China’s crumbling economy originated in the 1980s when China was opening up its economy to the rest of the world by creating special economic zones and implementing the one-child policy, which crippled China’s birthrate with social engineering.
The Chinese did this due to the communist philosophy, which enabled the state to interfere in individual’s lives due to the belief that the collective comes before the individual.
One of the critical battles during the Cold War from 1945 to 1989 was the battle between collectivism and liberal and economic capitalism, which saw the individual succeed but with the collective state-managed controlled economy stagnate and ultimately fail.
The Chinese political leadership chose to charter a third way, not communism with Chinese characteristics but capitalism with Chinese features, due to the underpinning ideology behind the Chinese Communist Party, which has been proven to be the wrong way to manage a nation.
That is why the Chinese Communist Party only maintained its legitimacy for its economic success, not through ideological frameworks of capitalism versus communism, due to China being a market-driven, not a state-driven economy, since the 1980s.
At the end of the Second World War, the global population was 2.3 billion; by 1980, it was over 4.4 billion people. This marked a doubling of the worldwide population, with the baby boomers born between 1946 and 1964.
This led to growing fears in the economic and academic community that humanity would experience global famines and mass starvation, which was prevented due to the creation of genetically engineered crops and improved technologies.
The Chinese Communist Party had the information in the 1960s and 1970s that they were heading towards mass famine and that the globe was not built to support a global population of over 7 billion, with the world’s current population at over 8 billion.
They were also heavily influenced by a view of eugenics and communist ideology but from the viewpoint of state intervention in people’s lives to stop China from starving to death.
These fears were ultimately unfounded and were essential to understand throughout the 1950s and 1970s; there were mass fears of global famine and global cooling, which were the global warming climate change fears of the 1970s.
In the early 1980s, China began the process under the leadership of Deng Xiaoping to open up the Chinese economy to foreign investment and begin developing a sophisticated market-based economic system for China, which was still being loosely controlled and monitored by the Chinese state.
China implemented this strategy because economics in the Far East was heavily influenced by the attitude exported from Japan, particularly in their reindustrialisation after its destruction and defeat in World War II.
Japan also industrialised in the late 19th century and conquered Korea and large chunks of China, which was only possible through state intervention and using debt to finance and grow Japan’s economy.
Furthermore, Japan has few natural resources, which drove the need for state intervention and the use of debt and imperialism to expand its economy.
The Japanese use the economy as a political end, not how the West uses it. It is a purely economic tool based upon principles of the free market for the Chinese; they adopted this viewpoint that the economy serves political ends and not vice versa.
Deng Xiaoping began opening up the Chinese economy to foreign investment offshore from the border with Hong Kong, which was still controlled by the British and its crumbling empire. It was handed over to China in 1997, marking the historical end of Britain’s empire.
The city chosen to open up the global economy only had a population of 330,000 people, which was tiny by Chinese standards; in 1980, China became the first nation to be home to over 1 billion people.
In the 40 years since Shezhen opened to the rest of the global economy, its economists exceeded that of its nearest neighbour, Hong Kong, in 2018, and the city is now the eighth largest city in the world at over 13 million people.
Impact on China
There are significant economic and social consequences of China’s opening economy and the development of the cities, with 65% of its population living in cities and 50% of its population moving to cities throughout the 1990s.
This was the largest migration of people in human history and marked the turning point in China from an agricultural economy to a manufacturing and industrial economy in the past 40 years.
There are two critical long-term economic impacts of this choice.
China experiences seven generations of economic development within one generation and experiences the same demographic decline experienced by other industrial nations rather than being spaced out over seven generations. Still, it is happening now in one generation.
When nations move from agricultural to industrial economies, people move to cities, and that’s when children become a liability and expensive; in the short term, previously, children were a free form of labour, but in small city apartments, they become a financial liability.
This is why nations, once they begin industrialisation, have a collapse or decline in their birthrate; for example, the United Kingdom’s birth rate declined over seven generations, which kept the overall population stable, and the UK started down that road in 1769.
India is another recent industrialising nation still behind China in industrial capacity and still has a good birthrate, which is just at replacement levels at 2.5, though some data says it is lower; this is an indicator of a historical trend of industrialisation, which leads to the collapse in the birthrate.
China’s Housing Crisis
China’s economy is functioning in one continuous economic input, and that is the continued phenomenal growth of the Chinese economy that is being powered by its industrial capacity and potential as well as internal factors that artificially raise its growth.
The construction is being promoted in China due to the artificial inflating of its GDP numbers, which has led to China building 65 million houses with a population the size of France with no people living there.
This inflation in the Chinese housing market could lead to an economic crash. The 2008 banking crisis and the 2007 and 2006 US mortgage crisis will look like not much of a big deal.
From the beginning of the recession in December 2007 to its official end in June 2009, real gross domestic product (GDP) — i.e., GDP as adjusted for inflation or deflation — declined by 4.3 per cent, and unemployment increased from 5 per cent to 9.5 per cent, peaking at 10 per cent in October 2009.
Real gross domestic product (GDP) fell 4.3 per cent from its peak in 2007Q4 to its trough in 2009Q2, the largest decline in the postwar era (based on data as of October 2013).
The unemployment rate, which was 5 per cent in December 2007, rose to 9.5 per cent in June 2009 and peaked at 10 per cent in October 2009.
This is just information about the United States, how it affected the rest of the world, how future crashes will be affected by China, how it will be unprecedented in financial history, and how it will affect the global economy.
Chinese citizens cannot invest their savings in assets outside of China due to restrictions made by the Chinese Communist Party that limit the flow of capital outside of China.
Therefore, to invest for retirement, Chinese citizens put their money in the Chinese stock market when there is an oversupply of housing and insufficient demand, which makes it incredibly unlikely that they could use the savings invested in property to live a comfortable retirement.
This leads to a considerable possibility of a Chinese financial crash triggered by the Chinese housing market’s overproduction of housing due to incentives not made by consumers but by the Chinese Communist Party due to state intervention in the economy.
Remember that for the Chinese, economics does not serve the purpose of the economy; it serves the purpose of political aims, which is, again, a different viewpoint than what is predominant in Western nations.