It’s been obvious for years that China has a Potemkin economy, kept alive by slave labor, market bubbles, and government underwriting. it can’t last forever. The latest grim forecast about the economy comes from Peter St Onge, an economist with a much deeper fund of knowledge about and understanding of the Chinese economy than I could have in a thousand lifetimes.

The biggest hint that the Chinese economy was in trouble was the demise of Evergrande, a massive property developer in China. The bankruptcy was huge, with the company’s assets valued at a probably inflated $245 billion and debts of $300 billion. However, Evergrande was just the biggest pop in the Chinese real estate bubble, not the only one.

Image: An abandoned luxury project in China. YouTube screen grab.

Across the board, Chinese ventures have been having problems, whether with overvalued assets, the Belt and Road initiative (which was fading even before Israel blew up the Belt and Road port in Yemen), or its demographic implosion, which will leave it as a nation of old men.

The military is also somewhat illusory. In May or June, a nuclear submarine sank in a Chinese shipyard—although, to be fair, we had a disastrous Navy ship fire a few years back, and a New Zealand ship just ran aground and caught fire. These things do happen.

Generally, though, the Chinese military has a competency problem with both men and equipment. My guess is that this is because communist countries do things in a slipshod fashion. The only spur to work is fear. As is the case with all slaves (which is what people in a totalitarian state are), when there’s no immediate oversight, people do as little as possible, and they do things badly.

Now, St Onge’s insights tell me that things are much worse than I had realized based solely on my semi-informed reading of reports about the Chinese economy. Three weeks ago, St Onge did a short video explaining how the above problems, plus a shrinking manufacturing sector, were leading to a coming recession in China:

In the three weeks since that video, St Onge says things have gotten much worse. China, he reports, is no longer on the edge of a recession. Instead, it’s dropped into the full danger category, forcing the Politburo to hold an emergency economic session and to start printing money like crazy to prop up the manufacturing, banking, and real estate sectors:

Specifically, Beijing's going to dump about 3.8 trillion yuan -- roughly half a trillion dollars -- to keep the economy running.

At the same time, China is slashing interest rates.

By the way, does any of this sound like déjà vu all over again? Because if it does, you’re right. It’s exactly what the Biden government has been doing to force a smiley face on the American economy. That is, it’s printed money and slashed interest rates.

The problem, of course, is that, whether in China or the United States, monetary policies cannot make up for a vacuum within the economy itself. If all the other government policies disincentivize the most important capital a nation has—the human capital—no government jiggery-pokery can keep the economic flywheel spinning.

Economies boom when people dive in, getting creative and working hard because there’s something in it for them. Government created inflationary wealth can lead only to eventual collapse because it’s all fake.

Currently, I view China as a serious geopolitical enemy, right up there with Iran. While Iran relies on physical terror, China is more insidious. It seeks to bankrupt America while destabilizing the people’s values through things such as TikTok. (In China, TikTok is not flooded with videos about sexual perversion, race hatred, anti-capitalism, anti-Americans, and mental illness. Just sayin’.) I’d rather face an outright war with a plainly seen enemy than slowly die before an enemy that destroys our manufacturing sector with cheap goods and destroys our national identity with values that are anti-liberty, anti-normal, and anti-moral.  

Having said that, considering how deeply entangled our economy is with China’s economy, if China falls, none of us will have a soft landing.