Doug Casey on the Rise of China… And What it Means for the World

By Doug Casey

International Man: Lee Kuan Yew, the former leader of Singapore, once said:

“The size of China’s displacement of the world balance is such that the world must find a new balance.

It is not possible to pretend that this is just another big player. This is the biggest player in the history of the world.”

What is your take?

Doug Casey: China has united 1.4 billion people into a single political entity, so of course they have a lot of weight. But simply having masses of people under your political control doesn’t mean as much as it used to.

China would still be a poverty-stricken non-entity if it hadn’t been for the reforms that Deng Xiaoping made starting in 1980. Masses of uneducated, desperately poor peasants are more of a liability than an asset in the modern world. Deng transformed China’s economy into something that functions pretty much like those in the West. But now, Xi Jinping seems to be returning to the philosophy of Chairman Mao, with much more centralized control. That’s very negative for the country.

Secondly, China’s demographics are horrible. The average woman today only has 1.4 children. Low reproduction rates are to be expected when a society urbanizes. But China also had a draconian one-child policy starting in 1980 that only ended in 2015. That, and the fact the Chinese prefer males for cultural reasons, compounded the phenomenon.

Few people in the West realize that as a result of these things, the Chinese population is in steep decline. UN projections—which aren’t worth much but are still interesting—find that by the end of this century, their population could collapse to 600 or 700 million. And they’ll mostly be old people, so it’s not going to bounce back quickly.

I have real questions about whether China’s economic miracle of the last 40 years will continue. Perhaps it will even go into reverse. That’s because China’s huge transformation is the result of its adoption of some aspects of Western Civilization, which made the United States and Western Europe different from, and better than, any other countries in world history.

I think there are at least 12 characteristics that are underpinned the West. They are free thought, free speech, free markets, property rights, limited government, individualism, rationality, personal liberty, the concept of progress, privacy, the rule of law, and entrepreneurialism.

Humans everywhere understand their value and adhere to them sporadically, of course; without them civilization is impossible. But only the West made them integral to itself, as principles. They’re what made us unique.

International Man: Since 2013, China has been working on its Belt and Road Initiative, which stretches from East Asia to Europe. It’s primarily a trade network of seaports and railroads controlled by Beijing, reminiscent of the ancient Silk Road. So far, over 100 countries have signed on to the massive trade and infrastructure initiative.

What are its geopolitical and economic implications?

Doug Casey: In the short run, it’s resulted in a lot of profits for Chinese corporations and employment for the Chinese workers who are building these things. Locals are hired mostly for coolie labor—which I find amusing and ironic.

Everyone in the West seems to think the Chinese are going to take over the world. While I acknowledge China’s hyperbolic rise over the last 40 years, I question whether the Belt and Road won’t be a huge overreach. It could backfire for several reasons.

Number one, the benefits of the Belt and Road initiative are primarily political. It’s planned and run on the basis of politics, much more than economics. It’s basically a government boondoggle—about the biggest in history. Building infrastructure in unstable third-world countries is generally a sucker bet for lots of reasons; it’s likely to be shockingly unprofitable. It may lead to the bankruptcy of a lot of Chinese banks and corporations that are involved with it.

Number two, a lot of countries are starting to see it as Chinese neocolonialism. I think the natives are going to find the Chinese much more unpleasant colonial masters than the Europeans. Among other things, massive numbers of Chinese people are immigrating to Africa. It’s a guaranteed formula for conflict.

I suspect it’s going to end badly for the Chinese politically and economically, especially in Africa, which produces nothing but raw materials and poor people. When Europeans and Americans stop shipping billions in capital, technology, and food to the Dark Continent, the progress it’s made will go into reverse because its political and cultural mores are hopeless. That’s why the infrastructure in most places south of the Sahara—railroads, roads, waterways, utilities, you name it—have collapsed in the years since the Europeans left despite trillions in aid and investment. You can see it happening now in South Africa, which is by far the most advanced country on the continent. The Chinese will be even less successful than the Europeans.

The local political nomenklatura profited mightily from bribes and corruption in the early stages of Belt and Road projects. Once they’re thrown out of office one way or another, retiring to mansions in France or Switzerland, the new governments will be unhappy with table scraps and one-sided Chinese ownership. They’ll try to teach the Chinese a lesson, and the Chinese will have to teach them a counter-lesson.

The Chinese could end up getting involved in lots of brushfire wars as a result. I expect you’ll see the Red Army acting the way the US Marines did in Central America and the Caribbean. Of course, the US will pointlessly stick its nose into the mix, increasing the odds of a global conflagration.

International Man: Since the end of World War II, the US has been the dominant power in the world.

Will the US hegemony in the world continue?

Doug Casey: The answer is no.

Perhaps the biggest reason is that there’s been a radical change, a degradation, of American culture. The US is not the country it once was. It’s become a multicultural domestic empire, which is intrinsically unstable and dysfunctional. The US has been transformed from a beacon of freedom into a highly taxed and regulated political dumpster fire. I hesitate to say it’s a police state—yet. But it’s moving in that direction.

In other words, the things that made the US different and great are vanishing. The twelve things I listed earlier are vanishing. At this point, it’s little better than any of the 200 other nation-states that cover the face of the globe like a skin disease.

About the only thing that the US government has that still more or less works is its military. But the US military is in steep decline. And nobody likes or even respects a country that bases much of its power on the military.

We’re generating hate all over the world. It used to be that everybody loved America. With troops and active “intelligence” operations in perhaps 100 countries around the world, that’s changed. The world has come to dislike and disrespect the US government. Americans seem to think it’s still Paris after D-Day. Far from it.

Meanwhile, the US government itself is facing bankruptcy, as are many of its citizens. The situation has been papered over, so to speak, by printing trillions of dollars—especially in the last couple of decades. The international acceptance of the US dollar has been critically important for US economic domination. Exporting over a trillion of them a year in exchange for real wealth has artificially raised the national standard of living a huge amount.

But the dollar has become just another irredeemable fiat currency. When it collapses, it’s going to create a whirlwind of hate and chaos everywhere.

So, all the dominoes are aligned in the wrong way.

I’m afraid the US is going to continue on its present path—certainly for the next two years, while actual Jacobins are in power in Washington DC, trying to accelerate these trends, not turn them around.

International Man: What is the US going to do about China’s rise?

Doug Casey: Let’s also ask: What should the US do about the fact the sun is going to rise tomorrow morning?

A couple of years ago, a concept called the Thucydides trap became a meme based on a book written by Graham Allison. His basic historical premise was that declining powers usually attack rising powers while they still can, while they’re still strong, and can still win.

The US is definitely declining. The Chinese are still rising. Although, as I said before, I think it’s very questionable how long that trend will persist. In addition to Belt and Road problems, their banking system is on the ragged edge of collapse, along with their bubble economy built on exports and real estate speculation. It could all come unglued, even as Xi becomes the world hegemon. Twenty years from now, we could see China devolve into a half-dozen satrapies run by warlords, the way it was only 100 years ago.

My guess is that the big danger is US/Chinese confrontation in the South China Sea. It doesn’t matter that it’s none of our business; Washington feels it has to show Beijing who’s boss. A second danger is China trying to capture Taiwan, although I discount that since they have a lot to lose and relatively little to gain. Again, it’s none of our business. In the long run, Africa will be a battleground.

Even if there’s not a hot war, the US will likely use trade barriers to punish the Chinese. If the Chinese are unable to export to the US and countries it controls, they’re going to have a real economic crisis on their hands. They’ll feel forced to react.

Trade wars are very dangerous. Look at World War II. The Japanese didn’t attack Pearl Harbor because they wanted a war with the US, but because the US, which was its major supplier of petroleum and other raw materials, cut them off. They felt they had no alternative but to attack while they still could. A version of that could happen with the Chinese.

Add the fact that when things get tough within a country, governments always like to find a foreigner to blame in order to unite the people and distract from internal problems. Either or both countries could do that.

It looks grim for both countries. But probably worse for the US. A hot war would be fought near China, and they’d have a huge home-field advantage—read a bunch of sunken US aircraft carriers. All the while, China is winning overwhelmingly in cyberspace, with both surreptitious cyber attacks and the use of social media for psychological war. Platforms like TikTok are directed via artificial intelligence to subtlety inculcate destructive values in the US but constructive values in the Chinese at home. The Chinese are famous for playing the long game. They understand that good times make for soft men, and hard times make for hard men.

International Man: China has made huge advances in technology, trade, and more.

Much of this has happened on the back of easy money and sky-high debt.

How much better off is China than the declining US empire?

Doug Casey: A lot of the answer may come down to timing.

As I said before, China under Xi is moving away from the policies that gave it so much prosperity over the last 40 years.

I hasten to point out that “Communist” China is not, in fact, communist. And it hasn’t been for 40 years. Its economic system is state corporatism, or fascism, very much on Mussolini’s model. It’s surprisingly similar to our own system, although with much more authoritarian, top-down control. Unfortunately, we’re moving in their direction, further from real capitalism—even as Xi is trying to make himself into a new Mao.

To sum up, financing the Belt and Road initiative, building cities in the middle of nowhere could destroy the Chinese banking system. The Chinese banking system has been built by a billion Mr. and Mrs. Wus, saving 50% of their incomes. If China gets massive unemployment, which it certainly will if there’s a trade war, Mrs. Wu is not going to save, she’s going to withdraw. And she’ll be most unhappy if she either doesn’t get her yuan or if they’re worthless due to inflation.

I’m betting the medium-term future for China is grim. In fact, maybe even more grim than that of the US, which is saying something. We just don’t realize it yet, partly because reporting out of China is sketchy and very politically controlled and partly because we’re so preoccupied with our own very serious problems.

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