China’s Economic Disorder: Overproduction, Oversupply, Overcapacity, oh my!

AND Real Electoral Trouble in the Real Republic of Georgia

Whether it is solar panels or steel, clothes or tech, many of the world’s manufactures are made in China. But did you know that ‘Capitalism with Chinese Characteristics’ means that the Chinese manufacturing sector is not really supply and demand driven and tends to produce far more than the rest of the world demands? Now… with a faltering post-COVID recovery, a housing market collapse, and worsening relationship with the West, is China’s economy in a genuine state of crisis? And could a troubled Chinese economy, unable to be buoyed by the recently announced stimulus, spread more Disorder globally? (On September 24, Pan Gongsheng, Governor of China’s Central Bank, unveiled the country’s boldest intervention to boost its economy since the pandemic.) And what should the US and UK do to contain China’s disordering potential? And how are different approaches to the Chinese economy a key electoral issue in the upcoming US Presidential election?

Today, we are gonna look at some ways in which China is seeking to rival the US on the world stage but is also acting in a disordered fashion vis a vis its own economy, Trying to pretend to be a market driven economy while giving non-market subsidies to key export sectors in highly distortionary ways… and that this non-market export at all costs model is connected to Chinese neopopulism… that is: menacing Taiwan, oppressing dissenters, imprisoning bloggers, and its overall appalling human rights record, including China’s treatment of Uighurs and Tibetans…

I’ve become particularly interested in the issue of Chinese mismanagement of its own economy… massive levels of internal debt, its high savings rate which led to the real estate bubble and burst and the new bugbear of oversupply: this how Chinese firms over produce things like Solar panels, EVs, and a range of seemingly necessary goods and that this phenomenon of oversupply/subsidies/dumping is massively disordering and makes it nearly impossible for the West to have a coherent market based approach to producing key components of the energy transition. 

This situation actually explains why some aspect of the Trump/Vance trade war with China is needed, just not in the neopopulist brute force just slap tariffs on it way they envision it. It also explains why China is terrified of Trump/Vance and has recently hacked their phones and is trying to tip the election against them.

On today’s episode of Disorder, to go on this journey with me and explain both how the Chinese economy functions or doesn’t and what disordering effects its non-market approach to capitalism with Chinese characteristics has on the globe I am joined by Zongyuan ‘Zoe’ Liu, the Maurice R. Greenberg Fellow for China Studies at the Council on Foreign Relations, and author of Sovereign Funds: How the Communist Party of China Finances Its Global Ambitions. Jason and Zoe discuss how China's economic policies (again ‘Capitalism with Chinese Characteristics’ ) – characterized by a motley mix of market-driven and state-controlled elements – have led to both tremendous Chinese excellence in manufacturing and also oversupply. The duo also discuss: the changing US-China relationship, the implications of Chinese overproduction on the global economy, and the role of massive Chinese provincial government debt.

As they Order the Disorder, they suggest how existing institutions like the World Trade Organization could work better, and how to patch up the failing marriage between China and the West.

(Listen here)

Learn More about Oversupply, China’s economic troubles, Chinese phone hacking, and the diplomatic channels that still function effectively btw the US and China

Read Zoe’s article ‘China’s Real Economic Crisis: Why Beijing Won’t Give Up on a Failing Model’ https://www.foreignaffairs.com/china/chinas-real-economic-crisis-zongyuan-liu

Read more on why ‘China’s economic ills are serious but not incurable’https://www.ft.com/content/553b106c-2bba-4f90-86d6-8496fc9cf902

On the Chinese hacking of Trump and Vance’s phone’s: https://edition.cnn.com/2024/10/25/politics/chinese-hackers-targeted-trump-and-vances-phone-data/index.html

For more on China’s government is about to spend big on stimulus – can it turn around the country’s sluggish economy? https://theconversation.com/chinas-government-is-about-to-spend-big-on-stimulus-can-it-turn-around-the-countrys-sluggish-economy-241260

To get more on Zongyuan Zoe Liu https://www.cfr.org/expert/zongyuan-zoe-liu

Watch US Ambassador to China Nicholas Burns explain The China Challenge https://foreignpolicy.com/live/burns-china-us-competition-diplomacy/

Read George Manus’ piece ‘China’s plan to boost flagging growth is the very definition of economic insanity‘ https://www.theguardian.com/business/2024/oct/13/chinas-plan-to-boost-flagging-growth-is-the-very-definition-of-economic-insanity

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Now from the sublimely ridiculously (China’s oversupply problems) to the tragically ridiculous (The Georgian election which has allowed the most pro-American nation on earth to slip further into Russia’s orbit):

As most of you will already know… Real Georgia had its real election and it was rigged long before election day came around and the pro-Russian party won.. (You can read more about it here from BBC).. from experts on the ground the election was administered smoothly enough, but a very pro-Western populace voted for a very pro-Russian candidate… yet the vote count is likely accurate but the pre-election environment was very problematic… At present Georgia’s President is saying she won’t recognize the Parliamentary results (The president is not a member of Georgian Dream – she was close to their funding oligarch initially, but broke with them in March 2023 when they tried to pass the first foreign agents  law):

Standing alongside opposition leaders, President Salome Zourabichvili urged Georgians to rally Monday night on Tbilisi’s main street to protest what she called a “total falsification, a total stealing of your votes,” raising the prospect of further political turmoil in the South Caucasus nation.

She spoke the day after an election that could decide whether Georgia embraces Europe or falls under the sway of Russia.

“This election cannot be recognized, because it is the recognition of Russia’s intrusion here, Georgia’s subordination to Russia,” Zourabichvili said….

Georgian Dream has become increasingly authoritarian over the past year, adopting laws similar to those used by Russia to crack down on speech. Brussels suspended Georgia’s EU membership process indefinitely because of a Russian-style “foreign influence law,” passed in June. Many Georgians viewed Saturday’s vote as a referendum on the opportunity to join the European Union.

Read the rest of the article from the AP here.

You have to keep in mind hundreds of thousands of Russians have fled to Georgia to escape being drafted since 2022… And Russian media and intelligence has so many links into Georgia so how did this happen?

It was more a pervasive pre-election atmosphere of intimidation threats against civil servants, and manipulation of administrative resources by the incumbent ruling Georgia Dream party, combined with targeted intimidation of voters on election day… and that is very much the recipe that Hungary’s Orban used to cement his one party state and cancel Hungarian democracy… And as we know what can happen in Real Georgia can happen in the State of Georgia… and Black voters and liberals will be targeted with misinformation and fears of going to the polls or fears of long lines at the polls or whatever… so the authoritarian neo-populist playbook ping pongs around the world from Tblisi, Georgia to Athens, Georgia quite easily. And Authoritarian learning suggests that you don’t rig elections on election day but for months before with misinformation and threats and dissuasion.

So for more on my views after talking to some Western diplomats stationed in Tbilisi on this situation subscribe to our pay for version of the substack: