Essay on China & macro, with Western narrative violations: “the notion that the world is deglobalizing would seem laughable to anyone living in Dubai, Singapore, São Paulo or Mumbai”

Source: https://research.gavekal.com/article/the-revenge-of-the-ottoman-empire/

My highlights:

Back in 2017, the value of Chinese exports to Asean economies amounted to 60% of China’s exports to the US. Today, China’s exports to Southeast Asia stand at roughly 120% of China’s exports to the US.

…from the early 2000s, global economic activity was massively boosted, not just by connecting China to the rest of the world, but also by connecting Chinese cities to each other, with all the associated construction of rail, air, road, telecommunications and power links this involved.

key income “thresholds’’. For example, if the average income in a country is below US$1,000, nobody owns a television; when incomes move above US$1,000, almost everybody buys one. For smartphones, the level seems to be around US$2,500. For the automobile industry, the critical level seems to be US$10,000 a year. For university education, the level is US$15,000 and above. For financial products like life insurance, brokerage accounts and mutual funds, the level seems to be US$30,000.

Today, the notion that the world is deglobalizing would seem laughable to anyone living in Dubai, Singapore, São Paulo or Mumbai. Rather, the world is going through a new wave of globalization, which is different from its predecessors. For the first time since Columbus sailed to the Americas (as Churchill said, “Christoper Columbus was the world’s first socialist: he didn’t know where he was going, he didn’t know where he was, and he did it all at taxpayers’ expense”), the world is experiencing a wave of globalization which does not require Western financiers, Western engineers, Western modes of transportation, Western currencies or Western technologies.

Evan Osnos latest essay on China: “To a degree I’ve rarely encountered, many asked to have their identities disguised”

Highly recommend if you have any interest in China. Below are a few excerpts plus an occasional personal aside: https://www.newyorker.com/magazine/2023/10/30/chinas-age-of-malaise

EXCERPTS:

The embodiment of this reversal is Xi Jinping, the General Secretary and President, who has come to be known among the Party rank and file by a succinct honorific: the Core.

I think about Yeats: Turning and turning in the widening gyre, The falcon cannot hear the falconer…

a leak from a Chinese social-media site last year revealed that it blocks no fewer than five hundred and sixty-four nicknames for him, including Caesar, the Last Emperor, and twenty-one variations of Winnie-the-Pooh.

564 nicknames is a whole lot of cat-and-mouse

China is as formidable as ever: it is the largest trading partner for more than a hundred and twenty countries, it is home to at least eighty per cent of the supply chain for solar panels, and it is the world’s largest maker of electric vehicles

…and I fully expect in 10 years (or earlier), China will have pole position in semiconductors too, regardless of the West’s restrictive efforts

I was surprised how often they spoke about Xi without uttering his name—a single finger flicked upward can suffice—because the subject is at once ubiquitous and unsafe. (To a degree I’ve rarely encountered, many asked to have their identities disguised)

Even standup comics are forced to submit videos of jokes for advance approval

China’s advance approval or the West’s fear of cancellation, sometimes censorship can look like a circle…

At his core, a longtime observer told me, Xi is “Mao with money.”

The most troublesome thing in China is that the open-mindedness—the ability to learn—has come to a halt. For forty years, we learned things, and then people concluded that China was formidable and capable, that the East is rising and the West is declining, that China is already a big boss in the world. And so we stopped learning. But, in reality, we haven’t even established a society with a conscience.

This is a broader psycho-behavioral trait in human beings I think, in that winners get overconfident and soft (good times breed weak men sorta thing), and applies equally to America/Americans, though America’s recent internal struggles with social conflict and political extremism and COVID are leading to a new degree of self-reflection that I think ultimately beneficial

a thirty-one-year-old former factory worker named Luo Huazhong posted a photo of himself in bed, with the caption “Lying flat is my sophistic act,” he said, professing solidarity with the philosopher Diogenes, who is said to have protested the excesses of Athenian aristocrats by living in a barrel

In July, the National Bureau of Statistics revealed that youth unemployment had hit a record high of twenty-one per cent, nearly twice the rate four years earlier. Then the bureau stopped releasing the numbers. Zhang Dandan, an economics professor at Peking University, published an article arguing that the true rate might be as high as forty-six per cent, because she estimated that up to sixteen million young people have temporarily stopped looking for jobs in order to lie flat

I don’t see much of this when I visit big cities like Shanghai; then again, when I visit Tokyo it’s not like I see hikikomori or “grass eaters” either

If they give you your phone at night, everything is going to be O.K.—they just want to talk to you,” he said. “You can WeChat your wife or your mistress.” But, if investigators keep your phone from you, the odds are you are a target, not a source.

Xi is said to have spoken bitterly of watching Boris Yeltsin contend with Russian tycoons in the nineteen-nineties. Joerg Wuttke told me, “When Putin entered the Kremlin in 2000, he assembled the oligarchs and said, basically, You can keep your money, but if you go into politics you’re done.”

But Xi, a Marxist-Leninist at his core, said last fall that state-owned enterprises would “get stronger, do better, and grow bigger.”

I think the American parallel for China’s SOEs is the metastasizing bureaucracy; China SOEs = American federal agencies

ancient expression—“shi, nong, gong, shang”—which describes a hierarchy of social classes: scholar-officials, farmers, craftsmen, and merchants

Hmm…merchants make all the money, and money seems upstream of power in all kinds of modern government systems. And I’m always amused by farmer-virtue-signaling, where Chinese farmers (in the US, replace with “factory worker”) receive superficial respect but are given none of the things that really matter, like financial security or political power.

When the zero-COVID policy was finally abandoned, the following month, the change was so abrupt that at least a million people died in a matter of weeks, according to independent analyses; the state stopped publishing cremation statistics.

Read the full thing and let me know what you think!

Podcast notes – Stephen Kotkin on China and Xi – Hoover Fellows podcast: “At least 600 million Chinese who are (still) not part of the world economy”

Hosts: John Cochrane, Niall Ferguson, H.R. McMaster
Guest: Stephen Kotkin
Recorded November 2022

Xi’s perp-walk of Hu Jintao
Not sure if pre-meditated, or if it was triggered by Hu reaching for a key personnel document

Never had an economy this large run by a political system this opaque

China’s Leninist structure never went away – you can’t be half Communist just like you can’t be half pregnant

Central Party School – Soviet collapse is #1 subject there, terrified of Gorbachev reform and the subsequent collapse

Xi will shave off as much GDP as necessary to keep Party monopoly

China’s economy went from $200B -> $18T
$500 -> $20K per capita

Soviets reached US military parity in 1970s – despite 1/3 economic size – but nothing like what Chinese have done

Mao in 1966 – targeted own state, destroyed planning mechanism (planned economy personnel), peasants decided they didn’t want to starve again
Peasants instituted market relations with each other — ignored collectivized statutes and norms
Communist Party latched onto this
Under Deng, grudgingly and in stages, accepted this growing market behavior and tried to control it
“Party hijacked the process and the credit for it”

Mao didn’t care about trade, wasn’t economically literate

Deng visits the US, decides to change partners – divorce Soviet Union and marry US
Why? Saw the success of Japan, Korea
China took Japan model — free and open access to US market

Peasants moved to towns, cities, and built enterprises from ground up

Party steals credit too from HK’s success
All the foreign money came through HK, which then invested into China’s Special Economic Zones

Niall:
-US essentially sponsored China’s development – technology transfer and access to higher education
-Xi made clear he prioritized Party’s success over the economy

Apple can make 10M phones in Vietnam, but 500M in China — scale is irresistible

At least 600-800M Chinese who are not part of world economy, didn’t finish high school, no healthcare, invisible China

We didn’t think it’d happen this quickly – that China would become a peer competitor in 1-2 generations

Niall:
-Hubris of Xi – reached climax in 2020, thought pandemic exposed US
-now China has a latent economic crisis, controlling covid, “building tower blocks for nobody”

Does the Party need the private sector? Or does it care more about its Leninist system?

ONTO RUSSIA — 34:00

Shocking for young Russians what’s happened to their country

(stopped here)