A Chronicle of China Dying

Things are seldom what they seem.

What is China up to? 

There is much talk these days of “Thucydides’ trap,” the idea that a dominant power inevitably comes into conflict with an emerging power; and so the US must inevitably go to war with China. Some go further, and suggest that China will inevitably overtake the US for dominance, and within our lifetimes.

That is not what I see happening. To begin with, by this thesis, it should be the US that is getting bellicose. I see China rattling the sabres, not the US. Further, if China’s rise is inevitable, the last thing China should want to do is to take any risk of provoking war—a war now is the only thing that might stop them, by reshuffling the deck.

Instead of a rising power, I smell dead meat.

This smells instead to me like what happened with Nazi Germany, and what happened to the Soviet bloc. Neither of which fit into Thucydides’ little mouse trap. If anyone ever did.

To my mind, and my reading of history, a war is at least as often the thrashing about of a power that feels itself in trouble.

Like Austria-Hungary, the relatively impoverished and senile power that actually started World War I. Or the Confederate States of America, an agrarian slaveholding society seeing itself threatened by the growing industrialization and the growing population of the anti-slavery North. Or Japan entering World War Two, calculating that they needed to grab a source of oil or soon die. Or Hitler invading the Soviet Union, probably for the same reason.

But as for Hitler, let’s back up a few years. Hitler’s government, in the 1930s, performed what looked like economic miracles for a prostrate Germany. Just as China’s government seems to have done since 1990. Just as Stalin seemed to do for Russia in the 1950s. Unfortunately, Nazi Germany in the 1930s was an economy run as a Ponzi scheme, printing money and hiding the real books, and Hitler understood that he could only keep the whole thing from collapsing by, first, confiscating the wealth of the Jews, and, second, invading and confiscating the wealth and labour of other lands. Czechoslovakia, then Poland, then… So war was inevitable; it was baked in the cake.

Outwardly, everyone seemed to think the economy of the Soviet Bloc was growing and competing with the West right up until the year it fell. Before it suddenly fell, many of not most Western intellectuals assumed the Soviet Bloc was on the brink of supplanting the West. Even such a right-winger, and such a savvy right-winger, as Henry Kissinger, who when he became Secretary of State compared himself to Metternich, as someone charged with trying to sustain a declining empire.

Yet the Soviet Union fell, apparently, because the government ran out of money. They could no longer afford to try to control or financially support their satellites. They could no longer afford to keep up with the USA in an arms race. And once the dust settled, the Russian economy was revealed to be significantly smaller than the economies of such second-tier powers in the West as Italy.

Might the same thing be happening to the Chinese Communist government? Their development indeed appears to be fast—but so did Nazi Germany’s. They have been sinking a great deal of money into armaments in order to mount a credible competition with the US. They have evidently been spending a lot of money to subvert prominent people in other parts of the world, and spending hugely on their “belt and road initiative” to buy influence abroad. There have been vast flashy infrastructure projects, high-speed trains and giant dams and the like. Just like Hitler with his Berlin Olympics and celebrated system of autobahns. Is it all an attempt to impress without real substance behind it? There have been entire cities constructed which, rumor has it, have been in the end abandoned and left to rot.

We do not know what is real, because, like Nazi Germany or the Soviets, the accounting for all of this has not been public. But surely, if it were real, there would be no reason not to trumpet the actual figures.

In theory, the Chinese economy should not work. Like that of the old Soviet Union, it lacks incentives. The joke then was “we pretend to work, and they pretend to pay us.” While China has to some extent gone “free market” there is still a heavy burden of government, taxation, and systemic favouritism towards government-run businesses, so that hard work and enterprise is not well-rewarded. In theory, central control is also going to be less efficient in allotting funds and resources than are free markets. To put it plainly, Chinese-style central planning has never worked elsewhere. It has only appeared, for limited periods, to work.

We also know that Chinese demographics ought about now to be hitting a wall. China’s rise was based on cheap labour, and, thanks in some part to the “one-child policy,” China is due to be running out of cheap labour. In theory, they might make a successful transition to a consumer-based and high-skills economy; Japan did before them; Korea did before them; Taiwan did before them. But notice that, at the moment they made this transition, Japan, Korea, or Taiwan also shifted from command economies to liberal democracies. Nobody has ever developed to this high-skills, consumerist level before without throwing off autocracy and central planning.

The Chinese Communist Party might have taken this route. They chose against it at Tiananmen, and have not looked back. They have since systematically suppressed civil society, necessary for such a transition: the Christian churches, the mosques, Falun Gong. No autocracy now means no CCP.

We further know that China has taken a big economic hit recently: first because of the trade war with Trump’s US; then thanks to the coronavirus and the shutdown it required; now because their markets are also in a coronavirus slump; and other nations are either talking about or enacting “decoupling.” 

Skim milk masquerades as cream.

Keep all this in mind, and their lunge to assume full control of Hong Kong might appear to be about more than mere power. Hong Kong has a great deal of real wealth—audited and substantial. Might it be that, just as Hitler decided to confiscate the considerable assets of the Jews, or Philip IV of France decided to cancel his debt to the Templars by declaring the order illegal, the CCP wants or needs to commandeer the assets of Hong Kong and its banks for government purposes to keep things ticking over for a few more years?

It may very well not work, and in the meantime the move has probably hurt China’s trade prospects further. But this may indicate just how desperate the Chinese government is. All they can afford to think of, perhaps, is meeting the next payroll, the next mortgage payment.

They have, at the same time, been putting Uyghurs, Falun Gong, and others in camps, just as Hitler did the Slavs or the Jews. For the Nazis, this was explicitly planned as a money-making proposition: slave labour. Might it be so for the Chinese government too? Along with a cash stream from organs harvested from prisoners for transplants. China has been fingered as the ultimate source of the recent flood of dangerous opioids in North America. Might their motivation be, not just, as commonly assumed, to subvert American society, but to make some fast cash, by whatever means necessary? This, after all, is the motive of the Mexican drug cartels themselves; and of the many individual drug dealers in Canada and the USA. There is more money in selling drugs than in most things.

China has also been accused of counterfeiting US bills, and slipping them into circulation. Isn’t the intent most likely to be the same as for domestic counterfeiters—to literally make some fast cash, rather than the more abstract and unlikely goal of subverting the US financial system?

The Chinese government simply cannot really be the eternal fountain of credit and hard coinage it is imagined to be.

But a shortage of money in government is apparently not the only problem.

Why, at this moment, is China making threats against all their neighbours? Just as they are marching into Hong Kong, they are upping the ante over the South China Sea, a move that alienates and threatens a coalition of nations, the Philippines, Vietnam, Brunei, Singapore, Malaysia, Taiwan, the US, Japan, and Australia. As if these were not enough enemies to deal with, they also provoke India over their border. And declare their rightful ownership of Vladivostok.

This is, as diplomatic or as military strategy, insane. Suppose even that, like Hitler, the CCP figured they needed to confiscate some more assets to survive. Then you would not provoke a big fish like India. You would pick the runt of the litter, like Poland, and try to isolate them.

But it sounds just like Nicolai Ceausescu, in the days and hours before his regime fell. He wrapped himself in the Romanian flag, and insisted that if his countrymen could not all stand together behind their government, national sovereignty was at risk.

This worked for Ceausescu for years, ever since the Russian tanks rolled into Prague in 1968. But now that the Warsaw Pact had fallen apart, it no longer worked. Without this external threat, his support had disappeared, and all he could do was unsuccessfully flee for his life.

The Chinese Communist Party seem to be making the same calculation. They are in desperate need of external enemies. Financially crippled, the economic reckoning upon them, they are no longer able to provide the steadily improving living standards that had sustained them in power domestically by a kind of social contract. As an alternative, they feel they need to play this dangerous game, to encourage the idea that China is surrounded by threats on all sides. So all good Chinese must put aside their misgivings and support the government.

There is a real danger they may provoke a war in order to make this stick. But they obviously do not want a real war. They seem to have calculated that they would lose any war, even with a minor power like Taiwan or Vietnam. Otherwise, they would do as Hitler did, and try to divide and conquer. Instead, they need and are trying to provoke a Cold War, purely for propaganda purposes.

This in itself looks unsustainable, since it requires increasing military expenditures. It was, many argue, the burden of such an arms race that scuppered the Soviet Union.

It all suggests that the PRC is actually now just trying to survive week by week, month by month, perhaps not even year by year. They alone have seen the real figures, and they believe they have no future.