What Is the Future of Chinese Expansion and Energy? || Ask Peter

WEBINAR – Peter Zeihan’s Risk List: What Keeps a Geopolitical Strategist Up at Night

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We’ve got some more interview style questions for you today! We’ll be focusing on China, specifically looking at the potential for Chinese energy independence and if any countries surrounding China should be worried about an invasion/resource grab.

While it may appear that the Chinese have access to significant shale oil deposits, the reality of their energy outlook isn’t so pretty. Most of the Chinese lake bed shales are waxy and produce only a fraction of the energy that American deposits produce. In addition, the location of these deposits just so happens to be in a historically secessionist region, so that helps limit development.

On the Chinese expansion front, the prospects aren’t looking too hot. With limited military capabilities and geographical constraints, expansion towards resource-rich neighbors isn’t feasible. My bigger concern is what happens after Chinese demand for these resources falls off and the countries sending this stuff to China lose that stream of income…

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Transcript

On paper, China has considerable, shale oil deposits. One of the Chinese, especially given their history of, massive state expenditure, doing more of their shale deposits, especially contrasted with their massive energy import dependance. Technically, China has the world’s second largest shale deposits. so potentially it’s very, very cool. And that’s certainly the failure hasn’t been from a lack of trying. 

The problem is it’s not very shale. Sovereign shale is shale that comes out, former ocean beds. so saltwater pressure, that sort of thing. Most of China’s shales are, I can’t pronounce word of some, like, extremely stringent. Thank you. Lake bed shells. so a lot more debris in them, if you will. And as a result, are kind of waxy. 

Well, when you frack a maritime shale, it’s hard and it cracks and you get the energy out. If you frack wax, it just kind of sloshes around a little bit and nothing happens. So it turns out that even if the petroleum density and China shales are the same as American shales, they can only get about 5% the energy out for every dollar that they put into the effort, even assuming that they were really good at the technology and they’re at best so-so. 

So only about 5% of the wells that the Chinese have drilled at this point even remotely approach break even. And all of those shales are in Sichuan and Sichuan. It has in the past been a secessionist region in China. So the last thing that the hyper centralized Communist Party is China is going to do is to exploit a new type of energy in a part of the country that might one day go the wrong way. 

and even within that, the volume that they’ve been able to get just warrant does not seem to justify a large scale expenditure. So they’ve steadily revised down their estimates. I think they’re now down to less than 2% of what they thought they were to get 15 years ago. I think for most people who follow you regularly, or read the news, it’s no surprise that China, mainland China has its sights on, if one day possible, securing the island of Taiwan, bringing one of these, an errant province back under the influence of the central government. 

Taiwan by itself, though, is a relatively resource poor place. And we look at China’s import needs, economic development plans. There are neighboring regions closer to home Mongolia, parts of Central Asia, parts of southern Russia that have a lot of the resources that they’re importing. Anyways. Is there a risk to these areas of a future Chinese land grab occupation, cross-border, conflict, kind of like you see between, India and China, the Himalayas. 

But obviously without a mountain range in between them. I think there’s a lot of risk, but not necessarily China. China can’t go north. Will get the Russians have made that very clear. They don’t have the Navy to conquer a place like Japan or the Philippines or Indonesia. Taiwan is theoretically a possibility. But if they pick a fight over that, the chances of another naval power interrupting their energy and their food inflows and the merchandise exports would destroy China’s industrial estate. 

it can’t go meaningfully southwest because of the Himalayas. And if they go south, you know, they tried that in 79 with Vietnam. They got their ass handed to them just as much as we did it. So there’s nowhere really for China to go and break a country in a meaningful way. I mean, there’s Mongolia, but special case, there’s not enough people there for really the matter. 

And they’re not a huge player in international markets. but I’m more concerned that if you remove China from the equation and Chinese demand for a lot of these minerals crash, you get two things going on at once. Number one, you got the gutting of the income that a lot of these mid-tier countries rely and on to do everything that they do. 

And then number two, it’s unclear where the United States was going to be a lot more narcissistic and focused on its own industrialization. We’ll need all of them. And we’re certainly going to preference specific partners like the Philippines, like Canada, like Mexico, like Australia, like Chile. And so if you’re not on that short list where you kind of get under the American security, your at worst economic umbrella, you need to find a new, for lack of a better word, daddy. 

And if it can’t be China, it’s not going to be the United States. Your list of other options have baggage. Japan might be related to the business. And if you’re an East Asia, you remember how that went last time. It’s not that I think that the Japanese are looking to go bonzai on everybody again, but it’s going to be lingering there in the back of your mind. 

As for the other countries that have projection power, Turkey for it. France. You know, these are all countries with a lot of baggage when it comes to former colonial relationships. Now, I wouldn’t expect it’s to be a neo colonial conquering because the power difference between these states and their former colonies, it’s not nearly as lopsided as it used to be. 

I think it would be more of a partnership, but everyone is going to have to find a friend, and you’re going to have to keep the friend interested. And you don’t have to negotiate every step of that process. Go. It’s a much more complex world than what we had during the Cold War. Even during the colonial era. It’s it’s going to be messy, and not everyone is going to be able to pull it off. 

The US Places Huge Tariffs on Chinese Imports

Some hefty tariffs have just been placed on many Chinese imports, including electric vehicles, semiconductors, solar panels, and more. This is an attempt to prevent China from dominating industries that the US wants to develop.

China will probably slap some more subsidies on these goods, which will lead to more tariffs and so on and so forth. These Chinese goods might also be hit with some European tariffs, but they’ll likely be smaller and easier to offset with subsidies. The developing world might be in the crosshairs as the next Chinese import market, but some infrastructure buildout will have to happen first.

As China continues along its downward spiral, impacts like these tariffs will have more outsized effects on the Chinese economy.

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Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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TranscripT

Hello from Poznan. Peter Zeihan here. Still in Poland. Today is the 14th of May. You’ll see this on the 15th. And the news is that the American administration under Joe Biden has just announced a series of very robust tariffs on Chinese imports, roughly 100% on electric vehicles, about 50% on semiconductors and solar panels on similar levels on a raft of other things. 

the goal, very simply, is to prevent the Chinese from swamping industries that the Biden administration is attempting to develop. this is something that has extraordinarily high bipartisan support. In fact, Donald Trump has already come out in favor because of his style, saying, I would have done even more. and that’s actually kind of on the point. 

the Chinese will respond to this by increasing their subsidies even more, which will force this administration or the next one to again up the tariff levels. Basically, the Chinese government will not be allowed to swamp products of these types and an increasingly wider variety of types into the American market at all. Now, that will, of course, trigger its own counter effects, because the Chinese will then try to put it into any market they can. 

Here in Europe, the question like in the United States isn’t will there be tariffs on Chinese products? But how high? Now, under policies currently under consideration by the European Commission, who kind of the executive arm of the European Union. tariffs are coming, but they’re going to be somewhere between 10 and 40% most likely. And that’s just not enough. 

the Chinese subsidizing of these industries is so extreme that anything less than 100% that the Biden administration has done is really not going to do more than slow things. And if you think Ford and GM have a lot of political pull in the United States, that’s nothing compared to Mercedes and Fiat. And, and Volkswagen. So high, high, high tariffs are coming to Europe on these topics as well. 

The only other place these products can then go is the developing world. But the developing world for the most part, doesn’t have the electrical system that’s necessary to use light electric vehicles. So the Chinese will be able to swamp some of these markets, but not enough to move the needle on where the Europeans versus the American versus the Chinese feel they need to be. 

Now, keep in mind that part of the reason why the Chinese are doing this is in the five years since the Covid started, the Chinese are now realizing that their population has shrunk a lot more than they originally thought. So they no longer have enough people under age 45 to mount any sort of consumption led economic recovery. And with the exception of industrial demand in China the last two years, we’ve really seen no increase in consumption at all. 

the population is simply aged out. So export led growth is all they have, and they’re no longer being allowed access to the American market. And very soon they won’t be allowed sufficient access to the European market as well. 

The State of Global Energy Webinar & The New Chinese Carriers

The Webinar – The State of Global Energy – is only 5 days away!

Peter will deliver his analysis and forecasts for regional energy production and his assessment of geopolitical risk—everything from war, to instability and regulatory risk—with an eye on challenges and opportunities facing global production and supply.

Please join us on Friday, May 10th at 12:00 PM EST.

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The newest Chinese aircraft carrier, the Fujian, has officially hit the seas. This a major development for the Chinese Navy, but still falls short when compared to with advanced counterparts (i.e. the US).

The Fujian is intended to be a test bed, meaning the Chinese will throw all of their tech onto it and see what works. Which means we’re still a ways out from seeing an actual combat vessel hit the water.

Despite all the “advancements” we’re seeing on the Fujian, the Chinese still opted out of the nuclear power option. So with a limited range and no intention of ever seeing combat, the Fujian doesn’t drastically alter my forecast for China’s naval capabilities.

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Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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TranscripT

Hey, everybody. Peter Zeihan here, coming to you from Colorado. for those of you been watching me for a while, you know that every once in a while I do a webinar on a topic of the moment, and we’re going to be doing that again this coming Friday, May 10th, at noon eastern, which, of course, if I get the timezones right would be 11 a.m. central, 10 a.m. mountain and 9 a.m. Pacific. 

That’d be about 45 minutes of going through all the crazy that we’ve seen in the energy markets going back to the end of Covid, explaining why we are where we are now and what to expect over the next 12 to 24 months. I’ll be going for about 45 minutes, and then we’ll have ample time for Q&A at the end, so you can sign up via the link that is attached to this email or this Twitter feed. 

And I hope to see everyone there. Morning, everybody. Peter, I’m here coming to you from Phenix, Arizona. taking an entry from the Ask Peter series today. specifically, the Chinese have just floated their third aircraft carrier, the Fujian. And does this change my general assessment that the Chinese navy is kind of a joke? maybe a little, let’s give you the backdrop. 

Okay. So the United States has been engaged in carrier aviation for over a century at this point, and we have ten ships of the Nimitz class, which are the super carriers, which are typically considered the gold standard in terms of their operational capability, their nuclear powered, the carrier of dozens of fighters and fighter bombers each and their capacity, to operate around the world is unlimited and unparalleled. 

in addition, these are now the old ships. The United States is in the process of floating a new type of carrier called the Ford class, which is bigger, has more speed, has more carrying capacity and can strike faster and maintain more sorties at the same time and get them out faster. In comparison, most of the world’s other carriers are very limited. 

the Brits are in the process of trying to get two super carriers very, very loosely modeled after of the American. Nimitz is in operation right now. The Japanese have converted two things that we call helicopter destroyers into medium sized carriers. And then there’s a huge drop to everybody else. So, for example, the French do have the Charles de Gaulle, which is technically a super carrier, but it has a hard time generating enough power to get up to speed to launch fighters unless the weather is absolutely perfect. 

And then there’s another huge drop to everybody else, like, say, the ties with the Indians. The Chinese are kind of in the middle, well below the Japanese, well below the Brits. they have three carriers now. The first one is actually an old Soviet carrier that was built in the 80s, but it was never completed. And then it rusted in a Ukrainian port for a decade, where the Ukrainians basically stripped it for metals, and then it got towed to China and sold and eventually rechristened as the. 

 sorry, I can’t remember the name. it was originally the patriotic, and no one in China, who is in the military, especially who’s in the Navy, will ever consider that that vessel’s anything other than a test of China’s ability to just comprehend what carrier aviation is. It is never, never, never, never intended to see combat in any form. 

The second Chinese carrier is a clone of that first one. That’s the on, and it, again, isn’t all that great. it is just a clone of an old Soviet model. And it was the Chinese attempt to see if they could take 1970s technology that did not work very well and bring it into the modern age a little bit. 

Most of the parts are the same, but they have put in some things like new avionics and sensors. And again, no one in the Chinese Navy would consider it a combat vessel. It’s a test vessel. The new one that we have, the Fujian, is their first domestically designed one. and that means that it’s certainly better and uses more current technology. 

But again, the Chinese navy is not talking about this thing as a combat vessel. It is a test bed. Think of it like for those of you who like the Navy stuff, think of it like the enterprise, not the USS enterprise of the United Federation plan, as in Star Trek. No to know the American carrier enterprise, which was designed as a test bed for a whole host of new technologies. 

This is China’s first attempt to build something that actually floats and theoretically down the road could see combat. But this isn’t the one that would do it. This would be in theory, if everything works out perfectly, which will take them years to figure out, this would be the model that other carriers would then be built on. So yes, the Chinese have three carriers. 

Yes, they are taking steps forward in their operations constructions, but they’re coming from a century behind and they still very honest with themselves here, are not claiming that any of these are combat vehicles. one more thing to keep in mind. The Fujian, the new one is a nuclear powered. So you’ve got an 80,000 ton vehicle that still has to burn fuel, which means that its range is sharply limited, and it can’t go much further than most of the rest of the Chinese navy, which is largely limited to operating within a thousand miles of the Chinese coast. 

So is this significant? Sure. And if they keep up their current pace, they will be able to have a carrier that can stand up to an American carrier that’s 50 years old in the next decade or two. Not something that changes my forecast all that much. 

Secretary Yellen Dumps Cold Water on Chinese Dumping

US Treasury Secretary Janet Yellen is fresh from a trip to China, and she is fired up. Well, perhaps as fired up as one can surmise the Secretary gets.

But first: China.

As long-time subscribers and readers well know, China’s demographic situation is in shambles. The Chinese Communist Party even admits it, which should be an indicator of how bad things are given the CCP’s creative and liberal license with reality. One of the several negative impacts of a shrinking population is a correlated decline in consumption. For an economy as dependent on industrial overproduction to fuel growth as China’s, this presents a stark and simple reality: the Chinese population will never, ever be able to fully consume Chinese industrial output.

China’s only option is to start dumping more product overseas, as slowing down output causes myriad headaches at home: shrinking economic growth, higher unemployment, exposure of the CCP’s rising ineptitude, etc. Chinese overproduction has already dramatically restructured the world of manufactured goods since China signed onto globalization in the 1990s. The US, its European and Asian allies have simply had enough.

This is beyond simple trade protectionism and market competition. From Boston to Brussels to Busan, there is a rising awareness and unwillingness to endure the various economic, national security and environmental costs of allowing Beijing’s economic imperatives to run roughshod over the world’s industrialized and emerging economies.

Enter Big, Bad Janet Yellen.

Whatever policy disputes one might have with the Secretary notwithstanding, she has a well-documented support of limiting barriers to international trade and the flow of goods. Simply put: Secretary Yellen is a fan of free trade and the general global economic lift associated with globalization.

But Secretary Yellen is not a fan of Chinese economic bullying and product dumping. Even before she left China, there were reports of threats of US trade tariffs and other barriers. The Europeans are at work with several policies of their own, and the Chinese Communist Party? Well…

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Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Talking Iran and China on Danger Close with Jack Carr

If you’ve followed me for a while, you’ll probably recognize Jack Carr and his show Danger Close. Last week, he released our latest episode together and if you haven’t seen it yet, I encourage you to tune in.

This episode is about an hour long and we discuss a number of heavy hitting topics. We explore Iran’s historical and geographical influences on culture, along with the greater Iranian threat via proxy groups including Hezbollah, Hamas and the Houthis. We also discuss China’s birth rate crisis and the potential motives for a Taiwan invasion, portraying a bleak vision of the future as a desperate attempt to save a dying empire.

You can see more of Jack Carr’s content and watch the interview at the link below…

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Should We Worry About Chinese Land Purchases in the US?

I’ve had a lot of you write in concerned about Chinese land purchases in the United States. There’s not much to be concerned about here, but let me paint the full picture for you.

Foreign ownership of US land is quite limited, and the Chinese portion of that is just a sliver of the pie (Canada has the largest piece of the pie for those curious). To temper worries even further, most of this US land is being bought by Chinese individuals simply trying to park their assets outside of China…and you can’t really blame them for that. If you need even more reason not to stress, just look at the historical precedence of foreign assets being seized in times of conflict.

It’s good to ponder these questions and keep an eye on things like foreign land ownership in the US, but as of now, there’s really no need for concern.

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First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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The Chinese Housing Crisis: Evergrande’s Bankruptcy

Evergrande, formerly China’s largest property developer, has just declared bankruptcy and the fallout is going to be massive. Let’s look at how we got to this point and some potential paths forward.

The collapse of Evergrande is a consequence of the Chinese government’s hyper-financialization policy that floods the economy with citizens’ savings to ensure stability…clearly it didn’t work. However, years of this policy have contributed to a massive overbuild of real estate, which is where many Chinese citizens have parked their private savings.

So, the potential for economic turmoil to ensue is quite high. How can China prevent this from happening? They can follow a Western-style bankruptcy procedure, which could stir up a whole slew of problems, or the government could intervene and circumvent the court ruling, which could spark concern internationally and diminish the legal autonomy of Hong Kong.

Regardless of which path is chosen, there will be dire economic consequences and myriad of issues for China’s social stability.

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Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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TranscripT

Hey everybody. Peter Zeihan coming to you from Colorado. The big news over the weekend is that a Hong Kong court has ruled that China’s largest property development group, Evergrande, is bankrupt and needs to be broken up. This is something that the Chinese government has spent a lot of effort on the last two years. Not happening because. Well, let me give you a little back story.

So there’s two big things that dominate the Chinese economy. The first is something I call hyper financialization. The idea that the government both de facto confiscates the savings of the citizen population so it can only go into projects funded by Chinese state banks, as well as massively expanding the money supply to the tune of like almost triple what we have here in the United States in order to make sure that there is plenty of cash sloshing around in the system so that banks can loan anything in any amount at low terms to anyone at any time, because if they can do that, they can expand, expand, expand and hire, higher hire.

And people who have jobs don’t go on long walks in large groups together. It’s a public stability, political control approach to finance. It’s not about profit. It’s about throughput, because throughput requires a lot of bodies anyway. That’s the goal. In that sort of situation, you get two things. Number one, you get companies like Evergrande who gorge on all this bottomless supply of debt to build, build, build, build, build, even if there’s no demand.

Second, you get a population who knows that their private savings is almost worthless because the Chinese government is forcing them to keep it in the state banks and they want to put it into a hard asset that preferably the state can’t control. And if they can’t get their money out of the country, then the next best thing is a hard asset in the country, which typically is property.

So you get people pooling their private savings in order to buy condos, and each condo is typically owned by a different consortium of private individuals making untangling it. Also, you have somewhere probably in the vicinity of 1.5 billion units in the country that have never been lived and never will be lived in. So you’re talking about 100% overbuild conservatively.

Some estimates say it’s as high as 3 trillion, which is just so far beyond stupid. Anyway, Evergrande going down means that their debts aren’t going to be serviced anymore and the physical assets they have had to be parceled up. And foreign investors are going to come in and see what bits that they can get. None of these things are things that the Chinese Communist Party would normally allow to happen.

So there’s a couple of ways that this can go. None of them are good. Option number one is we follow a Western style bankruptcy and restitution program where this system is broken up and a lot of their assets are sold at pennies, maybe dimes on a dollar, and it just goes away. If that happens, we will have a very clear idea of just how much the oversupply in the market is.

And you can count on private citizens being up in arms probably. I mean, the best estimate I’ve seen out of China is that 70% of total private savings is wrapped up in real estate. And most of these assets are worth no more than $0.10 on the dollar. So if you have a fire sale of the single largest player, which controls one sixth of the market, holy shit, things are going to get real very, very, very quickly.

Option number two is that the Chinese step in and abrogate the Hong Kong ruling. Now, legally this cannot happen, but the Chinese Communist Party is not really big on legal details when it comes to Hong Kong in particular. And I have no doubt that they could stick their noses in that. If that happens, that Evergrande goes on some sort of state drip and everything with the system just kind of limps on with the understanding now that Hong Kong has no legal authority over its own holdings, which will start an exodus of what few international firms are still there, regardless how this goes.

Don’t expect anything in the market to get better. This is not like, say, the TARP program that the United States put into place back in 2008 at the bottom of the subprime crisis, which kind of froze the market and put a Florida things and allowed for reforms and economic growth to eventually heal the damage of the subprime crisis.

This is this is a one off decision that is not just holding back one rock from rolling down the hill. Evergrande may be the biggest player in this market, but it is by far not the only one has been doing stupid things like this building condos that have no demand or running that like a Ponzi scheme. Every development company in the country basically operates this way, and the second and third largest players in the industry are state owned.

So you can count on the Chinese government not using this as an opportunity to break with the old model and put into place something sustainable. And even if all of a sudden this place were run by a bunch of Austrian economists, it’s too late. Housing demand, legitimate housing demand, housing demand for houses that people actually live in is dominated by people age 20 to 45.

People who are starting out well. 45 years ago, the Chinese government instituted the one child policy. You combine that with the most rapid urbanization program in human history and there are no longer enough people under age 45 to do anything that is consumption led, including home buying. So there is no path out of this that follows any pattern that we have established in a market environment which leads us to political and social outcomes, where the market economics are just atrocious and getting worse by the day with a government that is becoming ever more nervous about the state of the economy and the loyalty of its population.

I don’t want to say anything overly dramatic is like this is where it all starts to fall apart because we’ve had a lot of things like that go down in the last 18 months. But this cuts to the core of what enables the average citizen to actually support the government. And there’s no way we move forward from this without a lot of side damage.

China’s Energy Problem and Dealing with the Taliban

When one of your best options for securing an energy supply route is with the Pakistani Taliban, you know you’ve got some problems. So go ahead and add that one to China’s ever-growing list of ‘shit to figure out.’

The issue China faces is that securing a safe and reliable energy supplier is practically impossible no matter where they turn. Given their geographical position, the Chinese have to go through Pakistani Taliban territory, deal with rivals like India, go over treacherous terrain or a combination of all those.

China’s energy will remain vulnerable until they can sort this out, but at least they have a stockpile of low-quality coal to keep the lights on until then.

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How Extensive is the Corruption in the Chinese Military?

The Accidental Superpower: Ten Years On

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I had a handful of y’all point out that not everyone in the recent Chinese purges was targeted for political reasons; instead, many of these folks are facing corruption charges.

The level of corruption within the Chinese military is unknown, but I bet it’s more widespread than most people think. Between the missile silos that lack functioning hatches and the ballistic missiles filled with water instead of fuel, China is experiencing a Russian level of corruption.

The extent to which this has impacted and will continue to influence China’s military readiness and modernization program is expected to be significant. So, for all my non-Chinese viewers out there, I hope you get a good chuckle out of all this.

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TranscripT

Hey everybody. Peter Zeihan here. A few of you wrote in yesterday pointed out rightly that there is corruption in the Chinese government, and it’s not that not everything that Xi Jinping is doing is a purge of personnel for political reasons. I mean, that’s the primary thing, but it’s not the only one. He’s already pushed a quarter of a million people into corruption charges.

But for the military specifically, we’ve had a few things that have kind of bubble up over the last few days that are just a riot. So we now know that the the guy who was in charge of the country’s missile forces, as well as the secretary of defense, were in part dismissed last year because they had been siphoning money off from the procurement process.

And at some point over the summer of the fall, Xi Jinping discovered that all of those missile silos that the government has been building out in western China to achieve some sort of strategic parity. The United States, a lot of the hatches don’t open. And but that’s not the best part, The best part is that for a lot of the intercontinental ballistic missiles instead of fuel in the tanks, they just filled them up with water.

And that is something that, you know, you would expect to get kind of caught on. So you can only imagine how much stuff down the line has been lied about and stolen. But the only country that we can compare here to this level of theft would be Russia. We now know from the Ukraine war that probably two thirds of the funding that Putin has a lot of to the military over the last 15 years were just stolen.

I have no idea what the percentage is going to end up being for China. I’m sure it’s a lot higher than people were expecting. The only specific incident that I can think of where this fuel tank water issue is, even a meaningful comparison is back in the nineties when Russian MiG maintenance crews started siphoning off the coolant from the MiGs in order to drink it because it was cheaper than buying alcohol.

The scale of this appears to be just massive and obviously it’s going to have an impact on the readiness and the expansion of the modernization program of the Chinese military. Anyway, so this is kind of a yes, but or a yes and two yesterday. And everybody I hope you get a good chuckle out of it. And of course, with your Chinese, in which case, you know, tough.

Chairman Xi Jinping Guts the Chinese Military

The Accidental Superpower: Ten Years On

With a new “10 years later” epilogue for every chapter, comes an eye-opening assessment of American power and deglobalization in the bestselling tradition of The World is Flat and The Next 100 Years.

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Xi Jinping is doing his best Darth Vader impression and has the Chinese military in a force choke. After purging the system of anyone who can think, all that remains is the shell of a Defense Minister (now a press secretary for military diplomacy) and the “real” decision makers – the Central Military Commission – chaired by none other than Xi himself.

The Chinese military has remained largely untouched by Xi’s purges over the years, but this last round sought out any political players and corrupt personnel within the military. So, anyone with two brain cells, overly ambitious or competent, has been “relieved of duty.”

The Central Military Commission, which is now comprised of yes-men and sit-there-and-smile-men, will likely lose any semblance of military preparedness to prioritize ideological adherence. I’ll let you judge what that means for the future of the Chinese military…

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Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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TranscripT

Hey everybody. Peter Zeihan here coming to you from Colorado. We’re going to talk about some things that have gone down in China as regards to the military. Now there are a lot of folks who like to stress about the Chinese military and who are convinced that if we ever do get into a real fight with the Chinese, that we have our asses handed to them.

I’ve never been part of that crowd, mostly for an equipment point of view. They’ve got two carriers that have never seen conflict. We’ve got 20, which have seen lots of fights over the last several decades. Most of their ships can’t sail more than a thousand miles from shore. And that assumes that going in a straight line and no one’s shooting at them and they’re going slow to say fuel.

Whereas our fleet is fully bluewater capable. But I’m not going to talk about the technical aspects of the military today. But it said the leadership assets, the functional, the structural stuff. Now, in the United States, we have a defense secretary who’s in formal command of the forces and who reports directly to the president as a member of the cabinet.

So orders go from the president to the secretary of defense to the troops. That’s not how it works in China. In China, the defense minister does not have operational control over the military or over policy. They’re more of a glorified press secretary that deals with military diplomacy. And they are, as a result, the interface with our folks. But those are the decision makers.

The decision makers sit on the Central Military Commission, which is chaired by. Now, if you go back a few months, the Chinese government has been seeing a series of purges for all the not just a few months for 14 years now. And it claimed the defense secretary over this past summer and it took a while to happen. The guy basically vanished, didn’t show up at the office, wasn’t in first at all for two months before he was formally disposed.

And it’s only in the last couple of weeks that we finally have a new defense minister, a guy by the name of Dong Zhu, and he’s a an admiral. But again, the defense minister position in China is not all of that. The real decision making power lies elsewhere. Now, the issue that we’ve been seeing in China as regards to these purges has been robust.

It’s about JI trying to tighten his grip on everything. And over the course of the last few months, he’s fired 20 top level people, 12 in just the last two weeks In order to put his stamp on the military. You have to look at this from his point of view. When he came in, China was one of the most corrupt countries in the world.

And also it was one of the more centrally disassociated the Chinese Communist Party industry has tried to be very centralized and to all decision making to flow through Beijing into Xi personally. And China is a country of, you know, 1.3 billion people. And that requires a lot of hands on government at the regional and the local level. And when you’ve got decision making it the regional and local level people make decisions at the regional and the local level.

And that means that she would rather have them singing his praises rather than doing the dirty work of day to day governance. So he submitted a series of purges both to go after the corruption and against his political competition, perceived or otherwise. And over the next 12 years, basically gutted the system of anyone who might stand against him by going against anyone who might stand up.

And so whether it’s in local government or state government or in academia or business or in the federal bureaucracy, it has been purged of anyone with any ambition and any competence. The reason that the military was left out of those first several purges is because it was strong and because these people had guns. You deal with that last.

And now he’s starting to deal with that as well. And so a lot of the purges we have seen are going after either political players or folks that are actually guilty of corruption. And so, you know, about 20 so far, including a recently appointed defense minister ticked by, none other than Xi himself. Now, remember that Central committee that does the military planning and is now stacked just like the Chinese Politburo with incompetent.

Yes, man. Well, not even people who say yes, people won’t say anything because she doesn’t want to be bothered. So what we see now is starting to impose upon the military the same structural gutting that we’ve seen for everything else. China’s already gone from having a bureaucracy to one that doesn’t function at all because nobody wants to transmit information because they don’t know how she’s going to respond.

And now we’re seeing that in military activities as well. So is this good or bad? Well, it really depends upon who you are and where you care about and where you live. But think of it this way. In the old system, China’s military preparedness and capability was probably sharply limited by lack of expertise and by massive corruption, things like Russian style stealing of the funds.

Now, if she has his way, a third of the working hours of all the military will be spent reading texts written by Jingping about Xi Jinping, about how wonderful his using Peng is. Which one of those makes a better military? Not quite sure. It matters.