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AGING ASIA & XI GETS AN EARFUL IN EUROPE



EXECUTIVE SUMMARY

This week's strategic review covers a spectrum of global geopolitical shifts and economic updates, particularly focusing on the following key areas:

  • China's Economic Slowdown: The analysis of China's economic model underlines a shift from rapid growth to potential stagnation. This is attributed to excessive government control, reliance on government investment, and export-driven growth. To avoid further inefficiency and decline, the need for a shift towards domestic consumption and innovation is emphasized. 

  • Migration Trends: There has been an increase in Chinese nationals arriving at the U.S. southern border, attributed to economic opportunities and political pressures in China. This trend aligns with global migration patterns and is influenced by post-pandemic recovery dynamics and changes in U.S. visa policies.

  • Demographic Challenges in East Asia: Significant demographic shifts are expected in East Asia, with notable population declines and aging in China, Japan, South Korea, and Taiwan. These shifts are projected to affect economic vitality, labor productivity, and social welfare systems.

  • Europe's Stance on China and Ukraine: European Commission President Ursula von der Leyen has urged China to play a critical role in resolving the conflict in Ukraine and highlighted the economic tensions between the EU and China. The need for Europe to safeguard its economy against market-distorting practices by China was stressed.

These topics outline the strategic challenges and opportunities facing global powers, emphasizing the need for adaptive policies and international cooperation to manage economic, demographic, and geopolitical realities.

 

FROM THE HEADLINES


  • Biden to hike tariffs on China EVs, offer solar exclusions.

  • Spot rates for shipping containers jumped last week on signs of stronger demand.

  • According to the April numbers from the Port of Long Beach, trade flows to the US West Coast are strengthening.

  • Putin names economist as Defense Minister in surprise reshuffle.

  • Once again, the gas supply of Europe is dependent on a single company.

  • The Bank of Japan has reduced its bond purchases during regular operations as the yen's value remains low.

  • The Euro-zone economy is expected to gain momentum as Germany recovers.

  • India is set to sign a long-term deal with Iran to run a terminal at Chabahar port, as it aims to extend trade in Central Asia.

  • As Russia increases attacks, Ukraine intercepts fewer harder-to-hit missiles.

  • Fighting between Israel and Hamas intensified across the Gaza Strip as mediators pushed for a ceasefire and free hostages held by Hamas.


 

CHINA

A critical analysis of China's economic model under the current regime of the Chinese Communist Party (CCP) shows that China's economic policies, which once successfully promoted rapid growth, are now causing stagnation and possible decline due to excessive government control and inefficient economic policies.

China's economic growth model, heavily reliant on government investment and export-driven expansion, has led to overcapacity and unproductive investments. This model worked well when global demand for cheap Chinese products was high and China had a younger workforce. However, its limitations are becoming evident with changing conditions and global resistance to Chinese exports. Without encouraging domestic consumption and innovation, the focus on manufacturing and exports has led to inefficiency and corruption. The government's reluctance to empower the private sector and stimulate consumer spending may hinder future economic growth.


 

 

CHINA

There has been a recent rise in the number of Chinese nationals arriving at the U.S. southern border, a phenomenon exaggerated by some right-wing commentators as a potential security threat, with claims of military infiltration or espionage. However, the article points out that this fearmongering is unfounded, as espionage would more likely involve Chinese tech workers and graduates, who have the necessary access, rather than asylum-seekers.

A significant portion of the 37,000 migrants are young men, which is consistent with global migration patterns, especially among those taking physically demanding routes like the Darién Gap between Columbia and Panama. The increase in Chinese migrants can partly be explained by a larger global trend of Chinese emigration during the COVID-19 pandemic, influenced by a strong U.S. economic recovery and China’s slower post-pandemic recovery.

Additionally, changes in U.S. visa policies during the pandemic, U.S.-China tensions, and the high acceptance rate of Chinese asylum claims have contributed to this migration. Many Chinese migrants are responding to these factors and are driven by a combination of economic opportunities and political pressures at home.

Significant costs and logistics are involved in such migration, often involving large debts and the assistance of organized crime networks. Despite these challenges, the current levels of Chinese migration to the U.S. are expected to stabilize rather than increase significantly in the near future.


 

 

ASIA

The central point of "East Asia's Coming Population Collapse" by Nicholas Eberstadt focuses on the dramatic demographic shifts expected in East Asia over the coming decades, specifically the significant population declines and aging in China, Japan, South Korea, and Taiwan. These changes are projected to drastically reshape these nations' political and economic landscapes due to declining birthrates and the resultant decrease in workforce populations. This demographic transition poses significant domestic challenges for these countries, including economic stagnation and increased social welfare costs, and also alters their international standing, impacting their ability to maintain influence and power globally.


China

  • Population Decline: China's population will fall by eight percent between 2020 and 2050.

  • Aging Population: The number of people over 60 will greatly increase while the overall population decreases.

  • Fertility Rates: China's fertility rates are almost 50 percent below the replacement level. Despite ending its one-child policy in 2015, the birth rate has declined.

  • Economic and Military Impact: With a shrinking and aging population, China will face challenges in maintaining its economic growth and military recruitment. The number of people aged between 20 and 64 relative to those over 65 is expected to plummet, impacting productivity and increasing the financial burden on social services.


Japan

  • Population Decline: Japan's population is set to fall by 18 percent between 2020 and 2050.

  • Aging Population: By 2050, Japan will likely have fewer people under 70 and a significantly higher proportion of elderly individuals.

  • Fertility Rates: Japan's fertility rates are over 40 percent below the replacement level, contributing to its population decline.

  • Societal Impact: The demographic shift threatens to reduce economic vitality, as a smaller working-age population supports a growing number of elderly, which will likely lead to higher healthcare and pension costs.


South Korea

  • Population Decline: South Korea's population is poised to shrink by 12 percent between 2020 and 2050.

  • Aging Population: The proportion of elderly individuals will significantly increase, with a drastic reduction in the youth and working-age population.

  • Fertility Rates: South Korea's fertility rates are the lowest ever for a national population in peacetime, at 65 percent below the replacement rate.

  • Economic Challenges: The shrinking labor pool and aging population are expected to strain the economy, reducing labor productivity and increasing dependency ratios.


Taiwan

  • Population Decline: Taiwan’s population is estimated to decrease by eight percent between 2020 and 2050.

  • Aging Population: Taiwan will see a growth in the elderly population while the number of younger people decreases.

  • Fertility Rates: Taiwan's fertility rates are also significantly below replacement levels, similar to South Korea and Japan.

  • Social and Economic Effects: Like the other countries, Taiwan will face challenges in sustaining economic growth and social welfare systems due to a smaller workforce and a larger elderly population.


Overall, these demographic trends across East Asia indicate a future where economic growth could stagnate due to shrinking labor forces, and social welfare costs could balloon as fewer working adults are available to support a growing elderly population. This shift will likely profoundly impact the region's domestic policies and international relations.

 

 

 

CHINA/EUROPE

Ursula von der Leyen, the European Commission president, emphasized the critical role China could play in resolving the conflict in Ukraine, urging Beijing to leverage its influence over Russia to cease its aggressive actions. During a meeting with President Xi Jinping of China, alongside French President Emmanuel Macron, von der Leyen highlighted the importance of China's involvement in mitigating Russia's nuclear threats. Despite the uncertain impact of her appeal, von der Leyen's characterization of the conflict as an existential threat to Europe underscores the gravity of the situation, especially in light of Russia's potential use of nuclear weapons.

Additionally, von der Leyen addressed economic tensions between the European Union and China, pointing out the challenges of subsidized Chinese exports to the European market. She stressed Europe's need to protect its economy and security against market-distorting practices and the risks of deindustrialization. This stance reflects a divergence from the more conciliatory tone previously adopted by Macron, as von der Leyen warns of China's ambitions to reshape the international order with itself at the center, moving away from an era of openness to one of security and control.

 

 

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