When I tell people I’m becoming a China bear, they’re often surprised.
asserted
they → tell → people
“Weren’t you already a China bear?” they ask me.
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they → ask → me
I’ve always been a China bull — I’ve always believed that China’s economic growth would be robust, that they would master advanced technologies, and that their geopolitical influence would grow.
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influence → believe → technologies
This is exactly why I was also always a China hawk1 — I recognized the very real possibility that China would become a global hegemon, and I didn’t especially want to live in a world ruled from Beijing.
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I → recognize → Beijing
It’s why I advocated so strongly for friend-shoring, for export controls, and for military alliances to balance out China’s awesome and growing power.
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I → ’ → power
This was true even as China began to show visible signs of weakness in the late 2010s and early 2020s.
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China → begin → 2010s
Xi Jinping proved himself less competent than his predecessors, and the country’s real-estate-heavy growth model hit the skids.
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model → prove → skids
But despite those stumbling blocks, I still predicted that this would be the Chinese Century.
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this → predict → blocks
The country had what seemed like unassailable advantages in human capital, market size, and state capacity, even as all of its possible rivals were convulsed by internal division.
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all → have → division
And the one thing that most people cite as China’s big weakness — demographic decline — never struck me as much of a threat to the country’s power.
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people → cite → power
Now, however, for the first time I can remember, I’ve found myself becoming actually bearish on China.
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myself → remember → China
I still think it will be an immensely powerful country — perhaps the most powerful single country on the planet.
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it → think → planet
I still think it will be at or near the forefront of technology, and that it will generally be a safe, moderately prosperous, and tolerable place for its people to live.
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people → think → technology
But more and more, I’m starting to think that global hegemony of the type the U.S. enjoyed throughout most of the 20th century will be out of reach.
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U.S. → start → reach
I’m also starting to think that China’s bid for technological dominance is weaker than I had believed.
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I → start → dominance
And just as my previous bullishness made me a hawk, my increasing bearishness makes me more of a China dove.2 I still think friend-shoring is important, export controls are good, and we need robust military alliances to make very sure China doesn’t try to conquer Asia.
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China → make → Asia
But I no longer feel the same sense of desperate urgency about these prudent measures — they feel more like an insurance policy now.
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they → feel → policy
There are basically three reasons I’m revising my China expectations downward.
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I → be → expectations
China’s system is incredibly optimized for an era of technology and economic production that is very quickly coming to an end.
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that → optimize → end
AI will change everything, and modern China is not the kind of country that adapts well when everything changes.
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everything → change → country
The other reasons are less important but still worth mentioning.
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reasons → mention → ?
China’s new economic model — the government-supported push to capture all of global high-tech manufacturing — is not likely to succeed.
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model → support → manufacturing
And third, the country’s political situation appears to be deteriorating.
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situation → appear → ?
Just as the Deng/Jiang/Hu era illustrated the strengths of authoritarian political systems, Xi Jinping is giving us a much-needed lesson on the weaknesses of those systems.
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Jinping → illustrate → systems
His spiraling paranoia is turning the country inward, just as his economic policies are running out of steam.
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policies → spiral → steam
Anyway, let’s start with those economic policies.
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’s → let → policies
China’s manufacturing push is hitting its limits
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push → hit → limits
In a nutshell, Xi Jinping’s economic strategy is to dominate manufacturing — to have China be, in the words of Damien Ma, the “make-everything country”.
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China → dominate → everything
I’m increasingly convinced that this approach is already beginning to backfire.
Going all-in on manufacturing is a strategy you see a lot of developing countries use during their periods of rapid catch-up industrialization.
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lot → ’m → industrialization
When you’re poor, what your people need most aren’t video games or dog-walking services, but houses and cars and refrigerators.
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need → ’re → what
Manufactured products are also easy to export, and poor countries don’t have big domestic markets to rely on.
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countries → manufacture → markets
It might also be easier to reach the technological frontier in manufacturing, since you can reverse-engineer physical products more easily than services.3
Usually, as countries get rich and their needs evolve from the physical to the ephemeral, they move out of manufacturing and into services to some degree.
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they → reach → degree
But Xi Jinping decided that this was a mistake.
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this → decide → ?
He reasoned that if China continued to behave like a developing country forever, and promoted manufacturing at the expense of everything else, China could dominate the globe.
uncertain
China → reason → globe
This was an interesting hypothesis, and it might have worked — indeed, there’s still some chance it might work.
uncertain
it → work → ?
Militaries, after all, depend on manufacturing above all else, so in a big protracted WW2-style war, being the master of manufacturing might give you an automatic win.
uncertain
being → depend → win
And dominating key nodes in global supply chains lets you use export controls to bully other countries without actually bombing them.
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you → dominate → them
In fact, China is doing this more and more, using export controls on everything from tunnel-boring machines to rare earths to drones to medicines as bludgeons to force other nations to do its bidding.
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China → do → bidding
In order to make China dominate global manufacturing, Xi unleashed a wave of industrial policy bigger than any the world had ever seen, spending about 4% of GDP per year on subsidizing manufacturing industries — usually through cheap bank loans, but sometimes just by sending cash directly.
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world → make → cash
For a while, this seemed to be working spectacularly.
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this → seem → while
…and 38 more, not listed.
The Aporia
