The Peter Zeihan Podcast Series - The Garbage Time of History: China's Economic Decline || Peter Zeihan

Episode Date: August 6, 2024

*This video was recorded before Peter’s backpacking trip in mid-July. Lesson of the day: if the Chinese government starts censoring a topic, it's probably time to start looking into that. Today, we'll be examining China's economy heading into 'garbage time'. Full Newsletter: https://mailchi.mp/zeihan/the-garbage-time-of-history-chinas-economic-decline

Hey, everybody, Peter Zine here coming to you from Lost Valley in Colorado just above Denver. Today we're going to talk about a little bit of Chinese censorship and the general downward spile the Chinese find themselves in. I kind of watch what the Chinese are banning because it gives you an idea of what Xi Jinping and the CCP in China are nervous about. And there are a couple new terms that have popped up that are on the ban list that I think are worth talking about because it puts a few things into context. The first is the term garbage time. And for those of you out there who are sports enthusiasts have, of course, heard about garbage time. The idea is that near the end of the game, the last few minutes, one team is so far ahead. It's simply impossible for the underdog to catch up.

But they still have to go through the motions before they officially lose. For those of you who blend your sports metaphors with geopolitics, this is a term that popped up in the 2000s in the 1990s when people were talking about the Soviet fall. The idea being after the Soviet invasion of Afghanistan in 79 that everyone in the Communist Party at the top in Russia realized that the end was nigh, that the system was broken, and they were just kind of pacing time. Same basic concept. The idea is that things are so broken, there's no way to recover, and so therefore it's just a matter of waiting for the inevitable end.

You can understand why the Chinese government doesn't like the fact that people are even discussing this concept. The second term is something called laying flat. The idea is that things are so broken and hard work will get you nowhere in a broken system, so you might as well just lay back and do the least amount of work possible because there's no reward for anything else. Again, you can see why the Chinese government doesn't like that one. This is really indicative of the economic situation in China. The Chinese just released new data.

Once again, they came in under 5% for annual growth, which has been basically where they've been since 2019 now. And since most folks back in the 2010s estimated that China's government overestimated their GDP growth by about five percentage points, that suggests that for the last five, six years, the Chinese government really hasn't grown much at all in a Japanese style stagnation, but with an economy that hasn't advanced nearly as far. Nor should you expect this situation to get better. We have some slightly improved demographic data out of China that's recently come out. They are admitting publicly now that they've lost another 8 million people under age 5. And if you look at this new data, the Chinese are now publicly admitting that there's about the same number of people aged 50 to 70 as there are 0 to 25. That's the official data, saying that this larger, younger age group, which should be two, three times as large as the older group is actually the same size or maybe even a little bit smaller.

And of course, independent demographers are always saying that the Chinese government has overstated the Chinese population in the range of 100 to 250 million people with most of those missing people under age 40, suggesting that that 0 to 25 categories actually overstated by at least 80 million people, maybe something closer to 150, maybe even 200 million. Anyway, most of the people who do consumption in an economy are underage 40 because they're the ones who are buying homes and raising kids. And if this next generation just doesn't exist in numbers, then the Chinese can never have consumption-led growth ever again. That makes them entirely dependent on international trade. And international trade is in the process of cutting China out of the entire system. Obviously, this started with Donald Trump in the United States, but with the recent sanctions on things like EVs, it's spread to Europe and now it exists in Turkey, in India, in Indonesia, and in Brazil. It really is going global. So the last best hope that the Chinese had for recovery is now more than six years old.

And there's not going to be another one. And the people are beginning to notice.