February 27, 2018

China's Many Problems - Expand South?

China's problems are evident from comments made in late February 2018 to Submarine Matters here and here. I'm attempting a summary with the following points:

China is struggling to achieve economic growth from domestic consumption. Instead China's growth  is being fueled by unsustainable lending. Such lending is based on infrastructure investments (even though the average return on those investments ise nil). All this, and the following, will delay the time that China’s GDP will surpass the US GDP.

China produces far less oil and gas than its main competitors the US and Russia. China therefore has to import oil and gas more expensively and inefficiently than the US and Russia. Nuclear power stations are an expensive option that China is pursuing. China's coal, the alternative power station fuel, is highly polluting.

China has many current and future labour problems: The price of Chinese labour is no longer cheap since 1990. There is a coming demographic inversion with too many people by 2030 over 60yo, causing a huge spike in health care costs. Old parents and their health care is supported by too few working age offspring under 60.


China's overly large population (one dot represents 100,000 people). (Source Thorium)
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China has:
-  insufficient clean water (especially in northern China)
-  too little arable/farm land
-  too high a concentration of cities (which also displace farmland)
-  (too many people)
-  too many factories and power stations. 

All this is leading to dangerously unhealthy air, water and food pollution for the population. 

Solutions? Spreading population?:

North? China has difficulty expanding north over the border to Russia due to Russia’s military superiority. Some of Russia's conventional or nuclear armed 9K720 Iskander short-range ballistic missiles (SRBMs) are aimed at China. Also China is disinclined to spread its population north because:
-  Russia allows some legal Chinese immigration north
-  China has cooperative trade with Russia in oil and gas, and
-   many weapons sectors (including conventional submarines and high performance jet fighters).

East? Expansion East into South Korea and Japan is complicated by the South Korea and Japanese military and US nuclear and conventional forces. Spreading east into North Korea is not an option due to North Korea's nuclear deterrent.

West? into Kazakhstan (protected by Russia). India and Pakistan have preventative nuclear deterrents.

South? Bangladesh is already overcrowded and serves as a source of cheap labour.

There are possibilities of expanding south into poorly defended and in some areas sparsely populated, Southeast Asia including:
-  Thailand (noting many Chinese in frontier cities),
-  Cambodia (to build that mega deep water port).
-  Myanmar
-  Laos
-  Philippines
-  Indonesia

South into Australia? Australia:
-  generally sparsely populated
-  but has very limited water.
-  has an economy already highly interdependent with the China's economy (in terms of high levels
   of mineral, energy (including some oil and Uranium and much gas and coal) and agricultural
   exports to China)
-  is a long way to control from China.
-  a Chinese company has already leased the strategic Port of Darwin for 99 years.
-  After India China is the largest source of immigrants to Australia.

Does China have any viable solutions to its problems?

Pete

9 comments:

Mat said...

Africa. It is basically undefended territory against someone like China, and honestly it would probably be a good solution for both China and the African nations.

Anonymous said...

Infrastructure investment will always come back to bite the owner. It does not provide a profit in itself, but does provide jobs to the local economy . But in time,there will be a need to repair and replace much of the infrastructure , that is trains and rail lines, roads , harbor improvements , dock facilities . The list continues. Personally, I would not ask China for funding of any sort. If one can't find local funding,it means enough thought has not been into the process. Asking China for money is a cop out. Big statements from leaders,but no way to actually provide funding, and like a drug addict , go begging China for a money fix. And in return, China will ask for the souls of these business ventures. Look at poor Hong Kong. The Red Stifle and coming to a theater near you eventually .
China has now lengthened its Five Year Plan into a Multi Decade Scheme.

When any country borrows from another country(ies), the lender owns the chits and can make subtle demands from the borrower , thus losing its sovereignty.

Anonymous said...

Hi Pete

China is plotting to develop the Antarctica [1] as well as the Arctic [2, 3]. Encirclement of China by existing stakefolders such as US, Japan, Australia, Canada and so on is urgent issue. In this point, diplopmatic settlement of relation among these countries and Russia is quite important.

If China really wants to be respected by the world, she should respect the word. But, it takes quite long time, because it belongs to education of billion people. Encirclement of China by related counries is needed.

[1] https://www.smh.com.au/world/polar-progress-we-ignore-beijings-antarctic-ambitions-at-our-peril-20180220-h0wdc9.html
“Polar progress: We ignore Beijing's Antarctic ambitions at our peril” By Clive Hamilton, 24 February 2018

[2] http://www.xinhuanet.com/english/2018-01/26/c_136926498_4.htm
“Full text: China's Arctic Policy” Xinhua| 2018-01-26 13:23:52|Editor: Lu Hui

[3] http://www.straitstimes.com/asia/east-asia/chinas-polar-ambitions-cause-anxiety
“China's polar ambitions cause anxiety” Feb 20, 2018, 5:00 am SGT

Regards

Peter Coates said...

A February 27, 2018 comment from Josh
at http://gentleseas.blogspot.com.au/2018/02/rising-china-us42-trillion-economy-by.html?showComment=1519662001941#c2104561368235859847 is repeated here as it is very relevant.

"I think it is worth pointing out that One Belt/One Road is a short to medium term jobs project, since the construction market is absolutely saturated in China proper. Longer term, it is a project to bypass the first island chain/IO and the Med.

Even minor navies could block the straights connecting China to Europe and the mid east, never mind the USN. The move to build overland infrastructure and port facilities on the other side of India via CPEC is China conceding to geography: they have basically no ports available to open water, much in the same way the Russians don't. They are planning to have contingency infrastructure that bypasses the straights of Malacca and Lombok and rail infrastructure that goes all the way to Europe to bypass ocean transit altogether.

IMO this is an uphill fight, given the increased expense of rail transit. But there is a certain sweet spot where the extra speed of rail transit will justify the cost of using rails vice ships, for high value items and perishable goods. But end of the day One Belt/One Road is a huge gamble for China, and especially the countries hosting the infrastructure that have made very long term deals hosting its infrastructure.

Cheers,
Josh

https://squidjigger.com
Josh@squidjigger.com
twitter: @squid_jigger

Anonymous said...

More than just expanding South, it is very obvious now that China with President Xi at the helm for the next few decades wants to reshape Asia and at a minimum the Western Pacific with China at the center.
It is a direct challenge to the US (who enjoys dominance up to now) but also to other nations (major and small alike) in the region. The strategic ramifications are vast and long term. Those nations' foreign policies, economic policies and defense strategies and procurements must be planned and coordinated with this in mind. It will be up to leaders of those nations to equally rise up to the tasks ahead. This is NOT going to go away even decades from now, though I am sure none of us wish for it.
KQN

Josh said...

@Pete

Direct military engagement of the countries to China's south would be more than counter productive. Moreover the concentration of China's population into cities is a government policy, for better or for worse. They have no intention of shifting the population anywhere else. So while China has numerous socio-economic problems to deal with, migration away from the cities isn't one they see as a problem nor is one that could ever be redressed with conquest.

http://www.businessinsider.com/heres-chinas-big-plan-to-move-a-population-the-size-of-the-phillippines-from-farms-to-cities-2015-7

Cheers,
Josh

https://squidjigger.com
Josh@squidjigger.com
twitter: @squid_jigger

Anonymous said...

Pete

Migration to cities in a planned way can actually free up agricultural land (as long as you build up not out). One of the problems in asia in general is sub-dividing of family & village owned land into ever smaller parcels of land, such that every building that is built on such land takes up an increasing percentage of arable land & more & more of the agricultural output is taken up by people who could be more productive somewhere else. We have made it worse by effectivly stopping wide scale warfare, improved healthcare & improved transport, allowing us to keep an ever increasing population alive. Its been shown in the West that education & the like will eventually slow & in fact reverse this population trend (something govts seem to fear & start importing people to redress, causing social problems etc they did not count on). If you start with a billion people & level out at 3 billion you have got yourself more than a bit of a problem (India). You start with a billion people & slam the breaks on hard, you create a population cliff not a slope (China) which creates a different problem but one that is easier to handle via a city in the short term & a more manageable country in the longer term.

As to China's military might, it relies more on qty rather than quality. As we all know, qty has a quality of its own. However that works best on a large front. On a short front, qty tends to get in the way of its self. As to possible military targets, N Korea nukes are not a problem for China (easy target for them), but the best they could hope for was half the country as S Korea would move north (to 'aid' N Korea) & has the potential to get out of hand. It really would only leave SE Asia with Myanmar the stand out -large land border with China, reasonably physically large land area, no modern military to speak of & completely eliminates a whole chain of chokepoints (direct access to Indian Ocean).

Much more likely is a misjudgement or mistake in the SCS (try & claim the oil & gas there for yourself - no chokepoints & no major military powers in residence). The building of perminant fortified military bases by China in SCS on man made islands in disputed seas has made the situation much more unstable, as they are stationary. You can diffuse a situation (even when a mistake has been made or a potentially misjudged warning given - or even if done on purpose) by withdrawing warships or planes (or certain types therof) from an area to indicate that it is the end, not the start of something (at least in the short term). If a mistake is made from one of those fixed bases though, (especially if it directly effects one of the major powers), we may well see if its possible to sink an island.

Regards

Peter Coates said...

Hi Anonymous at 10/3/18 3:47 PM regarding Chinese development issues.

Your rural population move to the cities and other views are very interesting.

Given a large part of the Chinese economy is factory-manufacturing with many coal power stations to power them AIR AND WATER POLLUTION are major problems. Pollution adds to health problems (including costs) and interfers with agriculture and fisheries.

The Chinese Government may react by:

- increasing the number of high-tech, low pollution industries, like computers, cellphones and armaments? and

- limiting the increase in heavy-basic manufacturing and new coal power stations.

- perhaps China will transfer many Chinese owned factories to Bangladesh, Myanmar, Cambodia and Laos to reduce pollution in China?

Regards

Pete

Peter Coates said...

On China's efforts to reduce or limit growth of pollution The Economist reports in part March 17, 2018 https://www.economist.com/blogs/economist-explains/2018/01/economist-explains-19

China "has had draconian anti-pollution measures since 2013, when it introduced a set of prohibitions called the national action plan on air pollution. This imposed a nationwide cap on coal use, divided up among provinces, so that Beijing (for instance) had to reduce its coal consumption by 50% between 2013 and 2018. The plan banned new coal-burning capacity (though plants already in the works were allowed) and sped up the use of filters and scrubbers. These measures cut PM-2.5 levels in Beijing by more than a quarter between 2012-13, the time of the city’s notorious “airpocalypse”, and 2016. The measures were notable for being outright bans on polluting activities, rather than incentives to clean up production, such as prices or taxes (though China has those, too, including what will be the world’s largest carbon market, when it opens this year).

The recent improvement in air quality in northern China has come about through further command-and-control measures, which were imposed in mid-October and are due to last until mid-March. Air pollution spikes in northern China during the winter, because most domestic heating there is fuelled by coal. Those 26 cities, again with Beijing and Tianjin, imposed output controls on steel and aluminium smelters. They mothballed large construction projects in order to reduce smog from cement production and diesel trucks. And they created a new Environmental Protection Agency, with tough enforcement powers, in Beijing and its surroundings. These prohibitions were so tough that in some areas they forced the authorities into an unusual U-turn. The cities had promised to convert almost 4m households from coal-burning to electricity or gas in 2017 and shut off the coal in houses, hospitals and schools even before the replacement systems were ready. When hospital wards froze and schools took to holding classes in sub-zero playgrounds (where at least it was sunny), the government had to allow some coal-burning after all.

The drop in pollution in late 2017 exemplifies why bans in China often work better than elsewhere. First, many of the biggest polluters are state-owned, and so are more easily controlled. And second, with more than half of China’s pollution coming from coal-fired power stations, the government can concentrate on coal and do more than regimes in places where the causes of pollution are more varied."