The Garbage Time of History: China’s Economic Decline

*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’.

For the non-athletes that follow me, garbage time is a sports term that refers to the final minutes of a play when there is no chance for the losing team to recover, yet play must continue. So, if we apply that to the Chinese economy, it would suggest that China has crossed the point of no return.

If you trust the data coming out of China, the economy is stagnant and the demographic picture is grim. If you take your Chinese data with a grain of salt, the economy and demography of China are in a unrecoverable nose dive. So, to say that China is ‘laying flat’ and in ‘garbage time’ is no exaggeration.

If there was anything that might help China hold on, it would be strong international trade. Unfortunately, many countries are stepping away from deals with China and removing that last sliver of hope for the Chinese.

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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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Transcript

Hey everybody. Peter Zeihan here, coming to you from Lost Valley in Colorado, just above Denver. Today we’re going to talk about a bit of Chinese censorship and the general downward spiral the Chinese find themselves in. I keep an eye on what the Chinese are banning because it gives you an idea of what Xi Jinping and the CCP in China are nervous about.

A couple of new terms have popped up on the ban list that I think are worth discussing because they put a few things into context. The first term is “garbage time.” For those of you who are sports enthusiasts, you might have heard of this term. It refers to the final minutes of a game when one team is so far ahead that it’s impossible for the underdog to catch up. They still have to play out the rest of the game before officially losing. In geopolitical terms, it’s a concept that emerged in the 2000s and 1990s, referring to the period after the Soviet invasion of Afghanistan in 1979 when it became clear that the system was broken and it was just a matter of time before the inevitable end.

The Chinese government doesn’t like this term because it implies that their system is fundamentally broken and that it’s just a waiting game until the end.

The second term is “laying flat.” This idea is that things are so broken and hard work will get you nowhere in a dysfunctional system, so you might as well do the least amount of work possible because there’s no reward for anything else. Again, this term is problematic for the Chinese government because it reflects widespread disillusionment.

These terms are indicative of the economic situation in China. The Chinese recently released new data, showing annual growth once again coming in under 5%. This has been the trend since 2019. Most experts believe that China’s government overestimated their GDP growth by about five percentage points since the 2010s, suggesting that for the past five to six years, China really hasn’t grown much at all. This is reminiscent of Japanese-style stagnation but with an economy that hasn’t advanced as far.

Recent demographic data from China indicates that they’ve lost another 8 million people under age five. The data now publicly admits that there are roughly the same number of people aged 50 to 70 as there are aged 0 to 25. This is significant because, ideally, the younger age group should be two to three times as large as the older group.

Independent demographers argue that China has overstated its population by 100 to 250 million people, particularly under age 40. This suggests that the 0 to 25 age group may be overstated by at least 80 million people, possibly closer to 150 or even 200 million. Most consumption in an economy is driven by people under age 40, who are the ones buying homes and raising children. If this next generation doesn’t exist in significant numbers, China can never achieve consumption-led growth again.

This makes China increasingly dependent on international trade, which is in the process of cutting China out of the global system. This started with Donald Trump in the United States and has now expanded with recent sanctions on things like electric vehicles to Europe, Turkey, India, Indonesia, and Brazil. The effort is going global. So, the last best hope the Chinese had for recovery is now over six years old, and it looks like there won’t be another one. People are beginning to notice.

China’s Tariff Wars: The EU Opens a New Front

*This video was recorded in June of 2024.

We’re talking about a different kind of war today – Trade Wars. Specifically, we’ll be looking at attempts by the US and EU to limit Chinese involvement in their electric vehicle markets.

With 100% tariffs from the US and around 50% from the EU, the Chinese EV industry is being backed into a corner…and its only going to get worse. China’s retaliatory measures are limited by their dependence upon foreign imports and attempts to restrict exports of other materials like gallium have backfired. Heck, the Chinese even tried to slap some tariffs on bacon.

China’s myriad of other issues (demographics, post-COVID decline, low value add, etc.) have only exacerbated the problems brought about by these tariffs. The semiconductor industry is a good example of the inefficiencies in the Chinese system and how reliant on foreign expertise it is.

Don’t get me wrong, China is the world’s manufacturer and that’s no small thing, but its dominance will be challenged by these ever-growing wars on trade.

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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 the top of Frazier Peak in New Mexico. Back behind me, you can see Mount Walter and just a little bit of Wheeler.

Today, we’re going to talk about trade wars shaping up with the Chinese and why the Chinese don’t have too much leverage. The issue is that the United States and the European Union have both put heavy tariffs on Chinese electric vehicles—100% in the United States, about 50% in the case of Europe.

This is just the first round. Expect these tariffs to at least double over the next couple of years. The goal is to keep everything that involves any part of a Chinese EV out of the system, starting with the finished vehicles. This will extend to parts and especially batteries in the near future.

This is the beginning of the process, not the end. Regardless of what you think about electric vehicles, there’s a belief in the governing systems of both the U.S. and the EU that this is the future, and they don’t want another country or economic bloc to dominate it. Obviously, there’s a lot of subtext there, but that’s the core of the issue.

The Chinese are looking for things to retaliate against. The problem is, when you’re a major manufacturing country that imports all of your raw materials and relies upon foreign markets for all of your sales, there’s not a lot you can do. If you impede trade, you’re destroying the trade system you rely on for your economic model.

The demographic situation in China has gone from bad to horrific. Since the beginning of Covid, we’ve discovered that not only did they overcount their population by well over 100 million people, but people have aged out of the block that does most of the consumption.

We only got our first decent look at Chinese demographics a little under a year ago. The Chinese are now starting to understand why retail sales have not rebounded post-Covid—they’re not going to rebound because they no longer have enough people to generate a rebound. So, foreign sales are all they have. China is also not the technological leader, which means it can’t withhold technology from its trading partners to get market access.

So, the question is, what can they reach for? In the United States’ case, if you retaliate with tariffs on anything, it immediately triggers a second round of tariffs on you, which hurts you more. Even with things where the Chinese might seem to have an advantage, like gallium and germanium (two rare metals they dominate in production), they restricted access to Japan and the U.S. after previous sanctions rounds. The problem is, these metals are just byproducts of aluminum manufacturing. The U.S. is getting back into aluminum smelting, solving that problem, and leaving China without leverage.

In Europe, this is the first significant trade dispute between the EU and China, and it’s not likely to be the last. Europe is known as Fortress Europe for a reason, and China is ripe to be cut out of the European market. Right now, however, the Chinese don’t feel the same danger in doing retaliatory tariffs against Europe as they do with the U.S. The problem again is finding leverage, and they’ve gone after pork.

Back before Covid, China was hit by a massive outbreak of African swine fever, decimating their herds. America and other swine exporters stepped in to fill the gap. Then, the Trump administration cheesed off the Chinese government, leading China to decide to never buy American foodstuffs again unless there was no other option. They switched to European supplies for pork, mainly from Denmark, Spain, and to a lesser extent, Italy.

Fast forward a few years, and China’s swineherd has recovered, creating overproduction. Now, they’re sticking it to the Europeans on pork. It’s not nearly as impactful as targeting semiconductors, but the Chinese don’t have much leverage there either.

No one makes high-end semiconductors by themselves. Making chips better than 28 nanometers involves over 9,000 firms globally. China can make chips of about 90 nanometers, suitable for smart light bulbs, but anything more sophisticated requires significant outside help. The idea that having a fab plant means you can run with it is false. It takes a village for specialty chemicals, design work, and lithography.

If the Chinese ever find something to retaliate with, the EU and U.S. can hit back in ways that impact core Chinese interests very quickly. This leaves the Chinese with limited options, like going after pork. Unless you’re raising pigs in Spain, this isn’t a big deal yet. Sooner or later, Chinese demographics will cause their system to collapse, revealing how much of the lower-end manufacturing the rest of the world can do without. China is the workshop of the world for mid to low-quality products and the king of assembly, but that’s not the tool you use to fight a trade war.

Is Chinese Nuclear Tech Better Than the US?

Photo show three nuclear power plant reactors

*This video was recorded in mid-July, prior to Peter departing on his backpacking trip.

I’ve been asked to address the claim that China has surpassed the US as a nuclear power. On paper, China might have the upper hand, but that doesn’t always translate to real life.

China has been busy building the world’s largest nuclear fleet, and the US hasn’t built a plant since the 70s (even if they have had more recent expansions). However, the technology being used in the Chinese plants is dated and ignores major safety concerns. The US has struggled to keep a labor force large enough to operate new plants, but there’s potential for modular reactors and new tech to shift the tides in favor of the US in the coming decades.

Now onto the explosive stuff. The US nuclear arsenal is top-notch, well tested and maintained. The Chinese are expanding their arsenal, but precision manufacturing and testing are limiting that growth.

So, the Chinese may have the numbers leaning their way for nuclear power, but in the areas that really matter (like nuclear weapons) the US is still sitting comfy.

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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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Transcript

Hey, everybody. Peter Zeihan here, coming to you from a stormy day in Colorado. Hopefully, we won’t have a lightning strike close enough to make things too exciting. Anyway, today we’re taking a question from the Ask Peter forum. The question is about recent reports suggesting that the United States is falling behind China in nuclear technology. What are my thoughts on that?

This is a complex issue with both yes and no aspects. Let’s start with where China is doing well, which primarily concerns nuclear power generation and the deployment of new nuclear power facilities. Since the Three Mile Island incident in 1979, the United States has only built one nuclear facility, the Vogtle plant, constructed by Southern Company. A major issue they faced was talent and labor. When you haven’t built new nuclear power facilities for nearly 50 years, there aren’t many people entering that field, and those who were in it have mostly retired. As a result, the U.S. has had to reinvent certain skill sets and recruit former Navy nuclear engineers, like those who worked on submarines, to fill the ranks. This is a very costly process.

In contrast, China is building out what will easily become the world’s largest nuclear fleet. This means there’s a whole generation of nuclear engineers and construction workers in China who are experienced in this field. So, it’s not that Americans can’t do it or that we’ve lost the technology; we’ve lost the labor force. From a practical standpoint, that’s almost as bad. But it’s important to note that the type of nuclear reactors used in both the U.S. and China are typically light water reactors, a technology dating back to the 1950s. While China is developing a more robust and redundant labor force for 1950s and 1960s technology, this doesn’t necessarily mean they’re getting ahead in innovation.

If the United States decides to re-enter the nuclear power generation field, the likely approach would be through small modular reactors (SMRs). The advantage of large nuclear facilities is that they can generate over a gigawatt of power, enough to supply many cities. However, the problem with light water reactor technology is the potential for meltdowns, like a lighter version of the Three Mile Island incident. Public resistance to having these reactors near cities is a major reason why the U.S. hasn’t built more. In China, where public opinion and safety concerns are less of an issue, they’re building them rapidly.

The advantage of SMRs is their small size—they can fit on the back of a truck and be plugged into existing systems, like decommissioned coal plants. They are mobile and can be moved to where they’re needed. This makes them a good partner for renewable energy sources like wind and solar, which are intermittent, or for decarbonizing energy production. You can take an SMR to a decommissioned coal plant that already has all the infrastructure and simply set it up and run it. This technology could be a real game-changer.

However, building the prototype is a significant challenge. A company that was trying to break into this space faced setbacks last November when contracts fell apart, setting the effort back to the drawing board. While other companies are working on it, none are likely to have a working prototype within the next 3 to 5 years. Without a prototype, mass production of the technology is unlikely within the next decade. While SMRs are an interesting concept, they’re not progressing rapidly at the moment. As far as I know, China isn’t focusing on this direction either, as they’re more concerned with building large reactors.

There is also the possibility of using fourth-generation reactors, such as pebble-bed reactors. The French are working on this, but we’re not yet at the stage of having a functional prototype, so it’s too early to draw any conclusions. Even if the prototype is perfect, actual construction might not begin until 2035 to 2040.

Now, let’s talk about nuclear weapons. Nuclear materials aren’t just used for generating electricity; they can also make very dangerous weapons. The United States was not only the first country to build and use an atomic bomb but also the first to develop a hydrogen bomb. American nuclear weapons are likely still the best in the world, although we haven’t used one in quite some time. We’ve developed ways to use computer simulations to ensure our arsenal is effective and safe. The U.S. remains the world leader in maintaining and refurbishing nuclear reactor cores to ensure they don’t degrade.

However, the only way to know for sure how well these systems work would be to engage in a full-scale international intercontinental nuclear missile exchange—a test that, thankfully, we don’t want to conduct. But I’m confident that American weapons are still the most advanced. From the last time we had insight into Russia’s nuclear capabilities, they’ve likely slipped from being the second-best to something like ninth in the world. They still have many warheads, but the question is whether these warheads have degraded. Considering the poor performance of other Russian military equipment in Ukraine, it would be surprising if their nuclear arsenal were the one thing still functioning perfectly. This doesn’t mean we should provoke Russia into a nuclear conflict, but if such a situation arose, the blast radius of their bombs might be less than expected. It would still be a disastrous event.

As for China, they currently have only a few hundred deliverable nuclear weapons. They’re working on expanding this force and aim to reach some form of numerical parity over the next 15 years. This goal involves overcoming significant challenges, primarily related to precision manufacturing. Building a plutonium bomb requires creating an explosive core with a series of synchronized explosions around the core to force it to collapse and trigger a reaction. The Chinese can do this, but scaling it up is a challenge. They also need to miniaturize the warhead and ensure it can survive the forces of launch and re-entry. While the Chinese are not lagging in these areas, achieving all these requirements together is complex and untested in real-world conflict scenarios.

If they fail, it won’t be for lack of trying.

China After Xi

TECHNOVATION INTERVIEW

Here is a link to my interview with Peter High on Technovation. We covered topics intersecting demography, economics, energy, politics, technology, and security.

I get a lot of “what if…” and “what happens next…” style questions and most of them suck, but today’s question takes us down a fairly interesting rabbit hole – what happens to China if Chairman Xi Jinping dies or steps down?

Remember, I didn’t say that this rabbit hole was going to be a happy one, just that it was interesting. So instead of the headlines reading “China Flourishes Following the Death of Xi Jinping”, I would expect something more along the lines of “China Moves One Step Closer to Collapse”.

Between the gutted political system that Xi would leave in his wake and a faltering economy, China wouldn’t exactly be set up for success. The Chinese would likely have to scrap their current state structure and develop an entirely new system.

The bottom line is that Xi Jinping has caused plenty of problems during his time leading the country, but removing him from the picture isn’t going to magically solve those problems overnight.

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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’s lost wilderness. This is a lost canyon. A little bit of a bushwhack, but it’s been a good day. anyway, I’ve started my backpacking season, so we’re going to be taking a lot of entries from the ask Peter Files. I’ll try to do some current event ones, but, you know, I’m not going to be able to upload every day, so, you know, it is what it is. 

Anyway, today’s entry is what happens to China when Xi dies. So, you know, that’s a great question. a couple things to keep in mind. A number one has, imprisoned and executed his way into being a cult of personality. There is no successor. There is no potential successor. There is no up and coming cadre of people with talent. 

He is basically purge the entire system of any within of ambition or competence. And so it is just him and the bureaucracy now is going after things like patents and college dissertations, so that no one who is under age 25 can even get into the system in the first place. So it is just Xi, it is Xi alone, and he will ride the system into the ground. 

It’s so much worse than that sounds because China is not a normal country. So there are different sorts of governing systems. confederal federal and unitary, confederal. Your regions have more power than the center. So think Switzerland or Canada. In a federal system, there’s a shared competence, among the national government, the regional government and the local governments think Germany or maybe the United States. 

And then there are unitary systems where, the national government basically sets all policy and everyone just has to go along with it. that’s Russia, that is France, that is Argentina. technically, 

China’s federal, but because of the purges and because of the control of the Communist Party, it is basically become super unitary, where everything that happens in Beijing is the only thing that matters, because she is purged all of the regional local governments of anyone who has any capacity. 

There’s additional problem here. and that’s just the geography of China itself. it is not an easy place to rule. You have a lot of varied geographies that look to different parts of the world, much less different parts of the country for leadership and economic growth. So, for example, if you’re in the series of cities on the southern coast, roughly from Fujian to Gwangju, you don’t have an interior, you don’t have access to local agricultural product, and you don’t have access to one another. 

What infrastructure exists in this area has been built just in the last 30 years, and I don’t mean to suggest it’s not impressive by any standards it is, but it’s nothing like, say, being in the Midwest or in northern Germany, where the land is flat and infrastructure is easy. And so all these cities have their own individual identities. 

And historically speaking, all of them have gotten the majority of their calories going back 1500 years from somewhere not on the Asian mainland. Then you got the center section from Shanghai up to, 

Chongqing. There we go. Oh, the one province. this is kind of the. This is the area of the Yangtze River. This kind of the Mississippi of China. 

Think of it. It is Detroit and Minneapolis and Saint Louis and New Orleans and Houston all in one. definitely a discrete economic unit with discrete political and cultural identity. And then you’ve got the North, the north China playing around, the yellow River. This is an area that is pretty flat. And the problem is, is it’s just it’s been too big, historically speaking, to be all under one power until the industrial era. 

And so you would generally have warlords trying to take over individual chunks of the territory. And because this is also a flood and drought prone area, the waterworks were necessary to maintain the population. So when a warlord thought he was going to lose or wanted to launch an attack on a neighbor, he’d go after the waterworks anyway. So you get this nationalistic, militaristic north. 

You get kind of a corporatist industrial financial center. And then what has traditionally been a secession of South and keeping these all under the same rubric, under the same governing system is hard. And so you have to basically look at Chinese history from this point of view and that there’s kind of two models. Model number one is each region has as much autonomy as it can stomach. 

And the whole thing spins apart. In the north in particular falls into civil war. There’s a reason why all of China’s dynasties never last very long. It’s hard to hold this all together, or you overcompensate the other direction and hyper concentrate authority in Beijing under the Emperor, or now under the Communist Party general secretary, and hold everything as tight as possible. 

Neither of them last for long, and unfortunately, there’s nothing in between that works really well either. Kind of a confederal system would just lead to friction and eventually conflict among the various sections. Well, at the moment we are clearly having a hyper centralized system. So we have a hyper centralized system in a geography that is difficult to govern. 

But now everything is being all the decisions being made in Beijing, we have a unitary system because the party is eliminated. Everyone who isn’t Xi and Xi himself is not a spring chicken. I mean, he’s not like Biden or Trump old, but the dude can’t be around for much longer and there’s no one in the wings waiting to take over. So when this breaks, you take the most hyper centralized 

Iteration of China we have ever had? And you cut off the head at a time when the country is facing financial overextension and a demographic collapse. So when Xi dies, however, that happens, there will not be another government of China. 

We will be facing state dissolution because the demographic situation is so bad, it’s entirely feasible that we have a collapse in the country’s ability to generate any economic activity. Of note, before such time as something can theoretically rise on the other side of this. So we could we probably are looking at the end of the Han ethnicity as a player in international affairs, because by the time we get to the end of the century, there aren’t going to be a lot of them left. So when Xi goes, that’s it, the party’s over. All right, so you guys from the next canyon. 

Photo by © European Union, 2024, CC BY 4.0, via Wikimedia Commons

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

Please join Peter Zeihan for a webinar on June 5th at 12:00 PM EST on a topic that is near and dear to the hearts of the Zeihan on Geopolitics team: geopolitical risk. This webinar will feature Peter’s reasonable-fear list, focused on issues that in his opinion have the most potential to impact market outcomes.

CLICK HERE TO REGISTER FOR THE WEBINAR

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…

Prefer to read the transcript? Click here

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.

Support medshare's ukraine fund
Support medshare's global efforts

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

An AI generated image of connex boxes with American and Chinese flags on them

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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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.

CLICK HERE TO REGISTER FOR THE WEBINAR

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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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.

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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.

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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…

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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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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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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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