China Explosion?
GaryYoung April 30, 2024
I have been following China since 1967 because that was the year they tried to kill me! Here is the back story. That year the Navy allowed only submarine sailors to wear a beard and mine was pretty bushy. After leaving Australia we pulled into Hong Kong. On liberty and thirsty, I went to the Kowloon side to find a bar. Successful in that endeavor I was talking to one of the “bar girls”. The beard being obvious she asked if I was Australian. I said no, US Navy but I had been to Australia. There was a sudden crash of the front door being broken and she said “talk like an Australian” then disappeared. I was pulled out of the booth while screaming “what the bloody hell blokes”, patted down and asked where I came from. I said Perth Australia. The questioner spoke perfect English then asked “just where in Perth.” I said my mum had a flat just off Saint George Terrace.” They hauled me to the front door and booted me down the street. That was when I noticed I no longer had my wallet, money or ID!
The next day the news reported that thugs found a couple of US sailors in the bar and beat them to death! My beard and not having any ID saved my life. During a debriefing I was told that killing sailors was a current tactic of the PLA to discourage US ships going to Hong Kong. I subsequently found out that nearly all bar girls were in the pay for military information of one, more and perhaps all intelligence services including Russian Chinese, British, US and no doubt others. The intelligence people debriefing me thought the where in Perth question very unusual and the answer probably saved my life.
Three days after the event my wallet, money and ID came in the mail less 5 Hong Kong dollars (about 1 US dollar) which was about the cost of mail.
Morality:
The Chinese are about the most immoral people on earth. The paradox is my life was saved by some unknown Chinese woman yet the Peoples Liberation Army (PLA) would have taken it. China has subcultures some of 1
. which once and possibly still do practice Taoism, Buddhism, and some with a Confucian worldview. Religions drive moral codes. Even before the Mao era, most Chinese were non-religious. This was in part because any religious practice was looked down on as a folk religion. Mao Tus Tung was a true Marxist who believed human history was driven by economic forces so believed that there was no place for God in the future flow of human history. Thus communism became an atheistic system and Maoism even more so. The CCP is still very much against religion as evidenced by persecution of Christens and the Muslim Uyghurs. The propagation of a religion moral code in China was eliminated and the moral code was what the state said it was at that time.
There is little incentive to be honest. For instance the largest denomination of currency printed is the 100 Y (Officially named the renminbi but referred to as the Yuan or CNY.) A 100 Yuan note is worth a little less than US$14. When it comes to banking and buying things, electro-mechanical bill counters are used. There is a large market for bill counters that extract a bill every now and then and place it in a secret compartment. If a customer gives the clerk a stack of 80 bills, the clerk runs them and shows 79. The customer then thinks they miscounted.
Theft is a big problem. Looking at all the high rise living structures, windows have bars often clear to the top floor. Entitlement is strong especially in women who survived the Mao years. The term used is grab hags. Armed with a shopping basket they cruise street markets and stores grabbing what they need with no intent of paying. Farmers who raise crops near urban areas have been ruined because when harvest arrives gaggles of hags descend on the fields sometimes stripping them bare.
An example of a more extreme lack of morality is outlanders currently selling their daughters into prostitution and having their earnings sent home so their sons can attend college. Of course prostitution is illegal but the trade is wide spread and tolerated (see corruption). Male hotel guests returning to their rooms may have up to dozens of “calling card” describing prices and services rendered placed under the door. Business meetings, dinners, conferences, expositions, typically involving foreigners, civic
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leaders and business people almost universally have “hostesses” and other “influencers” as part of the offering.
Exceptionally extreme are “revenges against the state” killings. These seem to peak around Chinese New Year when people whose world has fallen apart “take revenge” by purposely plowing their cars into crowds of pedestrians, knife attacks against school children and other mayhem with the intent of killing as many as possible! Of course the state does not want knowledge of these events get out. It is a crime to take pictures or post anything on social media about what happened but the word of some events do get out.
Economy, the good news:
Dictatorships always lie and particularly about how the economy is doing. Judging about how dark the country is at night, the CCP economic numbers are likely 40% overstated. Still, the drop in abject poverty and the average standard of living for all Chinese has increased faster than anywhere else in the world since Deng Xiaoping took over from Mao’s Gang of Four in December 1978. Deng is known as the “General Architect” of “Chinese socialist market economy.” Notably he introduced elements of free enterprise. Inspired by the Soviet Union’s Glasnost and Perestroika, Deng initiated reforms aimed at political liberalization which was noted by businesses throughout the world and stimulated investments in China. In short, all his changes made China one of the greatest economic miracles in human history.
The Chinese are famously frugal savers. Their savings rate is about seven times the rate in the US. In 2022 they stashed away US$2.7 Trillion which is about one third of total household earnings! Before COVID the savings rate was about one fifth.
The Chinese dream:
The real question is how the “World Views” of each and every Chinese citizen have grown and changed because of the sensational growth in liberty and wealth that came with Deng’s reforms. (More on the importance of World Views later.) One very obvious change was for the first time Chinese individuals and families could
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see themselves acquiring and owning their own housing. For decades, China's real estate sector contributed 25% to 30% of the country’s GDP.
Economy, the bad news:
Since the COVID shutdowns the real estate sector has spiraled down to about 10% of GDP. The largest developer Evergrande defaulted on its debt but that is just a start of the ongoing disaster. There are over 100 large developers including government owned ones that have gone bankrupt or are in some to extreme financial trouble driving the housing sector towards a prolonged financial mess. The prevailing practice to buy a new home, typically a 90 square meter flat in a high rise building, buyers most often took out mortgages before the project started. The buyers are still liable for the mortgage even though their homes were never occupied, finished or even started. That process is actually fraud. Evergrande has been charged with US $78 billion in fraud. Many developers followed the practice.
Xi Jinping seems to be taking a more communist hard line track on liberalization. He has caused numerous foreign companies to shut down their China factories and set up elsewhere. One measure is Shanghai has lost over 40,000 high paid expatriates the last two years. The international pullout across China has compounded severe unemployment which has driven about 8 million personal bankruptcies by the end of 2023.
Defaulting on a mortgage for a property that doesn’t exist, paying rent where you live and losing your job is a recipe for disaster. Bankruptcies also ruin your “social credit score.” It should be noted the objective of social credit was to improve morality specifically to reinforce the idea that “keeping trust is glorious and breaking trust is disgraceful.” In being communist in origin the system has become brutal. A bankruptcy lowers social credit it to the point that these people are shunned everywhere, find it really hard to find a job and not even allowed to ride the trains. The state likely completely loses the future contribution of these people.
Chinese average annual per capita disposable income of households in 2023 was a little over 39,000 yuan ($5,570). The state had hopes that consumer spending would lift the economy but the 1/3 saving rate means that is not happening. Aggravating the situation is that numerous private wealth management firms and banks have gone bankrupt or nearly. I noted
. a couple of these firms had minimum required deposits of 5 to 10 million yuan and had tens of thousands of customers. The state is printing 100 yuan notes but they just disappear actually causing deflation. The government is printing even more money to stop the deflation and in Q1 of 2024 reported 5.3% growth in GDP but what they were doing is subsidizing industrial production in areas like solar panels, cars, and “heavy industry”.
The one child policy of the past means that the fast aging population will be retiring with insufficient young people in the workforce supporting the retirement systems. The retirement systems were originally handled by the provinces but some provinces were going broke and so the national government stepped in. Where that happened, people found that their account balances were about half of before. Even though it was illegal to discover gender before birth during the one child period, many did, the result was aborting girls. Young men outnumber young women. By 30 million. Looking further forward, a high percentage of Young couples just don’t want children and a sizeable percentage of young women don’t want to get married at all.
Face:
The Chinese culture has always had high utility in “saving face.” The CCP is fanatical about it. That is why any action that may counter the illusion of perfection of China in general and the CCP in particular is a crime. Face is why the government at all levels lie to the people. A particularly egregious example was the 2022 1000 year flood in Zhengazhoy, Henan Provence. The province said that there was 33 deaths. The national government later admonished the province but said there were 100 deaths. There is a 6 lane road that goes through a tunnel under the city. The three lanes in one direction was a total traffic jam. Reports were that the flood of water filled the tunnel in five minutes. Pictures from a bridge over an open area of the highway after the flood showed a jumble of car. Calculating three lanes, average length of cars and tunnel distance would indicate about 2700 cars had been flooded. A drone shot of the field where the flooded cars were taken indicates 2700 cars was about right. I seriously doubt that there were only one passenger per car and I seriously doubt several thousand people
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could evacuate a tunnel in five minutes. By the way, there was a full subway train also caught in a tunnel.
The Chinese are a proud and intelligent people. One agenda they have had for a long time is thinking it is time they took their “rightful place” in the world. I am also convinced that Xi Jinping is highly motivated to achieve China’s “rightful place” in world leadership. This may be Xi’s attempt for a lasting legacy. Michael Pillsbury, a China expert wrote the book “The Hundred-Year Marathon,” China’s secret strategy to replace America as the global superpower. One aspect of this strategy is the Belt and Road initiative in Chinese foreign policy. Another strategy is the ever increasing area of the South China Sea claimed. Yet another is gaining control of rare earth metals necessary for an all-electric future. Saber rattling over Taiwan may be because Xi is 70 years old and wants to achieve the goal before he checks out. The threat of invasion may instead be because all dictators gain the support of their people by going to war. The book is quite scary because so many things fit together. The one issue that may prevent the strategy succeeding at all is the incredible corruption everywhere within China.
Corruption:
Xi has lately been purging numerous high ranking military officers particularly in the PLA Rocket Force. I fear that he was giving serious consideration to invading Taiwan but found the military was not prepared. Replacing the corrupted with more professional officers is not a good thing for peace in the Western Pacific. I would much prefer corrupted military officers over competent officers. Xi seemed particularly upset because just a few years ago he purged high ranking military for corruption. At that time it was reported one very senior general had US $3 Billion worth of various world currencies stashed throughout his mansion. Paying for promotions in the PLA has been a long “standard” procedure. The more senior the rank, the higher the cost. Nepotism counts heavily and so the rich and connected are chosen over the competent. For example, Mao’s very mentally challenged grandson is a general in the PLA.
Last year a citizen came into a bank with two 100 Yuan notes with identical serial numbers. Turns out that the director in charge of printing money
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made a separate run of notes by himself reusing a block of serial numbers to make “gifts” for more senior members of the CCP. It should be noted that China has contracts to print the money of many other nations.
It was Deng Xiaoping who came up with the term “tofu dregs” when he was shown poor quality concrete construction. There was so little Portland cement in the concrete that it could be crumbled in the hand.
How things work is that the State owns all the land. When land is “sold” what is actually sold is a 70 year lease. Provinces control the land in their area and sell to developers and contractors. Kickbacks are paid. Developers need permits so of course bribes must be paid. The developers contract with builders and contractors. Kickbacks are paid. The builders find the cheapest labor and materials possible. Bribes and kickbacks are paid. It is estimated that about half the cost of a project such as a high-rise apartment building, a bridge, a government building and nearly everything else being built goes to graft of some sort. Rebar used to strengthen concrete is often little better that the poorest grade of cast iron and can sometimes be broken by hand. Previously mentioned is using so little Portland cement that the structures barely stand. Worse for concrete construction may be the use of sand from ocean beaches because it is worn round and contains salt which rapidly corrodes even excellent rebar. Sand from fresh water river deposits is very angler so bonds tighter but has been depleted so is far more expensive.
Consumer goods from food to automobiles are most often nothing but junk. BYD vehicles are well designed and dominate the Chinese market. There was a video of three men in their US $40-50 thousand BYD Formula Leopard 5 SUV’s off-roading. One came off a sand dune and his front suspension collapsed. They got it to a shop and demonstrated that the metal in the front suspension could be easily bent but his buddies SUV’s had really tough steel that could not be bent. Other owners having viewed the video checked their SUV’s and found similar under strength steel in chassis components. How that could have happened is some BYD buyer received a kickback to accept a lot of poor quality steel. The buyer had to have an “arrangement” with a supervisor that was in charge of stamping the metal into the suspension part because they would have noticed a problem.
Several videos have shown BYD and other Chinese cars in collisions and the air bags did not deploy.
There are endless examples like dying fish to look fresh, painting pigs black because black pigs are regarded as superior, hand held infrared thermometer that always read 37C (98.6F) because they don’t have a sensor, plastic items like power strips that crumble in your hand and many more. China really is the land of convenient short cuts. Consumers seem to be revolting with their attitudes changing from passively accepting such trash to growing resentment against the government for allowing it.
What will happen?
People behave based on their World View. This is the point that the reader needs to understand what I am describing. To do that, you will need to read The Graves Model . Prior to Deng, the majority of Chinese likely had a World View (WV) of 2 and a large minority a WV of 4. There were no doubt a small minority of WV 3’s and a little larger minority of WV 5’s. There were few individuals with 6 and 7 World Views. Post Deng my thesis is large numbers of WV 2’s moved to WV 4 and a relative large numbers of WV 4’s moved to WV 6. At the same time many people experiencing significant emotional events were jumping to WV 5 and 7. Deng shows evidence of having WV 7 values. He had to break away from the convergent even number World Views to instigate the changes he made. While Deng understood that a rising tide lifts all ships, XI seems to focus on a rising tide lifting his ship which makes me think he has WV 5 values.
The Tiananmen Square “incident” of June 4, 1989 is an example of what happened when people have moved to numerically higher World Views and the leadership has not. Before Deng the CCP and therefore the Chinese Government was populated by WV 4’s. In addition to The Graves Model the following Tyranny of the Fours is provided. Entitlement tends to lock a World View in place. What likely happened during the incident is the “old guard” within the CCP, who fought their way up the organization while looking over their shoulders for decades, got where they were by being shrewd and mean. They were not going to let these upstarts have any say in how the country was run.
The CCP has likely migrated to more WV 6’s rising in influence. While some may well fall in the nice category, there are likely many who do not. Sometime ago I wrote Tyranny of the Sixes, posted here. It is an unfinished work but there is enough to understand how bad WV 6’s can create a tyranny even worse than that of the WV 4’s.
China has moved to a strong surveillance society. They recently banned Tesla’s from many areas of China. This is because Tesla’s manufactured in China are not under state “control.” Chinese state controlled car companies operate under laws that require them to share any and all data requested by the state. This data includes GPS locations, conversations, pictures etc. Naturally the CCP suspects US cars can be used for similar data gathering and surveillance so that is why the bans against Tesla. Chinese made cars sold throughout the world have these survey features. US made cars have similar surveillance capacity but because of the Constitution, there is an extensive legal process required to extract the data for use by the “state.”
The CCP has also “suggested” that people not buy Apple i phones but buy Huawei instead. It is the state mandated access to any and all data why Chinese owned companies such Huawei and TikTok are so troubling.
Presently there are about 300,000 Chinese students in the USA, 160,000 in the UK, Russia has 40,000 and fast decreasing. The Crocus City Hall consort near Moscow in Russia that had a terrorist attack on Marth 24, 2024 seemed to be a student wakeup call. Their concern was not the terrorists but the way they were first treated by Russia as a strong ally of China and then their own country when they were trying to come home. For instance, air fare home on Chinese airlines quadrupled. Their reactions definitely indicate a lot of WV 6. The students in the UK have had numerous demonstrations against the CCP. That is very much SV 6 behavior. The CCP “monitors” the students and has called upon and threatened the parents back in China. Parents that work for the government have been threatened with losing their job. These threats have infuriated many no doubt solidifying their 6 world view. There is so much competing news in the US that I haven’t found much about what Chinese students are doing. I think students majoring is Science, Technology, Engineering and Math (STEM) just are too busy to bother protesting.
In the US we call our emerging generation Gen Z and Gen Z have a strong behaviors indicating they lean to WV 6. Chinese graduates have been conditioned to expect jobs paying 10,000 Yuan monthly or more with rapid growth in earning. The real awaking for young Chinese Gen Z is upon graduating, there are few jobs and those available now pay in the range of 4,000 Yuan. Then for those who have these low pay jobs, there is a lot of talk about “tang pang” which is doing the least amount of work possible. This behavior may have some elements of altruism to drive hiring more people but I think nihilism may be the prominent motive. It seems many of the youth are blaming the meaningless of their lives on the CCP.
The middle class is facing falling back into poverty. Since 2020 at least 4.3 million small businesses in retail and manufacturing have gone out of business. Most because of the COVID lock downs. The previous figure of 8 million bankrupt (known as deadbeats) has increased another 500 thousand so far in 2024. Of course the real numbers are likely worse. Small business owners understand the nature of money better than most and blame Xi and the CCP for over reacting to COVID and otherwise ruining the system that has been earning them the money to support their families. The CCP authorized 129 Billion Yuan to encourage “new energy vehicles. Over 500 electric vehicle startup companies took advantage of the subsidies. While many startups were serious, a couple hundred likely figured out how to get their hands on the subsidies. Near the end of 2023 there were about 90 new energy car companies still in existence and half those have now gone into bankruptcy. Most of the stressed business people blame the CCP for ignorance of how business works, stupidity and/or arrogance.
My prediction!
There is significant anti Xi sentiment within the CCP and I expect the factions to band together and get rid of Xi. I think few in the CCP share the ideology behind the long process required for Chinese world dominance. Most have been enjoying their elitism in the here and now and do not want to wait and let others enjoy elitism sometime in the future. Many in the CCP have gained great wealth because of the Deng policies funding their corruption but have been experiencing recent significant financial losses because of Xi’s “hard line” policies. The PLA actually report to the CCP worked out an agreement with the CCP that if the Beijing Olympics went off well, all solders would get a pay raise. They received the raise. Last year nearly all government employees including the military had pay cuts. There is ample incidental evidence Xi is blamed for the hard times. It will be hard for Xi to keep the support of the military when they had their pay cut. Pay cuts for government employees started in 2021 and now run up to 35%. It will be very hard to keep government employees loyal. Worse for the CCP, the government can’t pay many officials and when many state firms went bankrupt, previously loyal employees lost their jobs.
Blaming all on Xi seems like the track of least resistance.
Retired Shanghai University Professor Gu Gosping remarked “Acts of revenge against society occur almost daily. This is because the public has grievances without recourse, suffering they can’t express, and just causes they can’ defend. The legal system is unfairly oppressive, solely targeting and suppressing ordinary people. The CCP’s brutal repressions has created a pressure cooker scenario that’s on the brink of exploding.” The Chinese culture is very passive. This passiveness is reinforced by the surveillance state. It would take a strong leader to mobilize the populous and I just don’t see from where such a leader will arise. The best outcome one could hope that there is another Deng Xiaoping with enough support to replace Xi.
I would be most interested in your conclusions.