Leva: China's Three "Death Spirals"

China's Three "Death Spirals"

"Death spiral" is a situation that keeps getting worse and that is likely to end badly, with great harm or damage being caused.

1. Deflation, which is called a death spiral.

An article in Singapore's Lianhe Zaobao on September 10 of this year argued that the danger facing China is that, given that households may cut spending due to falling wages, or postpone purchases due to the expected further drop in prices, deflation could enter a snowball effect. Corporate revenues will be affected, thereby inhibiting investment, leading to further wage cuts and layoffs, and driving households and businesses into bankruptcy.

Data released by the National Bureau of Statistics on October 27 showed that in September, the profits of industrial enterprises above designated size nationwide decreased by 27.1% year-on-year, an increase in the decline by 9.3 percentage points compared to August, marking a decrease for two consecutive months. Dragged down by this, the cumulative profits of industrial enterprises above designated size from January to September turned from a 0.5% increase to a 3.5% decrease year-on-year, which is 4.0 percentage points lower than the previous value, marking the first cumulative year-on-year decline within the year.

1. Increasingly rigid and conservative ideology is another death spiral.

Japanese-American political scientist Francis Fukuyama, in his world-renowned work [The End of History and the Last Man], mentioned that (Soviet) economic deterioration weakened the (Communist Party of the Soviet Union) ideology. The original words were: Economic decay in turn fostered ideological demoralisation.

China will certainly learn from the Soviet lessons. As the Chinese economy enters a long-term downward cycle accompanied by the deterioration of the external environment, it is a standard move for the government to strengthen social control and speech suppression; it is nothing to be surprised about. It's like wrapping oneself more tightly in clothes during winter.

However, a chilling political atmosphere will inevitably strike the economy. During the ten years of the Cultural Revolution, the Chinese economy was on the verge of collapse, which is a relatively extreme example. After the economy continues to deteriorate, it leads to further tightening of social control, which in turn shakes the confidence of the public, foreign capital, and private entrepreneurs, causing deeper destruction to the economy... Is this not another "death spiral"? I believe it is. The government's power is too great and unrestrained, so every policy is excessive, and even the Ministry of State Security can manage the economy.

1. Aging and low birth rates are mutually causal, forming the third death spiral.

Getting old before getting rich, and getting into debt before getting rich. Aging increases the social burden, which, combined with the high unemployment rate during the economic downturn, especially the high youth unemployment rate, strikes the willingness of young people to marry and have children. In the first three quarters of this year, the number of marriages hit a new low since 1980, while the decline in fertility rates (low birth rates) further deepens aging and further increases the social burden, which will inevitably lead to the fertility rate sinking to the bottom and falling into the abyss of aging.

Therefore, I believe China has fallen into political, economic, and demographic death spirals.