China in Decline?

On 21 September 2023, South China Morning Post headlined this: China beats US in top global scientific ‘hot papers’ ranking. Its journalist Ling Xin in Ohio begins by saying, “For the first time, China has surpassed the US with in the number of papers published and cited in the world’s most influential journals.” She went on to report, “China also ranked first on the international papers citation chart in six major disciplines – agricultural sciences, chemistry, computer science, engineering, materials science and mathematics.”

Personally, such news are really not news to me. The trajectory is clear, it will continue to be so, unless China has another Hongxi Emperor (洪熙帝, reigning from 1424 to 1425) to shoot his own foot.

I labelled August 29, 2023 as China’s Breakthrough Day – when Huawei released its Mate60Pro smartphone in the midst of US Commerce Secretary Gina Raimondo’s visit. Many friends are not so sanguine, fearing that the US will come harder on China and Huawei. It is certainly going to be so, but I am pretty sure that with the type of resilience in our culture, China will finally prevail. Just look at its car industry this year; it is totally capable of ‘commoditizing’ anything that its entrepreneurs go in.

But pessimism is gripping many, including top scholars. Prof Tan Kong Yam of NTU Singapore published an article “Is China headed down the path of decline?” in The Straits Times on September 6. While his article is constructive, his title is unnecessarily pessimistic.

Tan begins by citing the vulnerability of China’s property sector – “given its outsized influence on the economy.” He goes on to suggest that China needs to shed the drag from its bloated real estate sector and overexpansion in infrastructure. Investor confidence appears to be lacking in China today, he laments.

While the reasons offered by him are largely valid, I contend that China is not heading south, economically speaking.

Three things are fundamentally behind China’s gloom now: (a) the greed element in Chinese mindset, (b) the decoupling attempts by the US and its allies on China’s economy, and (c) the ‘formidable tyranny’ of the Fed.

Chinese by nature are high risk takers; and they believe in real estate, thinking that they can make great capital gains out of such investments. I remember witnessing things when I visited Zhengzhou in 2012. Huge completed residential high rises were left unoccupied everywhere. Did they become white elephants, No, of course. They were taken up – because China was urbanising its population. And has China collapsed? Only Gordon Chang said yes.

Be that as it may, the Chinese government was trying to correct this “real estate is best” culture. Xi had admonished that “houses are for one to stay, and not for one to speculate’. His admonition immediately caused the overzealous bureaucrats to immediately act on the sector, when the overall economy needs proper ‘tuina’ (推拿, gentle massaging), hence the apparent meltdown. I believe China has realised this mistake and has started to loosen up. It should go back to normalcy in no time. Afterall, China has an extremely high national savings rate (equivalent to something like 46% of its GDP, and high downpayments are required for mortgages. Walking away is usually not an option). However, this greed element can never disappear. Once the tide subsides, Chinese will return to this ‘safe haven’ asset class again. Ditto on its infrastructure spending. Its belief in Supply Side economics is most commendable. Based on conventional economic modelling, most infrastructure projects in China would not have passed the financial feasibility test, but they went ahead regardless. And the West had cast all sorts of doubts about their necessity and viability. Who is having the last laugh now?

Its exports seem to be slowing. Have the Chinese lost their competitiveness? The answer is certainly a big NO. There is no denying that it is not in a good shape now. It is really the result of the last two headwinds mentioned earlier.

It is obvious that there is no way the US and its allies in Europe and Asia can decouple their economies from China’s. And realising that, they are now talking about de-risking, which they themselves are also groping in the dark about how they can or should go about doing it. Yes, some were forced to relocate their factories out of China because of the sanctions imposed by the US, or because China is no longer a place for them to produce low-tech and labour-intensive goods. This certainly has caused unemployment in China to shoot up, especially amongst its young. And the Fed’s ‘harvesting’ policy is causing virtually the entire world to lose the value of their currencies vis-à-vis the US Dollar. China is also not spared since it is still a long way for all the de-Dollarisation efforts to take good effect. A weak currency at a time when demands are down is particularly bad for China and this has a vicious effect on its general economy – lower revenues, higher unit cost, so on and so forth. Despite its success in harvesting the world, the US is only forecasted to achieve 2.2% in 2023. China, despite the gloom, will ‘chao-chao’ (臭臭, Ming-Nan lingo; meaning, at the very least) do about 5%!

US policies have impoverished much of the world. Its Quantity Easing efforts and close-to-zero interest rates in the earlier decade had sown two bad seeds: (a) the widening of the income gap between the rich and the poor, and (b) current inflation pressure. Commonsense Economics says that there must be a cost to borrowed capital. And money supply must be pegged to growth and productivity. All these had been cast aside, resulting in huge returns to the equity capital of the rich, thanks to the stock market P/Es and the huge spread generated by low borrowing cost (which, when multiplied by a high D/E allowability, generates obscene gains).

Old Joe and his self-aggrandization team have zero understanding of Commonsense Economics. You can move all the chip-making facilities to America, but if you do not sell to the innovative Chinese, who else can buy from you in huge volumes? India? Another twenty years maybe. And how much is ethnic Chinese IP capital in the US? More than 30%! Any shrinkage of this capital, and with zero collaboration between the universities and scientific institutions with China, America will have to kiss goodbye to its high-tech hegemony. Any surprise with the SCMP article mentioned earlier? Of course, China will also have to suffer in the interim.

And on the question of consumer confidence raised by NTU’s Prof Tan, he should have understood the Chinese better. With their deep pockets, they will swarm outlets and tourist joints once some forms of impetus to spend surface – like a festival, a celebration, a new ‘toy’, etc.

Huawei and BYD epitomize China’s innovativeness and competitiveness. Coupled with the people’s resilience, the country as a whole will persevere. The new Xiong-nus will be subdued in no time, not by war, but by the good side of Chineseness.

Policy initiatives in Xi’s China are pro-actively conceived years ahead. Belt & Road is a case in point. And in the process of aligning the entire country to a better vision of geopolitical realities, there will always be short-term pains, like what they are experiencing now. Few Western policies are long-term driven, for the incumbent leaders are always worried about their next election chances. They therefore react, rather than proact, in most situations, giving rise to many side effects in the longer-term.

The European leaders have certainly understood the folly of blind loyalty to Biden. Unfortunately, EU is still led by a dumb blonde, who rationalises and talks like Uncle Sam, the latest being her accusation that China is flooding the continent with subsidized EVs. As for the other Yellow and Brown banana leaders in Asia, they will do Sicko Joe’s bidding when they find that the US umbrella cannot even shelter the Americans themselves. And bet you, they will seek China’s accommodation once the US, but if and only if, comes to their senses – just like the way they rushed to recognise the PRC after Richard Nixon made his visit. Their encirclement strategy will vaporise once economic realities seep in. As for rest of the world, particularly the leaders in Central and West Asia, Latin America and Africa have wised up to America’s rhetoric. Their realisation that America is doing a lot of harm to the world now has woken them up. China is seen to be a more dependable partner now. (Everyone wants to be photographed next to President Xi now!) have made them understood China’s philosophy with the outer world better. However, thanks to Western and pro-West media, China still has an image problem with the men in the street in most developed countries. This has to be addressed, lest some of the weaker leaders in this world may become victims of CIA’s Colour Revolution efforts.

I greatly despise the Western and pro-West media, particularly The Economist. I was a subscriber for about 30 years. When it became a mercenary in the wake of the West and pro-West attempts to demonise China and foretell its collapse, I stopped reading them, save for the headlines that came through my mailbox and WhatsApp chat groups. Their journalists remind me of Gordon Chang, who has been predicting China’s collapse for the last twenty year). They are blind or lazy followers of ‘experts’ who have been schooled in Western economics – devoid of any understanding of the uniqueness of a certain cultural strength in Chineseness.  Recently, I received a posting on my WhatsApp and thought I should reproduce it below to show how outstanding The Economist is in playing this role.

1990. The Economist. China’s economy has come to a halt.

1996. The Economist. China’s economy will face a hard landing.

1998. The Economist: China’s economy entering a dangerous period of sluggish growth.

1999. Bank of Canada: Likelihood of a hard landing for the Chinese economy.

2000. Chicago Tribune: China currency move nails hard landing risk coffin.

2001. Wilbanks, Smith & Thomas: A hard landing in China.

2002. Westchester University: China Anxiously Seeks a Soft Economic Landing

2003. KWR International: How to find a soft landing if China..

2004. The Economist: The great fall of China?

2005. Nouriel Roubini: The Risk of a Hard Landing in China

2006. International Economy: Can China Achieve a Soft Landing?

2007. TIME: Is China’s Economy Overheating? Can China avoid a hard landing?

2008. Forbes: Hard Landing in China?

2009. Fortune: China’s hard landing. China must find a way to recover.

2010: Nouriel Roubini: Hard landing coming in China.

2011: Business Insider: A Chinese Hard Landing May Be Closer Than You Think

2012: American Interest: Dismal Economic News from China: A Hard Landing

2013: Zero Hedge: A Hard Landing in China

2014. CNBC: A hard landing in China.

2015. Forbes: Congratulations, You Got Yourself A Chinese Hard Landing ….

2016. The Economist: Hard landing looms for China

2017. Market Watch: China’s economic problems will come to a head in 2017

2018. CNN: Forget the trade war, China's economy has other big problems

2020. Economics Explained: The Scary Solution to the Chinese Debt Crisis

2021. Global Economics: Has China's Downfall Started?

2022. Cathie Wood: China's COLLAPSE Is FAR Worse Than You Think

2022. Business Basics: China's Economic Crisis, GDP is Crashing, Protests Everywhere. China's financial crisis is here." China

2022. 'The Worst is yet to come'. China's slowdown weighs on Global economy.

2023. The Economist: Why China's economy won't be fixed - An increasingly autocratic government is making bad decisions. The fact that China’s problems start at the top means they will persist.

You would have thought after so many years of prediction and Law of Averages that the West would have it right for one year 😬. Unless of course it's all just a smear to make their citizens feel good 🤣

I always love to illustrate my thoughts with some side stories, and in this case, on China’s unyielding spirit to succeed. This time is about China’s space capability. (I believe there are also great successes achieved in the military and micro-electronic fronts, however, due to the need to maintain secrecy, we are unable to know a great deal about them – hypersonic missiles, Fujian Aircraft Carrier, J-20 fighters, etc in the former, and chips and 5G technology for the latter. However, China’s feats in space technology is there for all to see and follow.) There is a great deal of information in Wikipedia about China’s space technology and I have taken the liberty to plagiarise it to share with readers.

China’s Space Technology

Early years

Qian Xuesen, the father of China’s space programme

·       1955: Qian Xuesen (钱学森) returns to China from the United States.

That year, China started constructing its first missile test site in the Gobi Desert, which later became the country’s first space port, Jiuquan (酒泉) Satellite Launch Centre.

·       1960: It launches a sounding rocket T-7M to a height of 8 km.

This was followed by its first missile, later renamed Dongfeng-1 (DF-1, 东风一号) – fuelled by alcohol and liquid oxygen – later that year.

·       1964: DF-2 follows.

·       1970: The 173 kg Dong Fang Hong-1 (DFH-1, 东方红一号, the East is Red 1) takes off atop a Long March-1 (CZ-1, 长征一号).

(China began to develop long-range Dongfeng intercontinental ballistic missile in 1965. The first test flight of DF-5 was conducted in 1971.)

The 1980s and Beyond

Dong Fang Hong-2 (DFH-2, 东方红二号) was China’s own first generation communication satellite. Communications satellites work in the geostationary orbit and require more powerful rockets to do the lift. It started to develop the Long March-3 (CZ-3, 长征三号) series in the 1980s. The Xichang (西昌) Satellite Launch Centre was chosen as the launch site due to its low latitude. It embarked a decade of commercial launches in the 1990s. Its first commission in 1990 (AsiaSat 1) in 1993 was a success; unfortunately, some failures followed, notably the one in 1996 which saw a Long March-3B rocket carrying Intelsat 708 veering off course immediately after take-off, crashing and killing 6 people and injuring 57, making it the most disastrous event in the history of Chinese space program. As a consequence, the Chinese commercial launch service came to a quick halt.

Fortunately, it was able to salvage its reputation and in a space of 15 years (1996 to 2011), China achieved 102 consecutive successful launches. Long March 3B was able to place heavy GTO payloads into orbits.

However, this good fortune evaporated after the US banned all forms of collaboration with China in this industry.

Notwithstanding, China persevered.

 (1)  The Rockets

Without a powerful rocket, nothing heavy can be lifted extra-terrestrially.

The Long March rockets were also experiencing a crucial revolution. After an early study that lasted for over a decade, a new rocket engine named YF-100 was eventually certified in 2012. 

 

2015: Long March-6 (长征六号), a small rocket using one YF-100 engine, on its first stage, makes its maiden flight.

 

2016: The medium-lift Long March-7 (长征七号), which is equipped with six YF-100 engines, completes its flight, increasing the maximum LEO payload capacity by Chinese rockets to 13.5 tons.

 

The launch of Long March-7 was also the very first launch from Hainan’s Wenchang (文昌) Space Launch Site. The Wenchang site is China's latest and most advanced spaceport. Rockets launched from Wenchang can send ten to fifteen percent more payloads to orbit thanks to its low latitude. Additionally, due to its geographic location, the drop zones of rocket debris are in the ocean, eliminating threats posed to people and facilities on the ground. Wenchang's coastal location also allows larger rockets to be delivered to launch site by sea, which is difficult, if not impossible, for inland launch sites due to the size limits of tunnels needed to be passed through during transportations. The unique advantages has made Wenchang the launch site of many major space missions of China in the following years.

 

The biggest breakthrough was brought by the introduction of Long March-5 (长征五号). It is capable of lifting up to 25 tons of payload to LEO and 14 tons to GTO, making it more than 2.5 times as much as the previous record holder Long March-3B and nearly as equal as the most powerful rocket in the world at that time – Delta IV Heavy. However, after a successful maiden flight in late 2016, the second launch of a Long March-5 in 2017 suffered a failure, which was a big setback for the Chinese space program in nearly two decades, causing postponement of major space missions which were in the pipeline.

 

2019: Long March-5 rocket finally returns in December at Wenchang. It successfully places Shijian-20, the heaviest satellite China had ever built, into the intended orbit.

 

With its great power, the Long March 5 cleared the paths to multiple world-class space projects, allowing China to make great strides toward its ambitions in the coming 2020s.

 (2)   China’s Manned Space (CMS) Programme

1999: Shenzhou-1 (神舟一号), takes off atop a Long March 2F (CZ-2F, 长征二号F) rocket from Jiuquan. After orbiting the Earth for 14 rounds, the spacecraft initiates the return procedure as planned and lands safely in Inner Mongolia, marking the full success of China's first Shenzhou test flight.

 

China’s Manned Space Programme was formally announced to the public.

 

January 2001 to January 2003: China conducts three uncrewed Shenzhou spacecraft test flights, validating all systems required by human spaceflight. Shenzhou-4 is lifted off in 2002 flies for almost 7 days and orbited around the Earth for 108 circles before returning.

 

2003: Shenzhou-5 spacecraft carries China’s first astronaut Yang Liwei (杨利伟) flies for 21 hours and 14 orbits around the Earth, the spacecraft lands safely in Inner Mongolia.

 

2005: China launches Shenzhou-6

 

2008: Shenzhou-7 takes off. During the latter flight, two of the astronauts conducted spacewalk.

 

China’s Manned Space Program continued to make breakthroughs in human spaceflight technologies in 2010s. (In the early 2000s, China had engaged with the Russians in technological exchanges on the development of a docking mechanism used for space stations.)

 

2011: In April, US bans all space collaboration between China and NASA. China launches an 8,000 kg (18,000 lb) target vehicle, Tiangong-1(天宫一号) in September.

 

2011: The uncrewed Shenzhou-8 performs China's first automatic rendezvous and docking. Nine months later, Tiangong-1 completed the first manual rendezvous and docking with Shenzhou-9, a crewed spacecraft carrying China's first female astronaut. Tiangong-1 was later docked with Shenzhou-10 whose astronauts conducted multiple scientific experiments, gave lectures to students in China, and performed more docking tests before returning to the Earth safely after 15 days in space.

 

2016: Although Tiangong 1 was considered as a space station prototype, its functionality was still remarkably weaker than decent space laboratories. Tiangong-2, the first real space laboratory of China, goes into orbit on September 15. It was visited by Shenzhou-11’s crew a month later. Two astronauts entered Tiangong 2 and were stationed for about 30 days, breaking China's record for the longest human spaceflight mission while conducting diverse types of human-attended experiments.

 

2017: China's first cargo spacecraft, Tianzhou-1 (天舟一号), docks with Tiangong-2 and completes multiple in-orbit propellant refuelling tests. The space laboratory missions verified China's capability of medium-term life support and resource resupply in space. The successful completion paved the way for the construction of China Space Station in the coming decade.

 (3)  Shooting for the Moon and Mars

2007: China launches its first lunar orbiter Chnag’e-1 (嫦娥一号). It performs a series of surveys and produced China's first lunar map. After it has served its purpose, the orbiter lands on the lunar surface.

 

2010: China's second lunar probe, Chang’e-2 reaches the moon.

 

2013: Chang’e-3 successfully lands on the Sinus Iridum region of the Moon, making China the third country that makes soft-landing on an extraterrestrial body. A day later, the Yutu (玉兔) rover was deployed to the lunar surface and started its survey.

 

2019: Chang’e-4 takes off.

 

Although humans have already got quite an amount of knowledge about the overall condition of the far side of the Moon in early 21st century with the help of numerous visits by lunar orbiters since the 1960s, no country had ever explored the area in close distance due to lack of communications on the far side. This missing piece was filled by China's Chang’e-4 mission that year. To solve the communications problem, China launched Queqiao (鹊桥), a relay satellite to enable communications. In January 2019, Chang'e 4 successfully soft-landed on the far side of the Moon, A rover named Yutu-2 was deployed onto the lunar surface.

 

China made its first attempt of interplanetary exploration during the same period. China had made an earlier attempt to Mars with Yinghuo-1 (萤火一号) on board of a Russian spacecraft in November 2011. However, due to an error of the onboard computer, the Russian spacecraft failed to start its main engine and was stranded in the low Earth orbit after launch. It eventually re-entered and burned up in the Earth atmosphere.

 

Chang'e 2, which was in an extended mission after the conclusion of its primary tasks in lunar orbit, made a flyby of asteroid Toutatis with closest approach being 3.2 km, making it China's first interplanetary probe.

 (4)  The BeiDou Navigation Satellite System

The first two satellites of the system BeiDou-1 were launched in October and December 2000. It offered basic positioning, navigation and timing services to limited areas in and around China. A more advanced system, BeiDou-2, was developed to serve the Asia-Pacific region and its first two satellites were launched in in 2007 and 2009, respectively.

 

The Beidou Navigation Satellite System proceeded in extraordinary speed. As many as five Beidou-2 navigation satellites were launched in 2010 alone. In late 2012, the Beidou-2 navigation system consisting of 14 satellites was completed and started providing service to Asia-Pacific region. The construction of more advanced Beidou-3 started since November 2017. Its buildup speed was even more astonishing than before as China launched twenty-four satellites into medium Earth orbit, three into inclined geosynchronous orbit, and three into geostationary orbit within just three years. The final satellite of Beidou-3 was successfully launched on June 23, 2020. The completed Beidou-3 navigation system integrates navigation and communication function, and possesses multiple service capabilities, including positioning, navigation and timing, short message communication, international search and rescue, satellite-based augmentation, ground augmentation and precise point positioning.

 (5)  Other Feats

Despite the harsh sanction imposed by the United States since 1999, China in May 2007 launched NigComSat-1satellite, which was first time China provided the full service from satellite manufacture to launch for international customers.

In May 2010, China initiated the High-resolution Earth Observation System program, commonly known as Gaofen (高分). Its purpose is to establish an all-day, all-weather coverage Earth observation system for satisfying the requirements of social development as part of the Chinese space infrastructures. The first Gaofen satellite was launched into orbit in 2013, followed by more satellites being launched into different orbits in the next few years to cover different spectra. As of today, more than 30 Gaofen satellites are being operated by China as the completion of the space-based section of Gaofen was announced in late 2022.

 

Apart from these, in August 2016, China launched world's first quantum communications satellite Mozi (墨子号) and in June 2017, it launched the first Chinese X-ray astronomy satellite. In 2018, China performed more orbital launches than any other countries for the first time in history. On June 5, 2019, China conducted its first Sea Launch in the Yellow Sea.

 And the Vertical Take-off…

The Chinese Lunar Exploration Program continued unabated. In November 2020, Chang’e-5, an 8.2 tonne spacecraft went into orbit, and its lander landed on the moon surface and collected samples. The ascent vehicle attached to the lander then took off from lunar surface and entered lunar orbit, carrying the container with collected samples. This was the first time that China launched a spacecraft from an extraterrestrial body. The ascent vehicle successfully docked with the orbiter in lunar orbit and transferred the sample container to the return capsule, accomplishing the first robotic rendezvous and docking in lunar orbit in history. The orbiter, along with the return module, entered the orbit back to Earth after main engine burned. The return capsule eventually landed intact in Inner Mongolia on December 17, sealing the perfect completion of the mission.

Prior to the launch of Chang'e-5, which targeted the Moon 380,000 km away from the Earth, China's first Mars probe had departed, heading to the Mars 400 million km away. On July 23, 2020, Tianwen-1 (天问一号) was launched and after a seven-month journey, Tianwen-1 entered the Mars orbit, and later its lander Zhurong successfully touched down on Mars and on May 25, 2021, its rover drove onto the Martian surface. Tianwen-1 completed the daunting process involving the orbiting, landing, and roving in highly sophisticated manner on one single attempt, making China the second nation to land and drive a Mars rover on Martian surface after the United States.

And the Construction of China’s Space Station

The "Third Step" of China Manned Space Program kicked off in 2020. Long March 5B, a variant of Long March 5, conducted its maiden flight successfully that year. Its high payload capacity and large payload fairing space enabled the delivery of Chinese space station modules to low Earth orbit. On April 29, 2021, 22-tonne Tianhe (天和) was successfully launched into Low Earth orbit, marking the beginning of the construction of the China Space Station, also known as Tiangong (天宫). A month later, China launched Tianzhou-2, the first cargo mission to the space station. In June, Shenzhou-12, the first crewed mission to the Chinese Space Station housing three astronauts was launched from Jiuquan. The crew docked with Tianhe and entered the core module about 9 hours after launch, becoming the first residents of the station. The crew lived and worked on the space station for three months, conducted two spacewalks, and returned to Earth safely on September 17, 2021, breaking the record of longest Chinese human spaceflight mission (33 days) previously made by Shenzhou-11. Roughly a month later, the Shenzhou-13 crewed was launched to the station. Three astronauts spent over 180 days before returning to Earth in April 2022.

Starting from May 2022, the China Manned Space Program had entered the space station assembly and construction phase. On June 5, 2022, Shenzhou-13 was launched and docked to Tianhe core module. The crew welcomed the arrival of two space station modules during the six-month mission. On July 24, the third Long March 5B rocket lifted off from Wenchang, carrying the 23.2 tonne Wentian (问天) laboratory module, the largest and heaviest spacecraft ever built and launched by China, into orbit. On September 30, the new Wentian module was rotated from the forward docking port to starboard parking port. On October 31, the Mengtian (梦天) laboratory module, the third and final module of China Space Station, was launched docked with the space station. On November 3, the 'T-shape' China Space Station was completed. On November 29, Shenzhou-15 was launched and later docked with China Space Station. Three astronauts were welcomed by the Shenzhou-14 crew on board the station, completing the first crew gathering and handover in space.

And Astronauts on the Moon by 2030

China has also initiated the Moon landing phase of China's crewed lunar exploration program, which aims to land Chinese astronauts on the Moon by 2030. 

America can say that they have been there already; but what China will achieve is likely to make NASA nervous.

Acknowledgement: To my good friend Chris Kwok Chu Chin who has made many good suggestions and helped me to correct typos.