(Reports this morning are that China’s former leader Jiang Zemin has died at the age of 96. He came to power after the Tiananmen Square protests in 1989, an event that echoes some of the growing frustration with China’s response to the Covid virus. Image from our friends at Reuters).

We have veered from our usual semi-snarky treatment of the events in our current national life. There is tension between the concept of ‘order’ we knew growing up and the ‘results’ of what has been done. We hope you enjoyed the holiday. We did, and participated in some of the events that make living in America worthwhile and fun.

Meanwhile, the events out in the wide world deserve some treatment to understand what is coming down the pike for our future. What is coming makes this a morning meeting so significant that Splash declared he would even shower before we gathered above the parking lot at Big Pink in case anyone wanted to Zoom it.

Let’s get the demurral thing clear up front. We are the products of our times and we drag some historic baggage along with what we perceive to be future portents. In the old bags there are memories of Fierce Russian Bears, Voracious Growing Chinese and a Virtuous Uncle Sam. We also know that has changed, so our first impressions of events are normally shaped by a historic landscape that no longer exists. Today’s outing is partly to consider why our first impressions must be rigorously subjected to review.

War is normally at the top of the list. There is ground combat in Europe between Mr. Putin’s war machine and the Ukrainians. Being a kinetic event, it naturally makes news. But there is more to it, since the conflict touches everything in energy and commerce. Europe, America and Russia are all pumping weapons into the fight, with the Ukrainians contributing blood. There is a growing weakness in supply chains and inventories to support the extraordinary effort.

We have all spent time in Asia and have an affinity for China and some of the people we met on travels there. Some of the smart-set people here share some of that emotion and periodically admire the ability of the Chinese system to bring order and results to their people due to their rigorous system of enforcement. The matter comes up with surprising frequency.

But China has some real challenges that are partially concealed behind the news. This morning it is the death of an old leader. But there is more, and we thought it was a good mid-week idea to lay them out unemotionally and see what the next year is likely to bring.

We have mentioned the looming demographic grenade for which State Chairman Xi holds the pin. It is a reflection of the power the Chinese government can use to bring order and results. Unmentioned is the fact that the system also brings consequences. The ‘One Child’ policy limiting family size was implemented in 1979 and continued until 2015. The litany of impact is broad and penetrating. In addition to the significant changes at the time- there were many- were others downstream.

The desire to have large families in China has declined. The population is aging. Smaller family sizes have enabled the people to enjoy some of the products they build for the world.

But here is the demographic impact of the One Child grenade’s detonation. Today there are nearly 1.5 billion Chinese. Life in rural areas is still poor. Those with children are often pressured to take multi-week rotating job assignments in urban areas. That disruption had a direct impact on the kids permitted to be born.

Estimates are that by 2050 there will be only half as many Chinese as there are today. That reflects a loss of nearly 700 million citizens over the next quarter century, or 28 million per year. The change in population is part of what is already sparking anger over lockdowns. Production and spending are down and likely to continue.

Remember the real estate turmoil there? It was a product of the state’s capability to impose order and get results. Entire new cities were constructed but stand vacant.

Energy? China is dependent on oil and coal imports. It is building coal-fired plants, but importing both raw energy stockpiles is a significant vulnerability. Other maritime powers could disrupt its flow. The perceived growing threat has the Japanese talking about rearming against the possibility of a Chinese invasion of Taiwan. But Ukraine aid has drawn down the inventory of US and EU arsenals. Teetering in that calculation are China’s internal problems and a perceived Western weakness that could tempt Beijing to impose order across the Taiwan Strait.

As things stand this morning, the old Cold War binary pivot point has vanished for atomic conflict. There are now additional players in the new calculus of the balance of terror. We will see how that works out in our new year. China’s weakness could be a factor for peace in Asia. It also could be a temptation to impose order and gain results.

Sprinkle some of the other global events in those calculations: Iran’s people are restive against their government. North Korea may have only a dozen or two nuclear weapons, but they have demonstrated the capability to deliver payloads by rocket across oceans. India is rising as the alternative to Chinese manufacturing. Brazil is immersed in controversy over the recent Presidential election. There is a Brexit sentiment rising in Europe and a similar phenomenon in the Western United States as counties east of the mountains in Oregon are seeking to leave their Pacific-facing state and join Idaho.

As a general conclusion, it appears 2023 will be a more exciting year than this slightly bedraggled one. We didn’t say better. But it will definitely be interesting. In the days to come we will try to look at the elements that contribute to results without order.

– Vic

Copyright 2022 Vic Socotra
www.vicsocotra.com