A Look At China’s Six Major Crises – OpEd

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By Kung Chan

In any given country, there will be many forms of crises. In general, I do not conduct research on issues that are unrelated to the economy and conflicts. Discussing and commenting on crises, especially major ones in a sensational way, are the business of certain “online celebrity commentators and experts”, something that I am unwilling to do. I would like to explain that the six major crises facing China that I mention, explain, and discuss below are not new theoretical concepts and they are unrelated to the business of popular online commentaries found in the country. In fact, I have been discussing and warning about them multiple times in the past few years, though in all frankness they are essentially major crises that have not attracted wider attention.

All these major crises will break out in China now and in the future. They are, in reality, not unknown to those who have even a glimpse of the actual situation of the country, and those who are even marginally related to information analysis.

Among the six major crises, the first to be discussed here is the aging crisis.

The aging crisis in China is not unheard of by most people, and I have already started researching and discussing this issue from the perspective of real estate in the last century. Now, even the lamest “online celebrity commentators and experts” have discussed it. Yet, it is uncertain how much people really know about China’s aging crisis and the future of the country’s 260 million aging population.

There are countless discussions and information on the spread of COVID-19, many of which are sensational. However, even if it is another common disease or influenza virus, the disastrous result would be the same, or even worse. What is the difference between China today and the same country after the SARS epidemic? The virus may have changed, but the nature of the result was the same, though it only gets worse. All in all, this is actually a concentrated outbreak of the aging crisis caused by the COVID-19 outbreaks. Hence, it is the aging crisis manifested as the depletion of public medical resources, and even of social resources, including funeral resources.

China is the country with the most serious aging crisis in the world, though for a long time, this has been largely ignored.

The second crisis is the food crisis.

This is an issue that I have discussed for years, since the boom of real estate at the end of the last century, as a matter of fact. With land becoming a resource of profit, less and less of it was used in the agricultural sector. However, being a country with vast land and huge populations, without land for growing food, the matter of feeding the people would be irresolvable. At first, food could be imported from other countries, yet with the problems keep snowballing. It is so much so that food has become an important issue in the Russia-Ukraine war. The United Nations continues to intervene in this, negotiations between major powers keep taking place, and Turkey has become a regional hegemony. In today’s China, not many know about famine, and even fewer know that after 1949, China faced serious food problems for a full 30 years.

The third is the financial crisis.

While there are many who conduct research on Chinese finance, many of them on have surface knowledge of the financial crisis, because few have experienced it first-hand. For Chinese financial scholars, the financial crisis is news in the media, mathematical models and statistics, as well as explanations in books and dictionaries. All of these are abstract. Therefore, when they talk about the financial crisis, they often based their discourses on other sources, with very few outputs of their own thought, predictions, and judgments.

The actual financial crisis includes both macro and micro, but also banking institutions and households. Any crisis involving asset values is a financial crisis. From such a viewpoint, China now being in a state of crisis with its debt problems constantly emerging and property constantly depreciating, and it will only get worse in the future. As for financial macro-control capabilities, such as the monetary policy of raising interest rates, while all these moves can be adopted by other countries, it would be hard for China to do so. This is because having huge household debts, raising interest rates will cause serious social turmoil, as evidenced by the collective refusal of housing mortgage loans by home buyers in 2022. Such a situation means that China’s financial crisis not only exists, but the crisis has deepened to the point where the People’s Bank of China has substantially lost the ability to regulate monetary policies such as raising interest rates.

The fourth is the supply chain crisis.

This is a result of the era of globalization. China profoundly engages in globalization and is the biggest beneficiary of it, but it has neither the ability nor the willingness to do more to maintain the globalization process. Its ambiguous attitude towards such major events as the war in Ukraine that seriously shattered globalization has naturally further boosted de-globalization. From globalization to de-globalization, in this huge transformation, the supply chains of all sectors in the world will inevitably be restructured, reorganized, and refashioned. This is something independent of people’s will. It involves a lot of capital, as well as a huge number of bankruptcies and debts.

Therefore, the supply chain crisis has an acute impact on China, especially when it involves many other major incidents. For example, China faces sanctions and restrictions on the semiconductor chip issue, but this is not entirely due to geopolitical factors. There are also aspects and considerations of supply chain restructuring in various countries to build self-owned, trusted, and risk-resilient supply chains. This is precisely why the United States will do everything possible to bring TSMC to the country for production.

Perhaps in such a process, only those countries and industries that deny de-globalization would experience the worst damages.

The fifth is a geopolitical crisis.

From the 20th to the 21st centuries, geopolitics is a field that has been much discussed, but grasped by few in China. More often than not, it is considered to be something that is unrelated to the country. Not many studies, nor understands it, and it belongs to marginal disciplines while most are merely at the newspaper commentary level. For a long time, China seems to really believe that its strength and rise have nothing to do with global geopolitics and that what it achieved depended entirely on the hardworking Chinese themselves.

However, the ongoing war in Ukraine has opened a window for Chinese people who are not deeply involved in global affairs to see the complexity of geopolitics. The world can change in an instant. The most frightening thing is that the power of geopolitics will force everyone to get involved and choose sides, and passively accept everything that we thought would not appear. In the face of a geopolitical crisis, even moral norms have gone bankrupt. What has been adhered to might be shattered, and even reasons could be used to justify the act of invading other countries. It is worth noting that geopolitical crises are increasingly showing dominance. In many fields, or in all fields, they surpass theories and historical practices of other professions and industries. Great changes have indeed taken place.

While this sounds too abstract, perhaps a simple analogy would help us to understand it better. In the face of geopolitical crises, there is actually no financial industry, no automobile industry, no wealth nor assets, and no financial accounting figures, that can be more worthy of consideration by geopolitical decision-makers than geopolitics itself. It possesses the power and superiority to crush all things and eliminate all paradigms.

The last one is the urbanization crisis.

There may be many crises related to China’s economy and society, but many of them are self-inflicted because the root of these crises is the abnormal development of China’s urbanization. China is a country with an extreme dichotomy between urban and rural areas. Before urbanization, the urban population was less than 100 million, and the remaining nearly 700 million were rural population. But in China at that time, cities were cities and villages were villages. Now China’s population has reached 1.4 billion, yet this is more of pushing hundreds of millions of rural people into cities, effectively turning cities into villages. Therefore, the current Chinese cities are extremely difficult to manage, and the management method is more akin to handling villages. Urban administration, as it stands, has been transformed into a typical model of a village managed by its chief. This means that the management style has become more direct, simplified, and even coarse. This is to the state where even rational governance models such as “pilot projects” that are emphasized in the reform and opening up have become a rarity in Chinese cities today. Therefore, during the pandemic, local officials declared that the local area was in a “wartime state” at every turn. This lawless phenomenon, hard to be seen elsewhere in the world, is a reality and has its inevitability in China.

What’s more serious is that urbanization always requires a large amount of land for real estate, and when real estate is thriving, it will destroy other industries and create an economic crisis. Therefore, China’s economic crisis is just a superficial, deep-seated crisis of urbanization. Urbanization, after driving the Chinese economy’s golden decade, can also lead to a decade or more of economic stagnation. In the end, there must be a comprehensive industrial crisis, and everyone will find out that nothing will make money anymore, an inevitable outcome of it. Under such circumstances, is there anything that the Chinese economy can make money from? There certainly is, but these companies and industrial sectors manage to earn profits because of the privilege they enjoy. When this happens, one can only imagine how China’s anti-corruption directions will be.

To sum up, there is actually nothing much to discuss on the above-mentioned major crises in China. For sure, there are debates over them, but these debates are largely meaningless considering the fact that many fail to understand the core issues, or even uprightly actively deny the existence and development of these crises. This, in turn, has seriously delayed the governance, mitigation, adjustment, and reform means to address the problems. The final outcome is nothing short of unspeakable social tragedies in public medical resources today, driven by the COVID-19 outbreaks that are in fact the aging crisis at their core.

Frankly speaking, I have not yet seen a future China that can successfully avoid the occurrence of these crises because of some successful reforms, some major and effective developments, some changes in human qualities, and some changes in social epistemology and values. Therefore, I can say with certainty that, either now or in the future, these major crises will not only erupt but the shock waves of the crisis will be transmitted to the deeper level of society, causing more and more realistic problems and conflicts.

Kung Chan is a researcher at ANBOUND

Anbound

Anbound Consulting (Anbound) is an independent Think Tank with the headquarter based in Beijing. Established in 1993, Anbound specializes in public policy research, and enjoys a professional reputation in the areas of strategic forecasting, policy solutions and risk analysis. Anbound's research findings are widely recognized and create a deep interest within public media, academics and experts who are also providing consulting service to the State Council of China.

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