The pretentions of The Center of Everything (what the ideograms for China say) are in tatters. Publius sees no way forward. The Center's instability is now the biggest foreign policy crisis in our history. We have seen nothing like it.
The Center of Everything has massive problems that we must take into account:
An economy that entered a deep recession early in 2012 and shows no signs of recovery.
Jury-rigged GDP data that everyone knows bear no relationship to this reality.
Mounting pollution problems that make living there extremely dangerous. Air pollution in the Center is so bad that at least 200 million of its people will leave the work force with lung disease long before retirement. Who will pay the up keep for these people as they slowly expire?
A spectacularly overheated real estate market that collapsed precipitately; recovery will take well over a decade.
A Party-centric government that is stumbling as it realizes that it cannot outrun the rate of Cyberspace Inflation.
The Party must insert itself in any deal, whether above board or below, to rake off enough in cash and commissions to ensure the wealth and power of its members.
The Party is at war with itself over who gets this massive wealth.
An 18th century-style banking system that is neither mature nor stable enough to manage economic calamities like the real estate implosion, deep recession and a massive debt overload.
Excessive reliance on unstable state (Party)-owned companies that exist outside the discipline of markets or the rule of law.
Grossly overblown claims on the South and East China Seas that could ignite a global conflict of unknown dimensions and outcomes at almost any time.
A very bad Party-led “blame the foreigners first” attitude for even the slightest domestic problem. This is already hurting many foreign businesses from cars to computing.
A massive and fast secular shift away from manufacturing to service for which the Party did not prepare, causing widespread unemployment and social unrest for which the Party has no cure.
Roads and buildings that are crumbling visibly as fast as they are built.
A Party-manipulated stock market that creates global problems.
A Party-managed exchange rate that undermines the Center's credibility.
Massive capital flight generated by anyone the brains enough to count to five on this list.
A pro-liberal, anti-Party rebellion in the media and business.
A Party that is beginning to panic over the implications of all this.
The idea that the Center of Everything can overcome even a few of these problems is preposterous. A massive shift away from Party rule has begun. The Party will fight back. Hard. Blood in the streets, and lots of it, is easy to foresee.
Many China hands say that while this outcome is likely, they cannot tell when it will happen. This, Publius says, is nonsense. The rate at which Cyberspace inflates is simple math. It is easy to fix a date on the Moore Curve beyond which the Party—the center of the Center of Everything—will fall behind Cyberspace Inflation and collapse.
That date is sooner than you think.
And we had better have a policy in place for when it does because the Center of Everything is a nuclear power capable of hitting any point in the US from any point on the Center’s landmass.
It did not have to be this way. In 1989, the Center of Everything's people offered the Party a chance for eternal glory at Tiananmen Square. All the Party had to do was to grab its 1688 Moment and launch a liberal revolution. Instead, the Party chose to adopt the Mussolini System:
Party control of the military, information and “strategic” industries.
The rest fends for itself so long as it does nothing to disrupt the Party’s power or image of itself and pays the Party mandatory fees and disbursements.
Hitler called Mussolini a “political genius” for this. It had all the advantages of Communist control for only a fraction of the cost. Hitler’s view, what’s not to like?
We know, of course, that the Mussolini system collapsed three-quarters of a century ago. And we know today that the way the large, complex geographies like Canada and Australia manage peace, stability and growth over the long haul is incomparably superior to Mussolini. Oblivious, after Tiananmen, the Party adopted Mussolini’s failed structure. The outcome, as the Party knew full well at the time, was set in stone.
But, being in the Party is all about making money and the bosses of the day wanted to make more of it and pass fast mounting problems on to the next generation. Which would have been fine had they used the years since Tiananmen to give the next generation the tools they knew it would need to solve the problems they knew were coming.
Instead we have Xi Jinping who is demonstrating a very high order of incompetence. Xi has put the pedal to the metal. He is pushing Il Duce faster than ever.
The problem is that the numbers say that Xi cannot force Cyberspace to stop inflating. The Party long ago made the mistake of allowing the people access to all the means of its own destruction—smartphones, PCs, laptops and now cars and soon healthcare devices and the Internet of Things.
Xi’s biggest threat comes from the need to shift from manufacturing to services fast enough to take up all the unemployed in the Center’s recession. To do this, the Center’s companies must have a access to a completely free and open Internet so they can manage their global customer and supply chain relationships, scale profitably and put the Center back on a growth track.
Xi has a choice: an open cyberspace and growth or his Party and no growth. Not complicated.
To keep the Mandate of Heaven, Xi must dismantle the Party.
Every day Xi delays means that, the way time operates on the Moore Curve, he must act even faster and the consequences will be even more violent and unpredictable. Like a fool, Xi is trying to run back up the Moore Curve, something that the math says doesn't work.
Publius says that Cyberspace Inflation has already eliminated Xi’s time margin. Publius has tried to lay out Xi’s options in a manageable timeline and cannot.
And these are the people who are bringing you the Nine Dash Line. Think about it.
April 25,016 Follow Up
People are finally getting the message. In the New York Times, Chris Buckley and Vanessa Piao penned a scary picture of water purity in the Center of Everything (Point 3). Fixing this will cost more money than The Center of Everything has or will get in the foreseeable future, putting its quest for Super Power status on hold indefinitely. Forget about the other 17 items on Publius' killer list.
Not to be outdone, in the Financial Times Gabriel Wildau and Don Weinland chronicled the Center's massive accumulation of debt in an already crippled economy (Point 8). Wildau's piece on China's growing cash conversion cycle crisis is illuminating (Point 1).
Paul Mazur in the New York Times showed that The Center's Internet controls (Point 5) are now a trade barrier that, as Publius said it would, will shut The Center's businesses out of the high value U.S. market. Talk about cutting off your nose to spite your face!
Jonathan Soble, whose byline you ignore at your peril, showed in the New York Times how the Party ensures that it gets paid in some pretty unusual ways (Point 6).
Then, in its most predictable move, The Center is moving to cut Apple's power in favor of the Party's (Points 5, 11 and 12). Check out the great Wall Street Journal piece on this by Daisuke Wakabayashi and Eve Dou.
May 4, 2016 Follow Up
The Wall Street Journal's Lingling Wei reports on the Xi regime's increasing sings of panic as it moves to get economists, analysts and business reporters to agree to the Party's cooked books (Point 2) covering up the Center of Everything's deepening recession. The Journal's Andrew Browne reports on the country's increasing anti-foreigner moves (Point 11) to prevent its people from understanding how quickly they must remove the Party for the Center to move forward in the modern world. These include restrictions on foreign publications like his own ( Point 5) and the placing of foreign NGOs under police control.
Tom Mitchell of the Financial Times penned an excellent piece on China's banking mess (Point 8). And penned another with Patti Waldmeir on the mess in China's commodity markets (Points 14 and 15). Lucy Hornby and David Sheppard of the Financial Times chronicle the Center of Everything's crack down on the release of almost any kind of economic data, hampering elementary business decision making (Points 1, 2, 5, 7, 12, 14, and 15). James Kynge adds a devastating piece on The Center's real estate market (Point 4) and that the Party does "not know where it stands between Marx and the market (Points 1, 2, 4, 5, 6, 8, 9, 15, 16).
May 25, 2016 Follow Up
Now even Xi himself is agreeing with Publius. A great piece by Tom Mitchell in the Financial Times today quotes Xi as saying that China's recession is cutting the military budget. And this just when China is trying to take control of the Nine Dash Line, bringing the U.S. military back to the Philippines and, yes, Vietnam. (Points 1 and 10.)
October 21, 2016
A great piece by Andrew Browne in the Wall Street Journal makes Xi's dilemma painfully clear. He's having his Trump Moment.
January 23, 2019
You heard it here nearly three years ago. Today, an excellent piece in Bloomberg reports Xi warning the Party that Publius is right. Xi now sees "serious" threats to the "Party's long-standing rule." He had three years to do something about this but has left it a little late!!
February 25, 2019
It has taken Xi Jinping three long years to wake up to what Publius said here and he has drawn all the wrong conclusions as Chris Buckley of the New York Times reported today. Instead of reversing the post-Tiananmen policies that are as dead end now as they were thirty years ago, he wants to batten down, locking The Center of Everything into a pre Magna Carta world of eight centuries ago.
This in turn gives ammunition to all those countries which want to keep Huawei and other Center-controlled companies out of their economies. And to limit XI's desire to expand the Great Firewall globally to give him the same pre Magna Carta control worldwide that he wants in The Center.
At the same time, Xi is locking The Center out of global growth opportunities.
October 1, 2019
Great piece in The Wall Street Journal today by Shen Hong on how The Center is nationalizing businesses at a fast clip to the reverse deep recession the country entered early in 2012 and companies across The Center entered a massive payables crisis. The shortage of funds has come home to roost and the state is being forced to bail out companies to prevent Hong Kong from becoming a national problem.
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