings) and analysts are predicting increasing consumption when multiple inheritances get concentrated in the one-child gen households. > improbable 11M STEM grads per year = PRC has the LARGEST demographic divident of SKILLED LABOUR in human history trying to capture high tech supply chains by itself. They just started moving up Academic + S+T + R&D over last few years, will take another 5-10 years to filter way through industry. The chances are not only good PRC will succeed but it's likely PRC will eclipse west in medium term. As for internal market share, the point of moving up value chain is to produce wealthier consumers. Shedding 600M lower income who buys $1000 rmb phones while gaining 60M upper income who buys 10000rmb will increase the value of the consumer base. Meanwhile we're still looking at PRC with ~700M until 2100s, which is still a stupid large market to serve. It's the kind of scale that enables PRC to drive down costs in any industry state decides to focus on. > thwart its progress. Once PRC starts reaching parity, it will start to thwart back. Not only will western high tech lose 1/3 of PRC revenue, they'll start losing market share from emerging economies, meanwhile PRC could turn on that industrial policy valve to ensure western high-tech become permenantly loss making unless supported by huge industrial policy.

nyokodo 4y ago
> 11M STEM graduates a year, around all OECD combined. There will be generation wealth transfers once old folks start dying (many in tier1/2 own homes + have enough savings) and analysts are predicting increasing consumption If STEM graduates alone could increase a country’s wealth then India would be the global superpower. You need a consumer base in proportion to your production which China lacks, and your production needs to be focused on high value add production which China’s is not. Wealth transfer between generations only works if there is a large enough number of people to buy or at least value the assets being transferred. When your population is going down sharply then there are too few people chasing too many assets which leads to an asset price crash so that wealth will go up in smoke to a significant degree. Similarly, a surge in spending based on concentration of inheritance is inflationary which leads to a loss of wealth. This is not a recipe for economic strength.