China...The Paper Tiger.....

America: your days as a global superpower are numbered

We've seen it before: the Roman empire fell, then the British. America's economic dominance could be about to end - and China is taking its place.

Within the next five years, China could account for a larger share of global GDP than any other country and knock the US off its perch as the world’s biggest economy, according to analysts at Deutsche Bank. 

“Based on current trends China’s economy will overtake America’s in purchasing power terms within the next few years,” Tim Reid of Deutsche Bank wrote in a research note. “Given this analysis it strikes us that today we are in the midst of an extremely rare historical event – the relative decline of a world superpower.” 

As Reid points out, America’s share of world output, on a purchasing power parity basis, has already slipped below 20pc, which has historically been the marker of a global superpower, from the Roman to the British empires.

DYI Comments:

China...The paper tiger that roars and growls but lacks the bite do to her many historical, geographical and financial weaknesses.  China historically until now has never (except for very brief periods of time) in its long history look outside itself to become a major power. China's history is rife with instances of turning back into itself and leaving international affairs to others.  Will this time be different?  That is always a possibility; history places high odds against it.

China is NOT a country but an empire built on money and coercion to keep its many divergent factions and cultures from flying apart.

The Chinese regime is a vast bureaucracy that has operational control enforced by a military-security complex that is well housed, clothed, fed, and paid to maintain their loyalty.  Ideology based principals, if they ever existed are long gone.  Such virtues as egalitarianism, selflessness and service to their fellow citizens is more propaganda than actual Chinese attributes.

China has island like qualities that isolate it not by water but from impassable terrain and wastelands.

    

China is 1.366 billion people living in a sardine can.  The effective living area reduces the size of China by two thirds its actual size with the majority of its people living within 1,000 miles of the ocean.

   

China’s soaring debt threatens growth and investment

SYDNEY (MarketWatch) — Economists seem to have only recently identified China’s debt problems. In fact, the country has had a 35-year addiction to cheap credit that now threatens to stunt its growth. 

New lending by Chinese banks has been equivalent to around 30% or more of GDP. Around 90% of this lending has funded investment in building, plant, machinery and infrastructure, especially by State Owned Enterprises. According to the World Bank, almost all of China’s growth since 2008 has come from “government influenced expenditure.” 

This expansion has rapidly increased China’s level of debt. Most estimates now put Chinese government (including local governments), corporate and household debt at around 200%-250% of GDP, up from around 140%-150% in 2008.

DYI Continues:  China has all of the trappings and appearances of a capitalistic country with private property, banks, an active stock and bond market but appearances can be deceiving.  They are not capitalist; as capital allocation is determined by political connections than the merits of the business.  In a sense free markets do not exist in China as capital allocation is not being determined by the market.

China is similar to Japan during the the 1970's and 80's but on steroids.  When this massive debt explodes the Communist party will have its hands full attempting to keep the empire from flying apart.  When that time comes China with all of flaws will be seen as "The Paper Tiger!"

DYI