(AIER)—Not so long ago, commentators across the political spectrum were warning us that China’s economy was set to surpass America’s. The United States needed, one Senator claimed, “a 21st -century pro-American industrial policy,” to ward off this existential threat.
Such rhetoric was reminiscent of the late-1980s, when a slew of books appeared to warn Americans that, unless the United States adopted Japanese-like industrial policy (government intervention that shifts resources toward a particular sector or industry), it was doomed to be economically dwarfed by a country which America had militarily crushed four decades earlier.
Yet in 1990, Japan’s economy began entering its “Lost Decade” of stagnation. While that owed much to seriously flawed monetary policy, it also resulted from extensive government interventions into the Japanese economy via industrial policy: a point conceded by no less than Japan’s finance ministry in 2002.
Similar patterns may be manifesting themselves in China today. The shine is definitely off China’s economy, and many of Beijing’s economic dilemmas have resulted from the Communist regime’s dirigiste policies.
The biggest time-bomb confronting Beijing is its self-inflicted demographic disaster. Thanks to the one-child policy pursued between 1980 and 2016, China now faces all the complications associated with an upside-down demographic pyramid, in which an increasingly elderly population is supported by a shrinking pool of younger people.
That means ever-accelerating spending on pensions, welfare, and healthcare which will steadily crowd out investment in things like research and development, infrastructure, and defense. No wonder Beijing is now urging families to have three children. The trouble is that once demographic patterns are set in place, they are hard to shift. Consequently, as the foreign policy scholar Ryan Hass notes, China is now “at risk of growing old before it grows rich.”
Dismal demographics isn’t the only challenge with which China must grapple. The country is reaping the whirlwind of conscious decisions on Beijing’s part over the past 15 years to embrace more state-centric economic policies.
Take, for instance, China’s much touted Belt-and-Road Initiative (BRI). Since 2013, Beijing has sought to systematically promote and invest in infrastructure projects around the world, particularly in countries China considers geopolitically significant.
From its beginning, however, BRI has been characterized by runaway costs: so much so that, as early as 2015, state-run Chinese banks started reducing their exposure to BRI while Chinese commercial banks began trying to avoid it altogether. There is also evidence that BRI has long been marred by corruption on the part of those Chinese officials responsible for directing it.
Such problems, however, are to be expected when the government plays a heavy-handed role in directing investment — a process which steadily accelerated in China after Xi Jinping came to power in 2012. This has produced widespread misallocations of capital across the economy as a result of state-controlled banks lending to inefficient and zombie state enterprises.
Chinese state officials have even acknowledged that Beijing wasted at least $6 trillion on unsuccessful investments between 2009 and 2014. That makes it unsurprising that the IMF’s 2021 Article IV Consultation report on China concluded that Chinese state-owned businesses were, on average, only eighty percent as productive as private companies. This, the IMF report stated, had played a significant part in China’s ongoing productivity decline since the late-2000s.
A related problem is China’s aggressive use of industrial policy, especially since the early-2010s, in the form of subsidies, direct state investments, and cheap loans. The goal has been to try to bolster growth in sectors like advanced manufacturing, technology, the service sector, infrastructure, and agriculture.
Naturally if you throw enough money at any given economic sector, you will get some results. But Scott Lincicome and Huan Zhu’s extensive analysis of industrial policy in China shows massive failures in areas like semiconductors, 3G mobile technologies, domestic aircraft, and automotive manufacturing. The same policies have also contributed to growing corruption in many economic sectors, including China’s highly subsidized R&D sector.
These and other trends are making foreign investors nervous. This brings us to yet another problem facing China’s economic policymakers.
Inbound foreign direct investment in China has been falling now for two straight years. It is now at its lowest level since 1993. This development reflects a complex relationship, from trade tensions to unease about Beijing’s intentions vis-à-vis Taiwan.
Decreasing confidence among foreign business leaders about China’s future economic prospects also underlies this foreign investment downturn. The European Union Chamber of Commerce in China’s 2023 Business Confidence Survey, for instance, reported “a significant deterioration of business sentiment.” More specifically, “64 percent of respondents reported that doing business in China became more difficult in the past year, the highest on record;” “11 percent of respondents have shifted existing investments out of China;” “8 percent have taken the decision to move future investments previously planned for China elsewhere;” and “one in ten report they have already shifted, or plan to shift, their Asia headquarters (HQ) or business unit HQ out of Mainland China.”
“Uncertainties in China’s policy environment,” according to the Survey, were central to this deteriorating confidence. Foreign businesses are anxious about growing ambiguity concerning what Beijing will allow foreign businesses to do in China. This uncertainty has surely been exacerbated by the fact that China’s National Bureau of Statistics is becoming progressively more selective about what economic data it releases, and regularly delays the release of other relevant data. In August 2023, China simply stopped releasing information about its youth unemployment rate.
Do these trends indicate that China is about to lapse into Japanese-style 1990s stagnation? It is far too early to tell. They do, however, indicate that American policymakers — whether their focus is national security or trade — should recalibrate their approach to Beijing and avoid getting locked into a narrative which assumes that China is an unstoppable economic colossus. Put simply, the evidence suggests that it is not.
Five Things New “Preppers” Forget When Getting Ready for Bad Times Ahead
The preparedness community is growing faster than it has in decades. Even during peak times such as Y2K, the economic downturn of 2008, and Covid, the vast majority of Americans made sure they had plenty of toilet paper but didn’t really stockpile anything else.
Things have changed. There’s a growing anxiety in this presidential election year that has prompted more Americans to get prepared for crazy events in the future. Some of it is being driven by fearmongers, but there are valid concerns with the economy, food supply, pharmaceuticals, the energy grid, and mass rioting that have pushed average Americans into “prepper” mode.
There are degrees of preparedness. One does not have to be a full-blown “doomsday prepper” living off-grid in a secure Montana bunker in order to be ahead of the curve. In many ways, preparedness isn’t about being able to perfectly handle every conceivable situation. It’s about being less dependent on government for as long as possible. Those who have proper “preps” will not be waiting for FEMA to distribute emergency supplies to the desperate masses.
Below are five things people new to preparedness (and sometimes even those with experience) often forget as they get ready. All five are common sense notions that do not rely on doomsday in order to be useful. It may be nice to own a tank during the apocalypse but there’s not much you can do with it until things get really crazy. The recommendations below can have places in the lives of average Americans whether doomsday comes or not.
Note: The information provided by this publication or any related communications is for informational purposes only and should not be considered as financial advice. We do not provide personalized investment, financial, or legal advice.
Secured Wealth
Whether in the bank or held in a retirement account, most Americans feel that their life’s savings is relatively secure. At least they did until the last couple of years when de-banking, geopolitical turmoil, and the threat of Central Bank Digital Currencies reared their ugly heads.
It behooves Americans to diversify their holdings. If there’s a triggering event or series of events that cripple the financial systems or devalue the U.S. Dollar, wealth can evaporate quickly. To hedge against potential turmoil, many Americans are looking in two directions: Crypto and physical precious metals.
There are huge advantages to cryptocurrencies, but there are also inherent risks because “virtual” money can become challenging to spend. Add in the push by central banks and governments to regulate or even replace cryptocurrencies with their own versions they control and the risks amplify. There’s nothing wrong with cryptocurrencies today but things can change rapidly.
As for physical precious metals, many Americans pay cash to keep plenty on hand in their safe. Rolling over or transferring retirement accounts into self-directed IRAs is also a popular option, but there are caveats. It can often take weeks or even months to get the gold and silver shipped if the owner chooses to close their account. This is why Genesis Gold Group stands out. Their relationship with the depositories allows for rapid closure and shipping, often in less than 10 days from the time the account holder makes their move. This can come in handy if things appear to be heading south.
Lots of Potable Water
One of the biggest shocks that hit new preppers is understanding how much potable water they need in order to survive. Experts claim one gallon of water per person per day is necessary. Even the most conservative estimates put it at over half-a-gallon. That means that for a family of four, they’ll need around 120 gallons of water to survive for a month if the taps turn off and the stores empty out.
Being near a fresh water source, whether it’s a river, lake, or well, is a best practice among experienced preppers. It’s necessary to have a water filter as well, even if the taps are still working. Many refuse to drink tap water even when there is no emergency. Berkey was our previous favorite but they’re under attack from regulators so the Alexapure systems are solid replacements.
For those in the city or away from fresh water sources, storage is the best option. This can be challenging because proper water storage containers take up a lot of room and are difficult to move if the need arises. For “bug in” situations, having a larger container that stores hundreds or even thousands of gallons is better than stacking 1-5 gallon containers. Unfortunately, they won’t be easily transportable and they can cost a lot to install.
Water is critical. If chaos erupts and water infrastructure is compromised, having a large backup supply can be lifesaving.
Pharmaceuticals and Medical Supplies
There are multiple threats specific to the medical supply chain. With Chinese and Indian imports accounting for over 90% of pharmaceutical ingredients in the United States, deteriorating relations could make it impossible to get the medicines and antibiotics many of us need.
Stocking up many prescription medications can be hard. Doctors generally do not like to prescribe large batches of drugs even if they are shelf-stable for extended periods of time. It is a best practice to ask your doctor if they can prescribe a larger amount. Today, some are sympathetic to concerns about pharmacies running out or becoming inaccessible. Tell them your concerns. It’s worth a shot. The worst they can do is say no.
If your doctor is unwilling to help you stock up on medicines, then Jase Medical is a good alternative. Through telehealth, they can prescribe daily meds or antibiotics that are shipped to your door. As proponents of medical freedom, they empathize with those who want to have enough medical supplies on hand in case things go wrong.
Energy Sources
The vast majority of Americans are locked into the grid. This has proven to be a massive liability when the grid goes down. Unfortunately, there are no inexpensive remedies.
Those living off-grid had to either spend a lot of money or effort (or both) to get their alternative energy sources like solar set up. For those who do not want to go so far, it’s still a best practice to have backup power sources. Diesel generators and portable solar panels are the two most popular, and while they’re not inexpensive they are not out of reach of most Americans who are concerned about being without power for extended periods of time.
Natural gas is another necessity for many, but that’s far more challenging to replace. Having alternatives for heating and cooking that can be powered if gas and electric grids go down is important. Have a backup for items that require power such as manual can openers. If you’re stuck eating canned foods for a while and all you have is an electric opener, you’ll have problems.
Don’t Forget the Protein
When most think about “prepping,” they think about their food supply. More Americans are turning to gardening and homesteading as ways to produce their own food. Others are working with local farmers and ranchers to purchase directly from the sources. This is a good idea whether doomsday comes or not, but it’s particularly important if the food supply chain is broken.
Most grocery stores have about one to two weeks worth of food, as do most American households. Grocers rely heavily on truckers to receive their ongoing shipments. In a crisis, the current process can fail. It behooves Americans for multiple reasons to localize their food purchases as much as possible.
Long-term storage is another popular option. Canned foods, MREs, and freeze dried meals are selling out quickly even as prices rise. But one component that is conspicuously absent in shelf-stable food is high-quality protein. Most survival food companies offer low quality “protein buckets” or cans of meat, but they are often barely edible.
Prepper All-Naturals offers premium cuts of steak that have been cooked sous vide and freeze dried to give them a 25-year shelf life. They offer Ribeye, NY Strip, and Tenderloin among others.
Having buckets of beans and rice is a good start, but keeping a solid supply of high-quality protein isn’t just healthier. It can help a family maintain normalcy through crises.
Prepare Without Fear
With all the challenges we face as Americans today, it can be emotionally draining. Citizens are scared and there’s nothing irrational about their concerns. Being prepared and making lifestyle changes to secure necessities can go a long way toward overcoming the fears that plague us. We should hope and pray for the best but prepare for the worst. And if the worst does come, then knowing we did what we could to be ready for it will help us face those challenges with confidence.
