Seven Reasons Why We Should Not Depend on Imported Goods from China

It seems to me that the situation in China is far different from what most people think it is. Even if we would like to depend on China, we really cannot.

Reason 1. When we depend on goods from China, an amazingly large share of the world’s industrial activity gets concentrated in China.

The five largest users of energy in the world are China, the United States, India, Russia, and Japan. The International Energy Agency shows total energy consumption as follows for the year 2016:

Figure 1. IEA’s estimate of energy consumption (total fuel consumed, or TFC) by sector in 2016 for the top five energy consuming nations. Mtoe is million tons oil equivalent. Source: IEA. Non-energy use is the use of fossil fuels as a material to create end products that are not burned. Examples include medicines, plastics, fertilizers, asphalt, and fabrics.

When these countries are compared, restricting our analysis to the portion of energy used by industry, we find the rather disconcerting result shown in Figure 2:

Figure 2. Chart by the International Energy Agency showing total fuel consumed (TFC) by industry, for the top five fuel consuming nations of the world.

China consumes more fuel for industrial production than the next four countries listed (United States, India, Russia, and Japan) combined. Of course, we don’t know exactly the corresponding amounts for other countries of the world, but we can observe that if a country is concerned about its CO2 emissions, the easiest way to reduce these emissions is to send heavy industry elsewhere, such as to China or India. There are likely many countries that are primarily service economies, thanks to the option of outsourcing most industry to other countries.

Much of the discussion I have read regarding sending industry elsewhere has been in the direction of, “As advanced as our economy is, we don’t need heavy industry; service jobs will substitute. Industry can be developed at lower cost elsewhere. Everyone will be better off with this arrangement. The invisible hand will provide jobs and goods and services for everyone.” In addition, corporations saw the possibility of adding customers from around the world. Not too many thought about the real-world problems that might result.

Clearly there is a problem with the jobs being lost to China and other Emerging Markets. When new service jobs are added, they often do not pay as well the industrial jobs they replaced. In fact, there might not be enough jobs in total, if automation plays an important role as well.

Another issue is that the level of industrial concentration can be a problem. We are now depending on China and perhaps a few other countries to provide for a large share of the “stuff” we use. Even if China is not the only provider, it is often an important part of the supply chain. If something should go wrong (for example, widespread riots in China), we don’t have a Plan B.

Reason 2. China needs energy products to make the goods it uses for itself and for the goods it exports. China’s own energy supply is faltering. Because of China’s huge size, it is becoming increasingly difficult to keep China’s energy consumption rising sufficiently rapidly using imported energy.

China’s own energy production is shown in Figure 3. (Note: Hot off the press! New BP report released this week.)

Figure 3. China energy production by fuel, based on 2019 BP Statistical Review of World Energy data. “Other Ren” stands for “Renewables other than hydroelectric.” This category includes wind, solar, and other miscellaneous types, such as sawdust burned for electricity.

It is easy to see that China’s coal production hit its highest point in 2013 and has stayed at a lower level since that date. Also, China’s highest oil production occurred in 2015, with lower production since that date. China’s total energy production has been rising recently, but only with great effort. Total energy production is only 8.9% higher in 2018 than it was in 2012, implying an increase of less than 1.5% per year, relative to 2012 amounts.

A standard workaround for inadequate energy production growth is imported energy products. Even with these imports, it has been impossible to keep total energy consumption rising as rapidly as it rose in the 2002 to 2007 period. The cost with imports is greater, also.

Figure 4. China energy production by fuel, plus line showing its total energy consumption (including imports), based on BP 2019 Statistical Review of World Energy data.

In 2018, China imported 71% of its petroleum (either as crude or as products), and 43% of its natural gas. It was the largest importer in the world with respect to both of these fuels.

In 2018, China’s coal imports shrank as its own coal production surged. This was almost certainly a change planned by China. China would much prefer producing its own coal (and keeping the jobs within the country) to importing coal from elsewhere. China imported 4% of its coal from elsewhere in 2018.

Reason 3. The commodity demand from China is so huge that, to a significant extent, it determines world commodity price levels. Where regional energy prices exist, China’s choice regarding whether or not to import from a country can influence local price levels.

Chile is the largest copper producer in the world. A recent article regarding problems associated with lower copper prices notes that the demand for Chilean copper has been driven “almost entirely by the expanding Chinese economy over the last three decades.” For many commodities, China consumes over half of the world’s commodity supply. If China’s industrial demand is growing, prices will tend to rise, allowing more of the mineral to be extracted. Higher commodity prices tend to be needed over time because the ores of highest concentration (and otherwise easiest to extract ores) tend to be extracted first. Ores extracted later tend to be more expensive to extract, so higher prices are required for extraction to be profitable.

This situation of China playing an extremely large role in commodity prices holds for a very large number of commodities. If China is building widgets or any other product, using a particular commodity, China’s need to buy this commodity in the world market will tend to hold up world prices for the commodity. This situation holds even for fossil fuel prices.

Reason 4. Over the next few years, China’s coal supply is likely to fall significantly because of depletion. This lower fuel supply is likely to lead to a shrinkage of China’s industrial capability, and, indirectly, falling world commodity prices of all kinds.

The problem that China is encountering in Figure 3 is “peak coal.” This is a similar problem to that encountered by the United Kingdom immediately before World War I, and to that Germany encountered just before World War II.

Figure 5. The timing of the peaks is peculiar, relative to wars.

Coal tends to be the industrial fuel of choice because it is cheap. Goods made with coal tend to be inexpensive, especially if wages paid to workers are low and if the company making the goods does not spend much money on pollution prevention. Hydroelectric can be an adequate substitute for coal, if the water flow can be depended upon. Wind and solar are too intermittent and not sufficiently inexpensive to be adequate substitutes for coal. Wind and solar (included in “Other Ren” on Figure 3) are also far smaller in quantity than coal.

Outsourcing a large share of the world’s manufacturing to China seemed like a great idea back when it was started, often in the early 2000s. If, at some point, China cannot really handle the responsibility it has taken on, outsourcing gets to be a huge problem.

The reason why coal prices cannot rise very high is because if they do, the prices of finished goods will need to rise as well. Wages of workers around the world will not rise at the same time because the higher cost of production takes place due to something that is equivalent to “growing inefficiency.” The coal mined is of lower quality, or in thinner seams, or needs to be transported further. This means that more workers and more fuel is needed for each ton of coal extracted. This leaves fewer workers and less fuel for other industrial tasks, so that, in total, the economy can manufacture fewer goods and services. Because of these issues, countries experiencing peak coal are pushed toward contraction of their economies.

Unfortunately, rather than leading to high prices (to compensate for the higher extraction costs), running short of inexpensive-to-extract fuel tends to lead to war, or to tariff fights. Countries whose coal is depleting will try to maintain their own supply as long as possible. They will invent excuses to stop importing coal. Back in September 2018, the Financial Review reported, “China has introduced unofficial restrictions on coal imports in a bid to prop up domestic prices by slowing down customs approvals at key ports.” China needed higher internal prices to make it profitable to extract coal from its depleting coal mines.

Figure 6. Chart showing prices of Brent Oil, China Qinhuangdao Spot Coal price, and Asian Marker Coal, all in US$ of the day. Amounts from BP 2019 Statistical Review of World Energy. Note also that the units of coal (ton) are much larger than the units of oil (barrel) used on this chart. Thus, the same number of dollars of buys a much larger quantity of coal than of oil; coal is cheaper.

If higher coal prices really were possible over the long term, it would make it possible to open new mines in more distant locations. The location of coal mines is important because transport costs by rail or truck tend to be high. China built the large ghost city of Ordos, Inner Mongolia, on the expectation that coal prices would rise, making development of coal in the area profitable. Unfortunately, coal prices fell, making the project not economic. I visited the area in 2015, after teaching a short course on Energy Economics in Beijing. There was a large almost empty airport, and few vehicles were using nearby multi-lane roads.

Reason 5. All of the concern about future tariffs artificially raised China’s 2018 industrial production and commodity prices. Because production was brought forward into 2018, China’s production and world commodity prices can be expected to be lower in 2019 and in future years.

Manufacturers wanted to front-run tariffs, so they tended to ramp up production in advance of the tariff implementation date. This higher production in turn tended to raise commodity production and prices around the world. Note on Figure 6, above, that coal and oil prices are both higher in 2018 than in 2017. Prices in 2019, not shown, are tending to trend downward again.

China badly needed higher coal prices in order to help its coal extraction. Thus, part of the reason that China was able to continue to function as well as it did in 2018 was because of all of the discussion about future tariffs. If this discussion had not taken place, employment in China would likely have been lower. With this lower employment, sales of automobiles and smartphones would have been lower as well.

Note, too, that even with the demand brought forward into 2018, China’s economy was not functioning very well in 2018. Private passenger automobile sales for the year fell by 4%. Smartphone sales fell by a worrisome 15.5%. Clearly, workers were having difficulty buying the kinds of goods a person would expect a growing economy to be selling. I would attribute these problems to the peak coal problem mentioned earlier, making it increasingly difficult to increase the amount of industrial operations provided by China’s economy.

Reason 6. The Chinese economy has been gradually changing and adapting to hide its energy problems. Even more changes will be needed in the future, potentially affecting the world economy, with or without tariffs.

The Chinese economy reports carefully massaged GDP numbers, which many analysts consider to be inflated in recent years. Its debt level keeps rising to try to keep all of its operations going.

We know that China discontinued one major industry at the beginning of 2018: recycling plastic and other types of low-valued recycling. With low oil and natural gas prices, this type of recycling cannot be profitable. Of course, discontinuing a major industry can be expected to lead to a loss of jobs within China. But, on the positive side, it frees up coal and other energy resources in China for other industries that can (perhaps) make more profitable use of them.

On a world basis, the loss of the plastic recycling industry becomes a problem. If rich countries are willing to subsidize the cost of sending plastic recycling to China, this subsidy allows containers that bring goods to rich countries to be sent back to China with a paid load inside. Thus, operating the plastic recycling industry helps keep the cost of shipment of goods from China to the US or Europe down because the shipping costs only need to cover the one-way cost of transit, rather than also covering the cost of shipping the empty container back. Without the subsidy to pay the freight of the plastic recycling, costs for the shipping industry rise, making international trade more expensive. Eliminating the subsidy that rich countries are paying to ship otherwise-empty containers back full of mixed trash is part of what pushes the world economy to contraction.

Other countries are not taking over very much of China’s role in recycling plastic, either. The net effect is that the loss of recycling is one of the things pushing the world toward contraction.

China has no doubt been cutting back in other ways as well. It is likely that it is not building as many uninhabited cities and roads that are really not needed. Ugo Bardi recently posted this chart showing global cement production.

Figure 7. World Cement Production by Ugo Bardi from a blog post on January 19, 2019.

China produces over half of the world’s cement; part of the reduction we are seeing relates to China’s falling use of concrete in new buildings and roads.

In some cases, China is moving in the direction of being a service economy. A recent video states that of the $237.45 cost of producing an iPhone in China, Chinese workers only provide assembly services, worth $8.46. The US contributes $68.69 of the cost, mostly in the design and distribution phases. The parts are generally outsourced from other parts of the world.

One way of looking at what is happening in China’s economy is to analyze the country’s oil consumption in terms of the relative amounts of diesel (used primarily by industry) and gasoline (often used by private passenger vehicles).

Figure 8. Gasoline and diesel consumption for China, based on data from 2019 BP Statistical Review of World Energy.

Based on Figure 8, it appears that China’s industrial growth suddenly leveled off about 2012. This, not by coincidence, is about the time that China’s coal problems were becoming apparent in China. China’s gasoline consumption has continued to rise, however. It appears that once it became apparent that its coal supplies were starting to seriously deplete, China began to “grow” China’s economy more as a service economy. After 2012, most growth seems to have come in the non-industrial sectors of China.

Reason 7. A major concern should be a financial collapse, far worse than 2008, both in China and for the world as a whole.

The world needs growing energy supply to support the world economy. China is increasingly having difficulty with its energy supply. When China has trouble with its energy supplies, the world as a whole has a problem with its growth in energy supplies.

A few months ago, I showed the role China has played in the world economy is this chart:

Figure 9. Ten year growth in world energy consumption, divided between the blue portion associated with rising population, and the red portion associated with higher energy consumption per capita, which I have called “Living Std.”, meaning “Higher Living Standards.”

China added a little bump in GDP growth at the end of the nearly 200-year time period shown, after it joined the World Trade Association in December 2001. The energy added by China (mostly in the form of coal) allowed the world economy to continue to grow, when it otherwise would have been up against limits.

Now we are reaching a situation where China’s energy production is likely to flatten or fall because of the depleted state of its coal mines, and the fact that coal prices can’t rise high enough, for long enough, to open new mines. The world economy, over the period shown, has always had rising energy consumption. In most cases, energy consumption rose faster than population growth, allowing some growth in the standard of living over time.

Changing to a situation of shrinking energy consumption per capita would likely be extraordinarily traumatic. Population would likely fall. Commodity prices would drop to low levels. Debt would tend to default; prices of shares of stock would fall. Many governments would fail. If shrinking energy consumption per capita starts in one country (whether China or elsewhere), it could easily spread to other countries around the world.

We don’t know what is ahead, but we know that the low points on Figure 9 were very bad times, even though energy consumption in total was not contracting. The decade of 1860 to 1870 was the decade of the US Civil War. The decade of the 1930s was the decade of the Great Depression. The decade of the 1990s was the decade of the collapse of the central government of the Soviet Union.

We also know that world energy consumption and GDP growth tend to be highly correlated.

Figure 10. World GDP Growth versus Energy Consumption Growth, based on data of 2018 BP Statistical Review of World Energy and GDP data in 2010$ amounts, from the World Bank.

This is as we would expect, because energy consumption is required for the many aspects of GDP growth. Transportation, heating and/or cooling, and electricity all require energy consumption, for example.

The recent divergence between GDP and energy consumption on Figure 10 may be the result of overstated GDP amounts by China, India, and other countries. If a country wants to appear inviting for new investment, there is a temptation to overstate GDP since other countries seem to be doing so, without penalty.

Back during the Great Recession of 2008-2009, our problem was with homeowners who took out loans that were far higher than they could really afford. Today, we have whole economies taking on more debt than properly stated GDP reports would suggest they are able to handle. We go from one version of optimism regarding debt levels to another.

Conclusion. If a person doesn’t understand how badly the energy situation is working out for China, or how important energy consumption is, it is easy to think that the problems China is facing are primarily tariff-related. In fact, China’s situation is a very worrisome one, with or without tariffs being added.

To fix the situation, China would need a very cheap, non-intermittent, locally produced, non-polluting additional energy source. This energy source would also need to be rapidly scalable. Such an energy resource doesn’t appear to be available.







About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
This entry was posted in Financial Implications and tagged , , , . Bookmark the permalink.

890 Responses to Seven Reasons Why We Should Not Depend on Imported Goods from China

  1. Figure 9. appears to be mislabeled or mistaken. “Population” is apparently Population Growth Rate, because both the global and Chinese populations continue to increase – not decline.

    • The whole exhibit is labeled “Growth Rate in Energy Consumption divided between population and living standards.”

      I thought about labeling this “Growth Rate in Energy Consumption divided between growth in population and increase in living standards,” but I ran out of room. I was hoping readers would figure this out for themselves. What I am showing is China’s contribution to world energy consumption growth.

      • One of the near constant errors I see in the media coverage of the global economy regarding population – confused declining population growth rate with increasing population growth (1%/yr) – which the avg. reader absorbs without understanding or objecting. I see a lot of comments (especially from millenials) who actually believe the world population is declining – as a result of this confusion between population growth rate and growth. You make lots of good points in your articles – clarity only makes them that much better.

        • jonzo says:

          The Federal Gov’t always does that when talking about spending. Decreasing military spending or decreasing deficit spending….NOT. It is a decrease in the rate of acceleration.

    • snolken says:

      very interresting reading gail..thank you for your work..

  2. Most finite critical resource exports have reached this same conclusion some time ago – regarding the global economy and its most critical resource – energy. China being the worlds largest manufacturer only focuses global energy short falls in a more visible way – creating a rather large “canary” in the global economy “mine.”
    On the other hand, whether manufacturing energy consumption is focused in China or spread out – it will change energy depletion economics and timelines very little more or less. That significant shortfalls in global energy and individual nation energy shortfalls are coming is basic math. Two conclusions should be drawn from the data in your graphics:
    1. A national finite critical resource independence strategy- even while participating in the current global economy is the best insurance against coming chaos from energy depletion.
    2. The priority to develop a near “free” (compared to current energy economics) and long term sustainable energy resource should be one of highest for the world. Fusion research should be accelerated to point where viability can be determined and implemented if successful – while maintaining advancement in other energy technologies. Because once we enter serious energy shortfalls economic and resource conflict chaos will limit technological breakthroughs.
    3. Additionally, as we deplete the last of the economically viable petroluem resources in the next two decades, economist need to focus on the impacts of absolutely dependent industries such as petrochemical and the cost increases on critical areas such as NPK food production – which the 95% of the global human and domestic animal bio-masses are dependent upon.
    4. Understanding and preparing for shortfalls in energy and related finite critical resources a softer landing and chance to avert a global disaster can be achieved. Without understanding and strategically preparing for what energy shortfalls mean to the global economy and its politics – only implosion and collapse can result.

    • Energy depletion economics says that the economy either:

      (1) Grows enough to keep up with depletion, interest payments, rising population, and all the other things that push energy needs up, or
      (2) Collapses.

      There is no middle ground. The amount by which depleting but still operational oil wells can theoretically produce oil is mostly irrelevant, as far as I can see, because the whole system needs to be operational for it to work. If the water separation from the oil system doesn’t work, there will be no more oil produced, for example. People do not see overall system needs, and put together wrong models.

      Thus, the date of collapse is important. It seems unlikely that we will be able to produce much fossil fuel of any kind after collapse. I have a hard time seeing very much happening in the two decades after collapse, unless part of the world economy can collapse more slowly than the rest.

      • Agreed – mostly. A real collapse will end civilization as we know – including technical problem solving and many necessary economy-of-scales that support the current economy.

        Trying to predict a collapse date may be impossible more than five to ten years in advance (and likely too late) – other than knowing that it comes before we run out of petroleum energy economic viability (two decades at the most based on well known reservoir volumes in what I read) – unless there is some timely implementable near “free” energy breakthrough – which necessarily means very, very soon. Fusion seems to be the only thing in our theoretical “hope” chest – but there seems to be little push to determine its physical and then economic reality. If the energy breakthrough (if there is one) isn’t cheap enough – it still won’t matter, the collapse will happen anyway and the human population will decline back to level where energy availability isn’t population limiting.

        People don’t see the extended finite critical resource economic dependencies (most sensitive being petrochemicals relationship to global food production) to the current economies-of-scale of the current scale of the transportation/energy sectors (85% of oil consumption) of the oil market. Petrochemicals (5% oil consumption) will become disproportionately expensive to petroleum as it ‘s economies-of-scales decline beyond the current optimums. These sensitivities will derail the global economies through food shortages and internal economic strife and chaos with even larger resource wars than what we have seen in recent decades in the ME- when there is a major energy short fall and well before we use all the oil.

        • you are quite right of course

          except for the bit about energy availability

          population of any species always grows to the limit of energy availability

          • Perhaps I wasn’t clear enough – that is exactly what I said. Humans are different from other species – our energy is fungible in to many things – especially food production in that we have the technology to use non-renewable energy and use it until it is no longer economically possible – but the out come is the same as lower animals when our energy resources can no longer provide adequate food supplies. Population collapse.

      • One of the most interesting pieces of information you present is the sudden decline of cement production – couple that with copper/electronics, housing and autos and it looks ominous.

  3. Shawn says:

    A note of possible interest. This morning Alice Friedemann’s Energy Skeptic website has been blocked under the category of Hate and Racism. I checked a few more collapse subject websites, could not be reached. Well, probably just the result of a complaint from a troll, or the inadvertent result of one of the hate web site purges sweeps by Google Still, I have wondered if at some point if on-line discussion of less than rosy futures might get censored. It is after all important for everyone to believe that the future will be better…..

    • Xabier says:

      Interesting. Recently, Alice published an excellent piece on the enslavement and rape of girls by ISIS,(pointing out that this is what the Tribes of Israel routinely did, too), her point being that such behaviour is likely to return generally. and also to be the fate of defenceless migrants feeling collapsing regions.

      A commenter never seen before laid into her at great length for publishing obvious ‘Islamophobic’ propaganda, and for being by implication a racist imperialist, etc. They said the same to me when I defended Alice. A real nut.

      Might be the root of the problem? She could have been reported for both ‘Islamophobia’and ‘anti-Semitism’.

      Of course, eventually any talk of Collapse may itself be banned as ‘economic subversion/ defeatism.’

      In this context, its helpful that FE is long gone with his diatribes.

      • Good points, lone nut or real one, be well advised that “the internets” will get heavily censored beyond China style level way before the final cascading JITs disrupting collapse onset, and or larger war commencing..

        As the basic rule would be rediscovered that plunging the societies few centuries back (optimistic scenario) is best achieved by extending the leverage between ruled and oppressed classes as far as possible. In other words lets plunge them into that dark abyss uninformed and helpless, so they can find the only help with us again..

        • Tim Groves says:

          Yes, they are starting to narrow the channels of communication and restrict what can be said and who is allowed to say it.

          It began with banning people who refer to certain protected classes of others by using “unacceptable” language, or denied validity of certain historical interpretations, but this was was always going to be the thin end of the wedge. Jon Rappaport had his website shut down by Word Press last month for being “an anti-vaxer” and I read that YouTube just shut down Black Pigeon’s channel, probably because he is so effective at deconstructing the illogic of what passes for left-wing ideology these days.

          It is only a matter of time before they (the controllers)get around to closing down all serious dissent on the major online platforms. Intelligent people like us 🙂 who want to chat about things we think are important will eventually have to invest in our own platforms, and even then we can expect a war of attrition against us. We could well be doomed digitally before we’re doomed literally..

          It’s my fond hope, however, that YouTube will continue to allow gardening videos up until the moment the Big Plug is pulled.

          • That’s was my aim, not as much as the political angle, and unfortunately I don’t share your optimism there, as gardening channels might go down pretty soon, especially those dealing with quasi autarky practices (e.g. low/no outside input)..

      • SomeoneInAsia says:

        Hmmmm… You don’t like FE, do you?

        • Xabier says:

          Liking or not has nothing to do with it: but diatribes and aggressive rants are not helpful, and may be used as evidence to endanger a site for ‘hate speech’ and close it down, and those were his speciality.

          He was much better when in calmer mode., as on other sites where he didn’t feel so free to let rip. That’s all.

          • GBV says:

            “…but diatribes and aggressive rants are not helpful, and may be used as evidence to endanger a site for ‘hate speech’ and close it down…”

            I suppose, Brother-Comrade, we should all self-censor ourselves and talk about how Chinese stats are always correct, how the Party knows what is best for us, and how we’ve always been at war with Eastasia (not Eurasia)?

            I wouldn’t bother coming to a place like this if I (and others) couldn’t say what they believe is true or how they feel, the delicate sensibilities of everyone else be damned. If it’s a choice between OFW being shut down or having to “self-moderate” and post niceties / half-truths, it’s really not much of a choice at all.


            PS – I hate you Xabier (not really, but I felt the urge to post some hate speech today) 🙂

          • Tim Groves says:

            To make his points, Xabier prefers to use a light saber than a blaster.
            He’s an elegant gentleman from a more civilized age.

          • JesseJames says:

            Xavier has fallen victim to classifying free speech as hate speech. The mere use of the term hate speech is a modern liberal fascist term used to censor unwanted points of view.

          • TIm Groves says:

            Xavier has fallen victim to classifying free speech as hate speech.

            Read his comment again. He is not classifying anything. He’s merely pointing out that in our increasingly totalitarian society, certain speech may be classified as “hate speech” and this classification used as a pretext for closing down websites.

        • Tsubion says:

          His heavy use of disgusting imagery didn’t help.

          And calling everyone not himself a mooor…on didn’t help either.

          But he was entertaining and had a way with words.

          We can all resort to fear mongering because… lets face it… most of these sites have been peddling doom and gloom for the past twenty years or so.

          And we’re still here… hanging on by a thread… but still here.

          • Apart from humor – amusement, his biggest contribution was the humbling side effect of realization, you don’t mess with ‘uncle true billionaires league’ if you are not up to them (NZ relocation was a bad plan with his relative low funds/pecking order).

  4. Tim Groves says:

    By the way, in case anyone is interested, here is Godfree’s latest article about how China is going to lead the world.

    • SomeoneInAsia says:

      All that talk of ‘humane authority’ in the article just feels so… false. Foreign Minister Wang Yi is virtually trying to tell everyone that we Chinese are all angels and have been for millennia. Hard sell, mate, I think you might as well try making an intelligent adult believe in Santa Claus. I love and treasure China’s philosophical and spiritual traditions, but face it, down to the present day those who rule China have proven themselves as willing as anyone else to resort to acts of blatant immorality and extreme brutality in exercising their power — in plain contradiction to what the said traditions stood for.

      And at the end of the day, sorry, but the finitude of our resources ensures nobody’s going to lead the world. Not China, not America, not anyone. So relax, the white man’s not going to have to learn Chinese — though the reason is not a pleasant one at all.

      • Tim Groves says:

        So relax, the white man’s not going to have to learn Chinese

        Every cloud has a silver lining!

        Or, as the Chinese say, shan qiong shui jin yi wu lu, liu an hua ming you yi cun.

        • Tsubion says:

          The mountains are steep and forbidding, the rivers deep and ferocious, will I ever get out of here?

          Suddenly, there are calm willows swaying in the breeze and myriad flowers blooming in fine fields.

          And look!, there is after all another village.

          And the village’s name was… Google!

        • SomeoneInAsia says:

          Looking at the sorry state of affairs towards which we’re all headed, I prefer to quote the following couplet:


          Let me know if you need a translation. 😉

      • GBV says:

        China = world financial capital, after 2032 anyway…

        “Where’s the proof GBV” you say? Well, go pay Martin Armstrong to find out for yourself:

        I’m too broke to afford any of his reports (though not too humble to beg for those who do have access to them to share them with my broke-ass for free…) 😦


        • Not sure if this was meant as pulling our leg or indeed serious post, no offense.
          In my humble opinion there are much higher chances that TSLA would double, triple (for a brief exalted euphoric moment) before ~2025, than any recommendation issued by that newsletter analyst ever coming through..

          • GBV says:

            Pretty serious, actually.

            I try not to put faith in “gurus” these days, but Armstrong has been proved to be prescient in the past and may be proven to be right on many of his predictions for the future. Of course, he could just be another snake-oil salesman like so many individuals in the financial services world… but given his notoriety, I haven’t been able to find many criticisms of the man suggesting he is a shill / fraud / etc. (like, say, James Rickards for example), which I find intriguing.

            It would be nice to actually speak with someone who has purchased one of his reports to get an idea of how valuable his analysis proved to be.

            Specifically on China, however, I suspect he will be right, as it appears that there is a cycle driving the migration of the world’s financial capital. It seems to move from the heart of the current empire to said empire’s current manufacturing “sweatshop” as said empire begins to collapse.

            So China, having become the manufacturing sweatshop of the West (gaining access / insight not only to our industrial processes, but to our ways of governance and diplomacy), will become the “empire ascendant” after the death of Western hegemony (i.e. between now and 2032), as the West continues to fall into decadence / madness / civil unrest.

            Of course, the end of the Age of Hydrocarbons means that the coming Chinese hegemony will pale in comparison to what the West achieved, as their ability to project power will likely be stymied by severe energy constraints.


            • Tim Groves says:

              China is 15 to 20 years behind Japan and Korea on the road to old-fartdom. It’s baked into the demographic cake,. With or without shifting economic sands, tariffs and unaffordable energy inputs, those demographic factors are going to force China to be a good deal less active and aggressive in the decades ahead.

              Europe and America are escaping the East Asians’ fate by allowing in millions of immigrants from the Third World to provide the extra young people they don’t provide for themselves. This is going to produce a demographic cake of a very different flavor.

            • GBV says:

              Demographics don’t necessarily dictate market confidence, which in turn dictates capital flows.

              I believe Armstrong’s argument is that, eventually, China will “open itself up” and allow the free flow of goods/services, while the West will become more corrupt and impeded by its own insane laws. Smart money will flee the West in search of freedom/safety/security, at which point (or perhaps even before then) I suspect those young immigrants who break their backs to support our high living standards won’t be as interested in coming to the West any longer…


            • Tsubion says:


              A bit like the users of MySpace fled in search of pastures new and came across a little town known as FaceBook.

              Now the users fo FartBook are looking for pastures new and end up in the loving embrace of Instagram and Whatsapp.

              Little did the users know that Instagram and Whatsapp were also owned by the evil Fartbook and therefore did not really constitute pastures new but the same old same old.

              At some point, the users gave up looking for pastures new. Some of them even returned to MySpace for the nostalgia, nostalgia being one of the largest contributors to GDP and mental wellbeing.

              The rest came to the realisation that they were being led by the nose round and round in a silly game just so the Masters of Coin could extract from them the means to build a breakaway civilisation.

              The users were never more than sheep to be fleeced.

              We need to stop pretending that there was ever anything else going on.

            • TIm Groves says:

              This fleece the sheep angle reminds me of something I read about a Chinese general’s speech made in 2015 in which he spoke of the Americans harvesting from other countries:

              If we acknowledge that there is a U.S. dollar index cycle and the Americans use this cycle to harvest from other countries, then we can conclude that it was time for the Americans to harvest China. Why? Because China had obtained the largest amount of investment from the world. The size of China’s economy was no longer the size of a single county; it was even bigger than the whole of Latin America and about the same size as East Asia’s economy….

              … The Americans need to create a regional crisis for China, to get the money back to the U.S.

              Why does the U.S. economy rely so desperately on capital flowing back to its market? It is because, since 1971, the U.S. has given up producing real products. They called the real economy’s low-end or low-value-creating manufacturing industries garbage industries or sunset industries and transferred them to developing countries, especially China. Besides the high-end industries, such as IBM and Microsoft, that it kept, 70% of its people moved to finance and financial services industries. The U.S. has completely become a hollow state which has little real economy to offer investors a big return.

              The Americans have no choice but to open the door of the virtual economy, which is its three big markets. It wants to get the money from the world into these three markets so that it can make money. Then it can use that money to harvest other countries.

              The Americans only have this one way to survive now. We call it the U.S.’s national survival strategy. The U.S. needs a large amount of capital flowing back to sustain its daily life and its economy. If any country blocks that capital flow, it is the enemy of the U.S.


            • John Doyle says:

              Very interesting! It adds up sure enough. Umair Haque, who writes in Medium says the USA is the world’s richest poor country. Most Americans are blissfully unaware of what is going in in their name. Propaganda has the narrative all sewn up.

  5. el mar says:

    Thank you, Gail, your article is a brilliant eye-opener regarding Chinas economical situation.
    This state can never, ever continue till 2030. China and the whole interconected world-economie is a dead man walking who can fall every day.

    Carpe diem
    el mar

    • Thanks! We all need to “seize the day.”

    • Tsubion says:

      I hope we don’t fall every day.

      One will suffice, thanks.

      Until then… may we keep kicking that can down the road with all our might, before the dying of the light, and John Wick’s last fight, only then will we face our plight!

  6. alpincesare says:

    Gail Tverberg > If shrinking energy consumption per capita starts in one country (whether China or elsewhere), it could easily spread to other countries around the world.

    It’s already the case for Europe: Per capita, it uses about 20% less oil than it did in 2005, because it depends heavily on imports and has to increasingly share world production with emerging heavy weights like China and India.

    • Europe is one of the big areas that has sent its manufacturing to China, so the real decline isn’t quite as bad as indicated by the line shown. But standards of living have been falling. Young people are having trouble finding jobs, especially ones that pay well. The UK is well known for its Brexit problems. And Ugo Bardi in Italy has been writing about the fact that he cannot keep up with the standard of living his parents had.

  7. Andrew says:

    I saw this article ( today. It seems that conventional economic is slowly changing.

  8. Duncan Idaho says:

    A Morgan Stanley economic indicator just suffered a record collapse

    Probably not an issue– we need to bomb Iran and stop all those dangerous illegal aliens from taking away those jobs.

  9. some people did something says:

    Fake News: Telsa kills again!
    Real News: Someone killed themselves again and tried to make Telsa Motors take the rap.

    Telsa stands by their standard explanation for these crashes and repeated once more that
    “the crash was due to user error. Another driver misunderstood the autopilot function. The autopilot feature is not really autonomous but not completely un-autonomus.The driver should make all major decisions on navigating the car to avoid crashes.”

    But don’t fret, true believers, you can play Atari video games at the driver’s wheel with all the free time

    Telsa Motors’ cars allow by taking the boring , arduous task of driving a little bit off your hands while your hands are on the wheel.

    • Rodster says:

      You know, it’s funny because if you listen to Zerohedge you get the impression that every Tesla has doors falling off or they are about to catch fire. Every Tesla I have seen in my area and there are quite a few, look in pristine condition on the road.

      • Tsubion says:

        The Zerohedge comments section is truly one of the mysteries of the universe. On the one hand they used to be quite informative and a useful source of alternative views. On the other hand… it has mostly descended into a scrap between dumb and his racist brother dumber to see who can make the funniest, dumbest comment of the day.

        What is truly revealing is that the same commenters manage to comment on every single article posted throughout the day… every single day for years on end!!

        Now that’s some serious dedication or what we’re witness to is “professional” commenters, trolls, agents etc.

        What’s also intrigueing is the way Zerohedge as a controversial platform manages to survive the purge going on with other far less controversial purveyers of alternative news.

        They are hosted in Canada and may have changed hands since the early days but still.

        Their rabid anti Tesla ravings appear to be mostly aligned with shorting the stock and little else. The shift to electric cars is not really possible until we see a revolutionary breakthrough iin battery development. And even then, you’re still lumbered with the ramping up of materials and battery manufacturing on a global scale to meet these ambitious requirements.

        It doesn’t look very good right now for any kind of new car manufacturing. There appears to be a very pronounced slowdown in sales many of which were based on cheap loans. And at the moment EVs are by far the pricier option.

        The idea of requiring breakthroughs for further expansion and growth applies across the board. But even if they arrived, the inertia of decades in the direction of collapse will be very hard to avoid for the majority of world markets. As Gail often reminds us, it has more to do with the ability of consumers to consume new products than any magical achievements on the production side.

        The cheap energy breakthrough simply hasnt arrived.

      • JesseJames says:

        That must explain why they are selling so many cars.

      • GBV says:

        “Every Tesla I have seen in my area and there are quite a few, look in pristine condition on the road”

        That’s funny.

        Most of the first-world economies seen in the world, and there are quite a few, look in sustainable condition on the world stage. And I suspect they will continue to look that way… until their doors fall off and they catch fire (metaphorically speaking).


    • aaaa says:

      Does Tesla pay for online shills or what?

    • The new German EV platform (for number of different models), now on the roads in final road test tuning and msm previews, due in consumer – public hands by ~2020 is ~3% more efficient (manuf’s claim not completely independent tests) and it’s a hatchback in comparison to Model 3 Tesla. But it is very ugly so far..

      Another question is when TSLA starts to mass produce their new cheaper (non cobalt) batteries, sooner than next recession or GFC_vXY .. ? This stuff is chiefly aimed at their upcoming pickup, semis, and sports car lineup.. obviously it’s bound to eventually trickle charge into batt storage application as well..

      • Tsubion says:

        What baffles me is why these manufacturers, even startups like Tesla, don’t start at the other end. That is… with the most affordable runaround for the largest number of consumers.

        Everything Tesla so far has targeted the high end luxury buyer. Why is it so difficult for a company today to design and market from scratch an affordable runaround – that would sell like hot cakes and in huge volume (a bit like affordable smartphones)?

        It doesn’t make sense. The designers are there. The engineers are there. The entrepreneurs are there. And the market is certainly there for cheap, good looking EVs. And yet we always hear the excuse that one must start by producing a sportscar and then trickle down before actually being able to break even and make a profit. It doesn’t make sense!

        The reason is the battery technology is not ready yet. Even with subsidies the cars are beyond the reach of most buyers. And with no real benefit for the extra cost other than vapid pride.

        The more you look at it, the more renewables, EVs, and Fusion etc look like ways of keeping Hopium alive so that things don’t fall apart even more quickly than they are.

        • I guess the advanced game at this point in time means that each of the global IC mega hubs is producing in tens of millions of cars. So, the entry point ticket price is huge, you have to plan at least for millions of copies produced each year at certain not distant stage of the newly established car company.. which is insane condition by any means.

          Some of TSLAs in house development are clearly leapfrogging the car industry standards: power train electronics is space-defense level marvel, batteries are/will be soon done very differently in comparison to competitors, which usually outsource this core tech dev stuff etc.

    • Tsubion says:

      Tesla is 100% responsible for the “mistakes” of their “users”. They perpetuate the culture of full autonomy when it hasn’t yet been achieved. They allow their “users” to engage autopilot – which of course is not an autopilot at all but gives the impression that it is – and then makes the recommendation to “users” that they should keep hands at the ready and attention alert so as to take over when the semi-autonomous car advises the “user” to do so.

      This is truly ludicrous! And unlike activating the Ludicrous Speed setting – which again encourages dangerous driving by the way – drivers are distracted the minute they activate autopilot.

      This is one of the most irresponsible deployments of technology I have ever seen. The “users” are essentially paying hefty fees to act as live crash test dummies.

      At the moment, it’s difficult to see how we can reach level five autonomy where a passenger can ride comfortably in the back seat of one of these cars and not fear for their lives.

  10. Sergey says:

    Peak coal is handmade thing, the primary reason why it’s peaked – climate change, not because it’s become too expensive to produce. Coal still abundant and cheap to produce, but it is being replaced by natural gas. Could you comment on that? It this correct?

    • Similarly to oil (deep water, tight, shelf, ..) there are also many varieties and grades of coal, usually it’s not easy, sometime even impossible to suddenly make existing plant burning something else. There are also logistic (rail to deposits, dwellings nearby, watershed, ..) and other intervening considerations affecting the operation of existing or new coal plant.

      Natgas is a bit more straightforward in this, but you have to pay for it (dearly).
      For example the Euros are getting empty as of lately and all options are not that good: North Sea and North Africa already depleted, Turkey hosting TWO pipeline projects – not exactly European historical ally.. (why feed and empower them), Russia reliable biz partner but questionable for some factions in terms of geopolitics, and so on.. Not mentioning US and their most expensive gas offering, currently selling in bulk only to Poland, lolz..

      • Natural gas is very expensive to ship, especially as LNG. As a result, it tends to be either too high priced for the consumer or too low priced for the producer. With this conflict in pricing, prices are not very stable. Prices now tend to be too low for the producer. The situation is not very different for oil, coal, or natural gas. In fact, uranium prices are now low compared to spikes in the 2008 period, as well.

        Prices seem to depend on the ability of factories and other big users of the products to raise prices to the consumer to cover higher costs of depletion. If wage disparity is becoming an increasing problem, then it is hard to raise prices.

Comments are closed.