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OK, thanks - all great points. This is a lot more info, not directly related to the conversation, but directly affects what is happening in tech and the rest o

OK, thanks - all great points. This is a lot more info, not directly related to the conversation, but directly affects what is happening in tech and the rest of China's economy, and why their tech may still fail. One thing I'm reading about, which is related, is that China's population is about to crash, and crash big time. It is all over the world, but particularly going to hit China hard because of the one child policy and they are still not a first world country. In 2018, birth rates dropped 12% to 15.2 million, with some provinces droping by 35%. Yi Fuxian, a professor at the University of Wisconsin-Madison, has written that China’s government has obscured the actual fertility rate to disguise the disastrous ramifications of the “one child” policy. According to his calculations, the fertility rate averaged 1.18 between 2010 and 2018. Replacement is 2.1 child per couple. Fewer children were born, and because of cultural preferences for male offspring, fewer of them were girls. There are 122 boys for every 100 girls born, so this is an issue - not all men will find a mate and competition for women will be intense. 1 in 5 men won't find a mate, at all. 34 million frustrated men. I've read before that this is one of the main contributors that nations go to war - for single men to get women, if there is a great inbalance. It would certainly make the wifeless men very angry and ready for war, and motivated. The male/female birth imbalance has already fueled human trafficing and child kidnapping. Chinese women born during the years following the “one child” policy are now reaching or have already passed their peak fertility age. There are simply not enough of them to sustain the country’s population level. The declining population will create an even greater burden on China’s economy and its labor force. With fewer workers in the future, the government could struggle to pay for a population that is growing older and living longer. Additionally, much of China's population have put their wealth into property based on the greater fool principle. This has resulted in entire ghost cities being built, with nobody living in them, and the apartment buildings are half-done (no one can live there even if they wanted to), and with the population collapsing, property value will precipitously drop, and soon. The value of chinese real estate is $52 trillion, twice the USA's, and greater than the USA's entire bond market. This reminds me when an acre in Tokyo in 1980 was worth more than the entire state of California's real estate - it's just crazy on principle. In China, 78% of wealth is in property, compared to 35% in the USA. 44% of homes are 2nd homes, 25 are 3rd homes. 30% of home sales are for people to actually live in. China's upcoming crash will make USA's 2008 crash look like a fender bender. A study published in The Lancet forecasts after hitting a maximum population of 1.4 billion, China will lose nearly half its population by the end of the century, no matter what they do. It's too late. The People’s Bank of China warned China had only about a decade left to enjoy the benefits of its large working-age population, which has helped propel growth over the past four decades,” All retirement in China is unfunded. The children might support 2 sets of parents - his and hers, and 8 grandparents in their home, and can't split up between kids - 1 child policy. The working population is getting very resentful. The goverment wants this generation to work the 996 schedule [9 a.m. to 9 p.m., six days a week]. This is why the "Lie flat" movement is spreading in China, and leadership is upset by it. Adding to this, desertion (not desertification) of rural areas are so severe that agriculture is not happening and Xi Jinping as admitted that China can't feed itself anymore. Scarier: the full effects of climate change are yet to be felt in full force. With the war talk, and everything else, companies are pouring out of China, so China's income is going to take a hit. And rising employee wages means that China is pricing itself out of the market against new low cost suppliers. While you say that they can do it inhouse, they still need to have buyers. And the buyers are the first world, who has all the money. With China being belligerent, is the West going to purchase from them, or will we comletely boycot them to starve their incipient industry? Or will they be good only with internal customers? I don't know. Will China be able to create an advanced semiconductor industry? Who knows. Only the future will eventually tell the tale.

dirtyid 4y ago
Thanks for taking the time, some roughly structured thoughts: First some PRC numbers to contexualize actual cost of current PRC demographics, 600M undereducated stuck in informal economy, ~20% (200M+) farmers most of whom who could be replaced by machines, trillions of SEO inefficient waste poured into essentially make-work jobs. Height of PRC manufacturing employed like ~300M. All of which is to say PRC HAS too many people, only fraction of demographic divident was exploited to essentially address global demand, while huge % have always been demographic drains, and the sooner they clear off the demographic balance sheet, the "stronger" PRC's actual geostrategic/geoeconomic posture will become. PRC excessive population has (IMO) on balance been more demographic curse than divident. There are two demographic shifts happening in PRC. 1. Net demographic decline which will only reduce PRC import dependancy and increase strategic flexibility (less mouths = more energy/food security). 2. Massive demographic boom in high skill workforce - PRC generating as much as all OECD countries combined in skilled talent. That's largest high skill demographic divident in human history, not the poverty farm to factory transition, but profitable factory to laboratory one, with decades left to milk. What does this mean? Medium/long term PRC is shifting towards more strategic independance and advanced economic development. Yes, there will be some heavy social pressures weathering the transition, but PRC is culturally and structurally well calibrated to weather demographic decline. Unliked developed welfare states, PRC is a modestly developed society with high home ownership and high savings rate because, bluntly there is no expectation of comprehensive safety net. Look at civil protests in the past few years, it's mostly developed societies protesting losing perks, not developing countries protesting to get perks they are not fathoming in the first place. Don't get me wrong, PRC society will be way more stressful than developed economies, but it will also be able to maintain political serenity easier because governance in developed countries with huge welfare obligations has more brittle modes of failure than PRC's alternative of having their citizens largely own their own homes and retire on their own savings. There's also additional dynamic of wealth transfers that will stimulate currently stubborn consumption because all this money is locked away as nest egg. Or that the poor in PRC are so poor (huge income disparity) that it doesn't take huge wealth transfer to keeps "dregs" from uprising, not that they could because they're old, and whatever welfare they get from the state will likely be better than what they grew up with. PRC decline will be one of "stagnation", western decline will be one of "loss" especially drama with increased immigration, it's easier to govern/manage the former than latter. > directly affects IMO less than one thinks. I'm bundling your (familiar) points under the customary PRC demographic collapsist narrative that tries to insinuate social pressures that will lead to inevitable stalled ambitions/developement or decline. But a country can decline in terms of QoL but still improve in PRC's nomenclature - "comprehensive national power". Consider all the Asian Tigers with shit tier TFR that move up value chain (especially semi) simply because more % of population became high skill over time. They've all experienced fair share of economic and social drama in past decades, and relative to boomers, current QoL are in continuous decline. Yet these mid to large sized (20-120m) societies managed to specialize in some strategic high value industries to become very competitive economies. And this is again where PRC is not like any other country. 1.4B pop with even bad TFR by virtue of base effect is enough to generate surplus talent to necessarily develop every sector simply because there's too many excess bodies not to. While current 20% youth unemployment is nothing to brag about, nor is lying flat not upsetting, but these are indicators of excess talent and extremely competitive labour enviroments. Sure, not good for society, but great for cut throat development. It's high skilled hunger games. Big reason TSMC thinks US fabs might fail is "cultural" issues (read: American's don't slave hard enough). Consider USA at peak of hegemony had ~250M pop to maintain technologic autarky in the 90s; IMO where PRC is trending towards is highly developed and competitive tier1/T2 coastal region with multiple times the skilled talent of US (maybe on par with OECDs), that will close parity and then lead in SciTech in the coming decades. Combine with cheaper labour from T3/T4+ regions (ability to arbituage regional labour costs great for PPP/maintaining all that infra) and PRC acquiring more automation / industrial robots than next 14 countries combined, and we have recipe for a PRC were social fabric will be increasingly miserable, but with almost foregone potential to leapfrog in comprehensive national power, with capacity to lead in many sectors while maintaining much larger modern military due to talent and PPP advantage. Like this is not how one would structure a society to maximize human flourishing or per capital wellness but it is well calibrated to maximize comprehensive national power for great powers competition. >buyers Covid export bump aside, PRC or US are not particularly export dependant countries (14% vs 20%)... with exports to west accounting for ~10% of PRC GDP. Ergo US/PRC dragging on trade war, because ultimately both countries run on dominant internal markets. And IMO, long term west will keep walls up anyway to potential competitive PRC products that encroach on their high value niche (look at what just happened to YMTC). PRC's long term game is to chip away at emerging market share and deny domestic market access. The new export controls could cost western semi 1/3 of revenue (PRC huge semi market) and have to scale back R&D / competitiveness. When PRC catches up, they'll start hammering industrial policy to make western products increasingly uncompetitive. It will not be about selling to west, but denying west sales, taking their sales from other markets, and reducing competitiveness of western industries to the point where they become loss leading strategic sectors sustained by billions in subsidies / industrial policy. My long term trend guess is convergence where PRC will grow slowly, but every unit of PRC growth will soon come at cost of more units of western growth.

dirtyid 4y ago

Thanks for taking the time, some roughly structured thoughts: First some PRC numbers to contexualize actual cost of current PRC demographics, 600M undereducated stuck in informal economy, ~20% (200M+) farmers most of whom who could be replaced by machines, trillions of SEO inefficient waste poured into essentially make-work jobs. Height of PRC manufacturing employed like ~300M. All of which is to say PRC HAS too many people, only fraction of demographic divident was exploited to essentially address global demand, while huge % have always been demographic drains, and the sooner they clear off the demographic balance sheet, the "stronger" PRC's actual geostrategic/geoeconomic posture will become. PRC excessive population has (IMO) on balance been more demographic curse than divident. There are two demographic shifts happening in PRC. 1. Net demographic decline which will only reduce PRC import dependancy and increase strategic flexibility (less mouths = more energy/food security). 2. Massive demographic boom in high skill workforce - PRC generating as much as all OECD countries combined in skilled talent. That's largest high skill demographic divident in human history, not the poverty farm to factory transition, but profitable factory to laboratory one, with decades left to milk. What does this mean? Medium/long term PRC is shifting towards more strategic independance and advanced economic development. Yes, there will be some heavy social pressures weathering the transition, but PRC is culturally and structurally well calibrated to weather demographic decline. Unliked developed welfare states, PRC is a modestly developed society with high home ownership and high savings rate because, bluntly there is no expectation of comprehensive safety net. Look at civil protests in the past few years, it's mostly developed societies protesting losing perks, not developing countries protesting to get perks they are not fathoming in the first place. Don't get me wrong, PRC society will be way more stressful than developed economies, but it will also be able to maintain political serenity easier because governance in developed countries with huge welfare obligations has more brittle modes of failure than PRC's alternative of having their citizens largely own their own homes and retire on their own savings. There's also additional dynamic of wealth transfers that will stimulate currently stubborn consumption because all this money is locked away as nest egg. Or that the poor in PRC are so poor (huge income disparity) that it doesn't take huge wealth transfer to keeps "dregs" from uprising, not that they could because they're old, and whatever welfare they get from the state will likely be better than what they grew up with. PRC decline will be one of "stagnation", western decline will be one of "loss" especially drama with increased immigration, it's easier to govern/manage the former than latter. > directly affects IMO less than one thinks. I'm bundling your (familiar) points under the customary PRC demographic collapsist narrative that tries to insinuate social pressures that will lead to inevitable stalled ambitions/developement or decline. But a country can decline in terms of QoL but still improve in PRC's nomenclature - "comprehensive national power". Consider all the Asian Tigers with shit tier TFR that move up value chain (especially semi) simply because more % of population became high skill over time. They've all experienced fair share of economic and social drama in past decades, and relative to boomers, current QoL are in continuous decline. Yet these mid to large sized (20-120m) societies managed to specialize in some strategic high value industries to become very competitive economies. And this is again where PRC is not like any other country. 1.4B pop with even bad TFR by virtue of base effect is enough to generate surplus talent to necessarily develop every sector simply because there's too many excess bodies not to. While current 20% youth unemployment is nothing to brag about, nor is lying flat not upsetting, but these are indicators of excess talent and extremely competitive labour enviroments. Sure, not good for society, but great for cut throat development. It's high skilled hunger games. Big reason TSMC thinks US fabs might fail is "cultural" issues (read: American's don't slave hard enough). Consider USA at peak of hegemony had ~250M pop to maintain technologic autarky in the 90s; IMO where PRC is trending towards is highly developed and competitive tier1/T2 coastal region with multiple times the skilled talent of US (maybe on par with OECDs), that will close parity and then lead in SciTech in the coming decades. Combine with cheaper labour from T3/T4+ regions (ability to arbituage regional labour costs great for PPP/maintaining all that infra) and PRC acquiring more automation / industrial robots than next 14 countries combined, and we have recipe for a PRC were social fabric will be increasingly miserable, but with almost foregone potential to leapfrog in comprehensive national power, with capacity to lead in many sectors while maintaining much larger modern military due to talent and PPP advantage. Like this is not how one would structure a society to maximize human flourishing or per capital wellness but it is well calibrated to maximize comprehensive national power for great powers competition. >buyers Covid export bump aside, PRC or US are not particularly export dependant countries (14% vs 20%)... with exports to west accounting for ~10% of PRC GDP. Ergo US/PRC dragging on trade war, because ultimately both countries run on dominant internal markets. And IMO, long term west will keep walls up anyway to potential competitive PRC products that encroach on their high value niche (look at what just happened to YMTC). PRC's long term game is to chip away at emerging market share and deny domestic market access. The new export controls could cost western semi 1/3 of revenue (PRC huge semi market) and have to scale back R&D / competitiveness. When PRC catches up, they'll start hammering industrial policy to make western products increasingly uncompetitive. It will not be about selling to west, but denying west sales, taking their sales from other markets, and reducing competitiveness of western industries to the point where they become loss leading strategic sectors sustained by billions in subsidies / industrial policy. My long term trend guess is convergence where PRC will grow slowly, but every unit of PRC growth will soon come at cost of more units of western growth.