The Dragon's Descent: China's Demographic Disaster and Imminent Collapse

A Peter Zeihan Perspective - Article #25

In this 12 min article, The X Project will answer these questions:

• I. Why this article now?

• II. Who is Peter Zeihan?

• III. Where did his perspective on China come from?

• IV. What is the top takeaway from his perspective on China?

• V. What is another top takeaway?

• VI. What is a third takeaway?

• VII. What is a fourth takeaway?

• VIII. What is a fifth takeaway?

• IX. What does The X Project Guy have to say?

• X. Why should you care?

I. Why this article now?

In a world where the dragon's roar once echoed across global markets and political spheres, we now hear a stifling silence – the sound of a giant grappling with its own existential crises. The X Project's latest deep dive into Peter Zeihan's insights on China couldn't be more timely. As the winds of change howl through the corridors of power in Beijing, understanding the seismic shifts happening within the People's Republic is not just academic curiosity; it's an urgent necessity for anyone with a stake in the future of global economics, politics, and power balances.

Long perceived as the unstoppable juggernaut of economic growth and expanding influence, China stands at a precipice. Not long ago, it was common to hear alarmist prognostications of China’s economy surpassing that of the United States in ever-shortening time frames. More recent headlines suggest this may never happen now. Zeihan suggests its best days are already behind it. The implications of its internal turmoil aren't just confined within its borders; they ripple out, affecting commodities, markets, and geopolitical strategies worldwide.

This article draws from Zeihan’s expert analysis to provide a perspective that stands in stark contrast to Ray Dalio’s as presented in the prior article #24, which covered his best-selling book, Principles for Dealing with The Changing World Order - Why Nations Succeed and Fail.

II. Who is Peter Zeihan?

Newer subscribers may be unaware, but Peter Zeihan is a geopolitical strategist who is a top influencer of The X Project. He is the author of four books, all of which made The X Project’s list of Top 20 most influential books, as outlined in articles #1 and #2. The three books covered thus far are The Accidental Superpower, The Absent Superpower, and Disunited Nations, in article #7, article #12, and article #18, respectively. Each of those articles has a different and longer biography of Peter Zeihan that you can check out.

III. Where did his perspective on China come from?

The X Project reviewed the following seven YouTube videos for this article:

1. January 4, 2024: 142,899 views

2. December 13, 2023: 604,868 views

3. September 27, 2023: 862,391 views

4. September 19, 2023: 2,212,268 views

5. August 11, 2023: 780,264 views

6. June 29, 2023: 763,715 views

   7. January 18, 2023: 332,510 views

IV. What is the top takeaway from his perspective on China?

The Demographic Disaster

Zeihan paints a picture of a demographic time bomb that has already gone off in China. With birth rates plummeting to historical lows and urban centers even worse off, China faces the fastest-aging population ever recorded. This isn't just about fewer babies; it's a fundamental shift that threatens the very workforce engine that powered China's economic miracle. The reverberations of this demographic collapse will be felt in labor markets, consumer spending, and the ability to sustain growth – a stark reversal from the narrative of an ever-growing Chinese economic powerhouse and one that Ray Dalio seemingly did not consider.

In addition to the videos above, Zeihan posted a blog on June 29, 2023, titled New Chinese Demographic Data = Population Collapse that shows the graphs of demographic data, and the article is reproduced here in its entirety:

“Today, we’re breaking down the new demographic data from the Chinese space. This will allow us to make some much-needed updates to an already bleak assessment…and spoiler alert, it’s going to get a lot worse.

The first graph shows us the demographic picture before any of this new data were released. You’ll notice China already has an incredibly fast-aging population. The number of people entering the workforce can’t keep up with retirees, so even when using the old data, labor costs were increasing faster than any country in history.

The second graph shows us what the new data are saying. The number of children under age five has collapsed, leaving China with nearly half the amount of five-year-olds as fifteen-year-olds. This happened well before COVID drove down birth rates and increased death rates. Even though this is the “official” Chinese data, it’s likely overly optimistic.

So that brings us to our internal extrapolation of the data as seen in graph three. Again this is our interpretation, but it gives you a better look at the Chinese predicament. Leaks out of China suggest the yellow bars don’t even exist; this means China isn’t a country in demographic decay…its a country in the advanced stages of demographic collapse.

China is entering its final decade of operating as a modern industrialized nation. For any foreign business still in China, those sunk costs on factories can only keep you there for so long…and it will only get worse from here on out.”

Zeihan claims that China admitted that it overcounted its population by in excess of 100 million people. China never actually got to 1.4 billion people, as is commonly thought, and it also means India surpassed China as the most populous nation sooner than 2023, as was widely reported last year. These overcounted individuals are primarily those who would have been under 40 years old. Under the old data, China’s population was expected to be reduced by half by the end of the century. Under the new data, he now expects China’s population to fall by half by mid-century.

If the social, economic, and political strain of dealing with such a large aging and dying segment of its society isn’t convincing enough as to China’s imminent demise, Zeihan has a few more reasons for you to consider.

V. What is another top takeaway?

Economic Model Unsustainability

The once robust and enviable Chinese economic model, heavily reliant on globalization, is showing cracks. Zeihan emphasizes China's acute vulnerability due to its dependence on global trade for essential resources like food and oil. As geopolitical tides turn, with worsening relations and shrinking global integration, China’s economic model appears increasingly fragile. This shift signals potential upheaval in global supply chains and markets, making a reassessment of China's role as the ‘world’s factory’ more critical than ever.

VI. What is a third takeaway?

Political Purges and Information Blackout

An alarming theme in Zeihan's discourse is the extent of political purges under Xi Jinping, leading to a stark information vacuum. Zeihan claims that Xi has killed the messenger so many times that no one brings him any information any more. Remember when China had electrical blackouts for a good portion of 2022? According to Zeihan, President Biden was the first person to tell him about them when they met on the sidelines of the Asia-Pacific Economic Cooperation (APEC) forum in Bali in November of 2022. This lack of transparency and the elimination of potential rivals and dissenting voices indicate a system closing in on itself. For international observers and stakeholders, this raises red flags about the predictability and stability of Chinese policy-making and governance, affecting everything from investment decisions to diplomatic strategies.

VII. What is a fourth takeaway?

Naval Power and Military Might Misconceptions

Contrary to popular belief, Zeihan argues that China's naval power is significantly overstated. While the Chinese navy boasts many ships, 380 - 650 depending on where you draw the line on what qualifies as a ship compared to the U.S. Navy’s 270 ships, their capabilities and range are limited compared to the U.S. Navy. Most of China’s ships are small 2,000-ton corvettes, and it does not have even one fully functional aircraft carrier. 90% of its fleet can’t sail 1,000 miles from shore in peaceful conditions, and it is likely not even 400 miles under combat conditions. Two of our twelve supercarriers, each of which has an air force aboard bigger than the air forces of all but four countries, have far more firepower than the entirety of their navy.

This revelation challenges the narrative of a rising Chinese military threat in global waters, reshaping geopolitical and defense strategies, especially in the Pacific region.

VIII. What is a fifth takeaway?

Impending Economic Collapse and Global Impact

Perhaps the most chilling takeaway is the near certainty of an impending economic collapse in China, as per Zeihan’s analysis. The convergence of demographic decline, economic model failure, and political instability paint a scenario where China's fall from grace could be both swift and catastrophic. The global implications are vast – from disrupted supply chains to shifts in global power dynamics. Understanding these potential outcomes is crucial for governments, businesses, and investors alike.

IX. What does The X Project Guy have to say?

That is a completely different picture of and outlook for China than Ray Dalio’s compelling and much more positive one in The Changing World Order. It is hard to argue with the destiny of demographics, and so I find myself leaning toward Zeihan’s position. However, I think considering a middle ground between the two outlooks is reasonable. In other words, while the demographic collapse may be very real, the consequences may not be as dramatic as Zeihan portrays nor be exhibited as soon as he suggests they might be. On the other hand, Dalio may have captured the dynamics of China’s rise very well up until now; however, the upward trajectory he suggests may not continue due to the demographic drag.

In the final section, I will discuss a dangerous middle-ground scenario. However, you must now be a paid subscriber to view the final section. In a few articles, the paywall will move up within the article so that only paid subscribers will see the last two sections. Or said another way, free subscribers will only see the first eight sections. I will be moving the paywall up every couple of weeks, so ultimately, free subscribers will only see the first four sections of each article. Please consider a paid subscription.

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