The China Run Is Over

The world is undergoing a change and the next 30 years are not going to include China. This is the end of that story.

In my articles I try to cover subjects that helps people understand the macro events that are happening along with technological implication in an effort to help the loss of money. Going with the crowd will often lead to a train wreck financially.

Right now, the situation with China is one that is going to really cause a great deal of harm in the coming decades. There will be a lot of wealth lost there and it will not be pretty.

So why is it time to start getting bearish on China?

Demographics

This is the biggest headwind China is facing. There is no way to avoid what is taking place and the impact economically is devastating. The nation is trying to convert their economy to one based upon consumerism. Sadly, for them, it is not going to work.

Here is the demographic table from 2020. Just by looking at this, we see how the next few decades will not bode well.

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Source

In fact, some researchers believe the situation is dire in China. Some believe the fertility rate of the country is much lower than the government numbers are letting on.

China’s population decline may be much faster than expected, with the number of people in the country halving within the next 45 years, a new study has warned.

The projection was based on the official birth rate of 1.3 children per woman last year – well below the figure of 2 needed to keep the number stable – and forecast a much more dramatic decline than previous estimates.

Source

Basically, the Chinese population is getting over very quickly. Notice from the chart how they have a so few people under 20. This does not lead to massive consumer spending. As people get older, they tend to spend less since their incomes are fixed.

This also leads to less workers to perform all the work that is needed.

Losing Its Best Customer

Have you noticed the United States and China are at odds with each other? This is something that some feel might be heading to war. Personally, I do not think this outcome is likely since the Chinese tend to be a lot of show and very little might. For all their boasting about a navy, the reality is they could get stomped by the Japanese, let alone the Americans. So China is not going to follow that path.

What is evident is that China is upsetting its best customer. Anyone who owned a business knows this is a never a good idea.

Since China is not a consumerism economy, they have to rely upon exports. The United States is the world's largest importer. Of course, it comes as no surprise, since China is a low cost producer (or was), that the U.S. has an enormous trade deficit with that country.

For years, American companies have tried to get into China. After all, with a market of 1.4 billion people, there is a lot of money to be made there. However, if the forecasts are right, the entire country could be down 700 million people in 40 or so years. This does not help the attractiveness of the country.

At the same time, the headaches being caused make it not worth it for companies. To start, the Chinese are known for stealing the technology from companies entering its markets. This does not sit well with many nations, especially the Americans. Both Trump and Biden went after Chinese companies for stealing technology.

Another issue is companies are realizing it is not smart to have all their manufacturing coming from one place. The lockdown in China due to COVID froze the supply chain for many companies. Instantly, in the course of a week or two, all shipments stopped. It was realize that things need to be spread out more, even if the cost was a big more. They simply cannot afford to have things shut down overnight like that.

Firms from the US are not the only ones leaving. The Japanese are pulling out of China with greater urgency now. While they started the process more than a decade ago, opting to do a lot of manufacturing in Vietnam, they are accelerating the process.

China's Replacement

There is already a replacement ready to step in. This is a country with the demographics that countries such as the United States wants along with the low skilled labor that will make it a force when it comes to providing products are a reduced cost.

Here is the demographic chart of this country. Note the stark difference between it and China.

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Source

For the United States, there is also the advantage of geography. Mexico is a lot closer than China. That means shipping costs are greatly reduced as well as security. It is much easier to float something up the Pacific Coast or through the Gulf of Mexico. These areas are very secure and easy for the US to patrol.

The above chart shows how Mexico is primed to become the China story over the next few decades. While China is getting older as well as smaller, in terms of population, Mexico is ideally situated to provide the world with a growing economy that is going to experience significant growth. Look at the size of those categories 24 and under. Anyone who has kids knows those are the age brackets that are very costly.

Mexico is positioned to take advantage of their demographics and low cost labor, much in the same way as China did. With the EU shrinking due to their own demographic issues and Japan still constrained by theirs, Mexico can take advantage of its proximity and trade agreement with the United States to really prosper over the next 30 years or so.

And that will help to end the run for China.


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Very interesting perspective on Mexico replacing China in terms of production. Very possible because, as you said, the shipping costs would be miniscule.


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agree and if we ad drones as the workforce it will reduce even more

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Mexico has a lot of advantages going forward, especially in the West since they are the one country with the demographic make up that will enable them to go forward in a powerful way.

Southeast Asia is going to be in the same position.

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Bang, I did it again... I just rehived your post!
Week 76 of my contest just started...you can now check the winners of the previous week!
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China really screwed themselves honestly. They remind me of that person in business that gets a big head when they have one little success and quickly come to realize by trash talking the people that helped get them there was a HUGE mistake and they are left with nothing.

No one likes an A hole in the room and Chinas been clearly doing this by offering up threats, dishing out crap and trying to control everything. It's quickly starting to isolate them and the country seriously seems to be in trouble.

I don't see it leading to war either at least not large scale. I honestly don't think we will ever see another large scale war again it would seriously just be way to destructive to either country involved instead it will be smaller scale and digital type wars.

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Lesson #2,867 on how socialism NEVER works.

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yet for some reason we have to constantly repeat it because a large majority of people are clueless :(

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No one likes an A hole in the room and Chinas been clearly doing this by offering up threats, dishing out crap and trying to control everything. It's quickly starting to isolate them and the country seriously seems to be in trouble.

Well you could replace "China" with "United States" over the past 40 years and state the same thing.

Tyranny is the same.

China's issues are deeper than what most people are discussing. They were made by the US and now the US is going to do a rug pull.

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That's true as well and years ago you could put England as the worlds Ahole there's always at least one lol

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I like Mexico. Nothing against China, but commies aren't cool. Hopefully the commies that run the US lose power soon too.

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Well China would have the same issues even if they were run by the CCP.

And by the way, from an economic standpoint, they are less communist than Massachusetts or California right now.

China is less communist and more of a one part system.

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I'd call both the Chinese, and US systems fascist, but everyone gets all uptight about that word.

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I don't know if because of china but leodex and all other websites that show you 2 layer tokens are not working for me
and yesterday only decency was working not other interfaced work do you know why?

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Another ways of China is expanding their territories. With their one belt one road, countries which are in the territory are deployed with chinese citizens secretly. The double citizenship of chinese migrants is a way to keep china is the biggest population in the world. Double citizenship is a threat to the dwelling countries of the chinese migrants. Those migrants have loyalty to Peking not to the land they live.

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They can try to do that all they want. If their economy starts to contract, they are in big trouble. The social cost that is there is enormous. How much does garbage removal alone run into for 1.4 billion people?

The country is already be isolated from the semi-conductor industry. That is going to be fatal in the digital age.

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Seems you've been following the work of Peter Zeihan. He has been pretty accurate with his predictions thus far, but seems not to understand how cryptocurrency and blockchain tech are going to influence the world. I think it's because everything he does is an extrapolation of what happened in the past, and doesn't take into consideration the possibilities of new technology much, because he has no access to data from the future.

A good guy to follow, but if everyone in the world did what he does, there would be no progress. Visions of the future often have to forget the past. Paradigm shifts and such. You know what I mean.

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He is a good one. Another good one is George Friedman. He has a similar view of China and US relations. The US, in his opinion, is simply going home.

According to his theory, we will take a 10 year breather in our foreign policy.

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As for blockchain and cryptocurrency, you are correct except China is trying to remove themselves from that arena.

Where Zeihan is correct is that we are going to still operate in the Nation-State world for a couple more decades.

My guess is that by about 2040, we start to see the beginning of the end for the nation-state. That is going to radically destroy the geo-political landscape.

The Metaverse is going to be radically different but I think we are still a couple decades away from that.

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Well as we move through to automation and robots, will the demographics still matter?

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It will help to offset the decline in the workforce. That is what Japan did. However, it will not help consumption.

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India’s demographic chart looks somewhat like China’s but I was surprised that Brazil’s looked a bit like it too. But if a demographic chart with lots of kids is a good thing, México and Nigeria have bright futures.

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Brazil is also an exporter, like Germany and China. They are going to face headwinds.

Nigeria does have a bright future as does a lot of Africa if they can clean things up. That is going to be a problem since they are not likely to get outside help. The Africans have a grand opportunity, including Nigeria, they just need to overthrow the corruption. Not easy.

Mexico is corrupt but it has US interest so I think between corporations and US Foreign policy, the Mexicans will have the resources they need to get it done.

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That is a really interesting take on it. From listening to the propaganda channels you would think China is some kind of military might that we will have to battle, but your outlook makes way more sense.

Makes you really think about why they are basically trying to open the southern borders.

In my opinion, I feel people need to learn how to 3D print and manufacture their own goods. That is decentralized manufacturing at its finest!

Great write up as always sir! Reblogging for https://coin-logic.com

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In my opinion, I feel people need to learn how to 3D print and manufacture their own goods. That is decentralized manufacturing at its finest!

Without a doubt, I believe that is the future. We are going to move towards regional manufacturing and, eventually, local. Through technology, it will be produced closer to where it is consumed.

Ultimately, you are right, it will be in the individual home.

From listening to the propaganda channels you would think China is some kind of military might that we will have to battle, but your outlook makes way more sense.

The Chinese always were good at putting on a show. However, 500 years ago they missed controlling the shipping channels because they built majestic top heavy boats when clippers were required.

They look very nice, just werent effective.

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Very interesting post and definitely the Chinese have some issues looming. Japan had an imbalance and look at what has happened there so if the fertility rate drops even further then the population could easily halve over the following 30-50 years. prosperity will also allow families to have more kids but if the wealth starts drying up along with opportunities this will shrink even more.

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I can't agree less with you. China's domination especially in underdeveloped countries will soon come to an end and this will surely affect their economy.
Ever since their crackdown on miners without prior notice, many investors are no longer comfortable with dealing with China

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