Thread by @balajis

@charlierward @bbalkus @RoastedFowl @JackNaneek I think this is basically cope.

China falling into a ditch on its lonesome would be mighty convenient but hope is not a plan. Neither is confrontation from a position of weakness.

Here is why I disagree on predictions of Chinese demographic and economic collapse. 🧵

@charlierward @bbalkus @RoastedFowl @JackNaneek Demographics

First, robotics > demographics. Instagram had 13 employees, Kodak 13000. Who won?

Second, they’re flipping every switch to boost birth rates. Three child policy. Intentionally crashing education & housing costs. Less 996, more babies. They are aware and trying.

@charlierward @bbalkus @RoastedFowl @JackNaneek Remember, modern China is capable of absolute hairpin turns in policy. From communism to capitalism. From celebrating Jack Ma to canceling him.

And, potentially, from the one child policy and “incentivized” birth control to the three child policy and “incentivized” birth.

@charlierward @bbalkus @RoastedFowl @JackNaneek China’s social credit system is fully capable of turning Cass Sunstein’s nudges into shoves. Your entrance to a building is now determined by your vaccination status. Can we be sure they won’t do similar things with childbearing status? foreignpolicy.com/2019/03/05/bei…

@charlierward @bbalkus @RoastedFowl @JackNaneek China has repeatedly shown the willingness to do things far outside the West’s Overton window. One Child Policy, Tiananmen, 996, Hong Kong, Xinjiang, COVID Lockdown.

So it’s a mistake to think they won’t throw the kitchen sink at birth rates. Indeed that’s what they’re doing.

@charlierward @bbalkus @RoastedFowl @JackNaneek Now, Evergrande.

I’m open to correction. But the biggest difference I’ve seen between Evergrande & Bear/Lehman is that Evergrande was a “controlled demolition”.

Regulators *intentionally* imposed the three red lines to deleverage & crash housing prices.
carnegieendowment.org/chinafinancial…

@charlierward @bbalkus @RoastedFowl @JackNaneek Why? Maybe because Xi Jinping said “houses are for living in, not speculation” and so the regulators tried to figure out how to bring down the housing market in a controlled way without crashing the economy. Hence, three red lines. bloomberg.com/news/articles/…

@charlierward @bbalkus @RoastedFowl @JackNaneek It’s an ongoing situation, so am open to correction, but from everything I’ve seen many bits are opposite of Lehman.

1st, it appears to have been done intentionally to reduce housing costs.

2nd, they’re not doing Fed-style QE to prop up mortgage prices. npr.org/sections/money…

@charlierward @bbalkus @RoastedFowl @JackNaneek Now, put it all together: higher housing costs = fewer babies.

The Chinese state doesn’t want contagion from their controlled demolition of Evergrande. Remains to be seen if they can avoid that. But a GOAL was to slash housing prices to boost birth rates. ifstudies.org/blog/higher-re…

@charlierward @bbalkus @RoastedFowl @JackNaneek Put another way, the Chinese state is not nice but *not* dumb. They saw far enough ahead to put up the Great Firewall, ban foreign social media, and build their own. That’s why FB can’t deplatform Xi Jinping like they did Trump. And anyone on Weibo who tried would probably die.

@charlierward @bbalkus @RoastedFowl @JackNaneek It’s just wishful thinking to underestimate China. Or to think they will be benevolent overlords.

They have executed extraordinarily well since 1978 even as the US blew a massive lead.

Luck won’t stop them. Nor will a declining US military. Will have to be something new.