Dan Warnick

Famine, Economic Collapse of China on the Horizon?

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(edited)

Our fears of a new Chinese famine appear to be closer than we thought.  The latest sustained and overwhelming flooding, coupled with a trade war with the U.S. and the West and loss of much confidence by their worldwide trading partners may prove too much.

Another famine coming? China struggles to meet basic food demands

Could this ultimately bring about the closing of the Chinese borders once again?  My earlier thoughts led me to believe food supply would drive China to the bargaining table with the U.S. and lead to compromise.  However, that thinking (hope?) didn't include a devastating and sustained flooding of their rice bowl.  There is actually a larger, far more deadly fear and possible consequence.  If a famine were to take hold it could be seen, rightfully so IMHO, as a failure of Xi's government to make progress on the trade war with the United States, leading to not only devastating economic impacts and loss of prestige, but the actual starvation and deaths of 10's of millions of Chinese citizens. 

The CCP with Xi as its Leader for Life may cling to the belief that they only need close the borders and clamp a blanket of darkness on all internal media while completely blocking access to outside communications in order to weather such a storm as they now face.  But, there are enough Chinese people still alive that remember all too well the last famine China suffered through from 1958 to 1962.  The losses of life from that previous famine, as the figures are now estimated, were as many as 50 MILLION people, although that number could be much higher since it would be impossible to count the losses across huge remote regions of the country.

I don't believe that China will have the stomach (pardon the pun) for any large military engagements if they are struggling to feed the population and suffering massive financial losses from reduced trade abroad.  It's not that the military forces themselves would suffer any such food shortage, it is that the People's Liberation Army and all Public Security Bureau (police) forces may simply need to be focussed on internal strife during a protracted recession and very likely famine.  And in a famine, the military and police would know exactly how much their own families, friends and hometowns were suffering and dying.

The Covid-19 crisis and the average Chinese people's perceptions of the hows and whys of the government's involvement and mismanagement, together with the resultant loss of life and loss of whatever perceived freedoms people had enjoyed prior, will not soon be forgotten either.

What will China's next moves be, and what will they mean to both the Chinese people and the outside world?

Edited by Dan Warnick
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(edited)

 

7 hours ago, Dan Warnick said:

Our fears of a new Chinese famine appear to be closer than we thought.  The latest sustained and overwhelming flooding, coupled with a trade war with the U.S. and the West and loss of much confidence by their worldwide trading partners may prove too much.

Another famine coming? China struggles to meet basic food demands

Could this ultimately bring about the closing of the Chinese borders once again?  My earlier thoughts led me to believe food supply would drive China to the bargaining table with the U.S. and lead to compromise.  However, that thinking (hope?) didn't include a devastating and sustained flooding of their rice bowl.  There is actually a larger, far more deadly fear and possible consequence.  If a famine were to take hold it could be seen, rightfully so IMHO, as a failure of Xi's government to make progress on the trade war with the United States, leading to not only devastating economic impacts and loss of prestige, but the actual starvation and deaths of 10's of millions of Chinese citizens. 

The CCP with Xi as its Leader for Life Xi may cling to the belief that they only need close the borders and clamp a blanket of darkness on all internal media while completely blocking access to outside communications in order to weather such a storm as they now face.  But, there are enough Chinese people still alive that remember all to well the last famine China suffered through from 1958 to 1962.  The losses of life from that previous famine, as the figures are now estimated, were as many as 50 MILLION people, although that number could be much higher since it would be impossible to count the losses across huge remote regions of the country.

I don't believe that China will have the stomach (pardon the pun) for any large military engagements if they are struggling to feed the population and suffering massive financial losses from reduced trade abroad.  It's not that the military forces themselves would suffer any such food shortage, it is that the People's Liberation Army and all Public Security Bureau (police) forces may simply need to be focussed on internal strife during a protracted recession and very likely famine.  And in a famine, the military and police would know exactly how much their own families, friends and hometowns were suffering and dying.

The Covid-19 crisis and the average Chinese people's perceptions of the hows and whys of the governments involvement and mismanagement, together with the resultant loss of life and loss of whatever perceived freedoms people had enjoyed prior, will not soon be forgotten either.

What will China's next moves be, and what will they mean to both the Chinese people and the outside world?

They will import more food, from nations other than the USA and be fine

Canada and others will gladly sell them more food; US is not the only nation that can run deficits.

They will increase ocean harvesting.

They also have strategic food reserves, and can restrict the consumption of expensive foods (e.g. ration meat).

 

The idea they will starve and that will force them to capitulate on the trade war they are winning against the US is laughable.

https://tradingeconomics.com/united-states/balance-of-trade

"China Trade Surplus Larger than Expected

China's trade surplus widened sharply to USD 58.93 billion in August 2020 from USD 34.72 billion in the same month the previous year and far above market expectations of USD 50.5 billion. Exports rose by 9.5 percent, the fastest pace since March last year, while imports unexpectedly fell by 2.1 perccent. The country's trade surplus with the United States widened to USD 34.24 billion in August from USD 32.46 billion in July.  less

2020-09-07"

 

"US Trade Gap Highest since 2008

The US trade deficit jumped to $63.6 billion in July of 2020 from a downwardly revised $53.5 billion gap in June and above market forecasts of a USD 58 billion deficit."

 

Edited by Enthalpic
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How much are we bringing in in tariffs? Anyone know?

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(edited)

27 minutes ago, ronwagn said:

How much are we bringing in in tariffs? Anyone know?

It appears that no-one is reporting the data since late last summer, but as of August 2019 it appears that the number was about $63 Billion.  A quick SWAG says the number should be around $80 Billion by now.

Trump's Tariff Bounty: How Much The U.S. Has Brought In And Where The Money Is Going

Edited by Dan Warnick
2019
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Was China importing, rice, potatoes, wheat?  No.  Importing Peanut/Soy for animal feed and that is all.  The floods only mean the rice harvest will be poorer than normal over a small region and no one truly grows enough rice for export let alone even partially feed China for more than a month.  Nor does anyone grow enough wheat to replace said rice if their entire crop failed(yea right).  Rather they would have to either eat, soy, or corn grown from Brazil/Argentina/Paraguay/USA with a side helping of wheat from Russia/Canada/USA.  AT least there is plenty of spare soy capacity as their hog population(reason for their imports of soy traditionally before African Swine Flu) died off to less than 50%.

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Is the loss of ag output in China bigger than available imports from other countries? I’m guessing that would answer the famine question, no clue how to quantify though.

Hard to see Xi going full Mao and letting people starve but who knows, it’s happened before.

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3 hours ago, Dan Warnick said:

It appears that no-one is reporting the data since late last summer, but as of August 2019 it appears that the number was about $63 Billion.  A quick SWAG says the number should be around $80 Billion by now.

Trump's Tariff Bounty: How Much The U.S. Has Brought In And Where The Money Is Going

From your old link and it has gotten much worse since then.

"Well, it hasn't been much of a windfall, and the main reason for that is that the trade war has taken such a big toll on U.S. farmers that the administration has rolled out two separate rescue programs kind of for the farm economy. These have been programs where farmers receive big, direct payments to make up for all their lost sales for China. And as it happens, those programs have been about $28 billion. So you've gotten $27 billion in new tariff money, but you've spent about 28 billion to help farmers out during this conflict. And so if you think of it that way, the net effect has been [] negative."

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9 hours ago, Enthalpic said:

 

They will import more food, from nations other than the USA and be fine

Canada and others will gladly sell them more food; US is not the only nation that can run deficits.

They will increase ocean harvesting.

They also have strategic food reserves, and can restrict the consumption of expensive foods (e.g. ration meat).

 

The idea they will starve and that will force them to capitulate on the trade war they are winning against the US is laughable.

https://tradingeconomics.com/united-states/balance-of-trade

"China Trade Surplus Larger than Expected

China's trade surplus widened sharply to USD 58.93 billion in August 2020 from USD 34.72 billion in the same month the previous year and far above market expectations of USD 50.5 billion. Exports rose by 9.5 percent, the fastest pace since March last year, while imports unexpectedly fell by 2.1 perccent. The country's trade surplus with the United States widened to USD 34.24 billion in August from USD 32.46 billion in July.  less

2020-09-07"

 

"US Trade Gap Highest since 2008

The US trade deficit jumped to $63.6 billion in July of 2020 from a downwardly revised $53.5 billion gap in June and above market forecasts of a USD 58 billion deficit."

 

Other nations can starve instead. Ex. Small coastal nations without the Naval power to see off Chinas escorted 16000 strong distant fishing fleet. 😒

Why do you think so many Somali Fisherman turned to piracy in the last 30 years? 

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(edited)

1. Per latest from August 2020 , official statement current inventory of wheat and Rice is at high level due to bumper harvest last year and is over 1 year of consumption.

2. Recent bulletin of output of early Rice by statistical office shows that output is 3.9% higher than in 2019.

3. CHinese state works in different way than all other countries because they know that nobody can feed their 1.4 billion people , not enough food on this , 3rd planet from the Sun. And they remember the great famines that killed millions of Chinese in their recent history.

It is a simple case of risk assessment.

And Staple foods like Rice and wheat are very very cheap to buy or grow and also cheap to store.

Edited by Marcin2
Typo
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46 minutes ago, Marcin2 said:

1. Per latest from August 2020 , official statement current inventory of wheat and Rice is at high level due to bumper harvest last year and is over 1 year of consumption.

2. Recent bulletin of output of early Rice by statistical office shows that output is 3.9% higher than in 2019.

3. CHinese state works in different way than all other countries because they know that nobody can feed their 1.4 billion people , not enough food on this , 3rd planet from the Sun. And they remember the great famines that killed millions of Chinese in their recent history.

It is a simple case of risk assessment.

And Staple foods like Rice and wheat are very very cheap to buy or grow and also cheap to store.

Every nation stores at least 2 years of seed and ~1 years consumption..... In fact massive incentives start to appear for more seed growing if number drops below 3 years of seed...

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A lot of interesting comments on the food production, trade and stocks.  Some I had not known before.  Keep them coming.  Good stuff.

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14 hours ago, Dan Warnick said:

Our fears of a new Chinese famine appear to be closer than we thought.  The latest sustained and overwhelming flooding, coupled with a trade war with the U.S. and the West and loss of much confidence by their worldwide trading partners may prove too much.

Another famine coming? China struggles to meet basic food demands

Could this ultimately bring about the closing of the Chinese borders once again?  My earlier thoughts led me to believe food supply would drive China to the bargaining table with the U.S. and lead to compromise.  However, that thinking (hope?) didn't include a devastating and sustained flooding of their rice bowl.  There is actually a larger, far more deadly fear and possible consequence.  If a famine were to take hold it could be seen, rightfully so IMHO, as a failure of Xi's government to make progress on the trade war with the United States, leading to not only devastating economic impacts and loss of prestige, but the actual starvation and deaths of 10's of millions of Chinese citizens. 

The CCP with Xi as its Leader for Life may cling to the belief that they only need close the borders and clamp a blanket of darkness on all internal media while completely blocking access to outside communications in order to weather such a storm as they now face.  But, there are enough Chinese people still alive that remember all too well the last famine China suffered through from 1958 to 1962.  The losses of life from that previous famine, as the figures are now estimated, were as many as 50 MILLION people, although that number could be much higher since it would be impossible to count the losses across huge remote regions of the country.

I don't believe that China will have the stomach (pardon the pun) for any large military engagements if they are struggling to feed the population and suffering massive financial losses from reduced trade abroad.  It's not that the military forces themselves would suffer any such food shortage, it is that the People's Liberation Army and all Public Security Bureau (police) forces may simply need to be focussed on internal strife during a protracted recession and very likely famine.  And in a famine, the military and police would know exactly how much their own families, friends and hometowns were suffering and dying.

The Covid-19 crisis and the average Chinese people's perceptions of the hows and whys of the government's involvement and mismanagement, together with the resultant loss of life and loss of whatever perceived freedoms people had enjoyed prior, will not soon be forgotten either.

What will China's next moves be, and what will they mean to both the Chinese people and the outside world?

I think that China is doing quite well at the moment, based on news reports.  Their economy is growing and social activities have returned to normal.  You can watch some of the videos / live streams recorded in Chongqing recently.  The floods have receded and they have cleaned up the city.  I believe the city has changed quite a bit since you lived in China in the 90's.  The place looks quite nice and a hive of activity with crowds everywhere. 

 

 

 

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China never sat idle, then or now.  In fact the rate of growth was and is phenomenal.  However, I would caution anyone putting too much credence on what western visitors show in their videos or relate from their travels and experiences, my own included to a certain degree.  One thing that outsiders cannot fully gauge is what is happening below the surface.  Learning what is below the surface takes many years and many varied trusted sources.  As far as economic realities and a true reading on their foodbanks, data is the way to go and that data is suspect since the only source is the CCP.

Anyway, thanks for sharing your view.

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8 hours ago, Strangelovesurfing said:

Is the loss of ag output in China bigger than available imports from other countries? I’m guessing that would answer the famine question, no clue how to quantify though.

Hard to see Xi going full Mao and letting people starve but who knows, it’s happened before.

Is there a reason you cannot type into google/bing, duckduckgo, opera... etc: China food production by crop and World import/exports of crop "x"...??? 

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55 minutes ago, footeab@yahoo.com said:

Is there a reason you cannot type into google/bing, duckduckgo, opera... etc: China food production by crop and World import/exports of crop "x"...??? 

The data comes from the CCP, and they're not known for forthright honesty 

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7 hours ago, NickW said:

Other nations can starve instead. Ex. Small coastal nations without the Naval power to see off Chinas escorted 16000 strong distant fishing fleet. 😒

Why do you think so many Somali Fisherman turned to piracy in the last 30 years? 

The same monsoons that flooded China hit their neighbors too. Vietnam, Cambodia, North and South Korea, even Japan was hit. So those guys are also looking to import food and/or unable to export to China. 

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13 minutes ago, Ward Smith said:

The same monsoons that flooded China hit their neighbors too. Vietnam, Cambodia, North and South Korea, even Japan was hit. So those guys are also looking to import food and/or unable to export to China. 

I believe less than 1% of global rice production is exported so... << ouch >> to anyone wanting to import

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On 9/19/2020 at 1:54 AM, footeab@yahoo.com said:

Was China importing, rice, potatoes, wheat?  No.  Importing Peanut/Soy for animal feed and that is all.  The floods only mean the rice harvest will be poorer than normal over a small region and no one truly grows enough rice for export let alone even partially feed China for more than a month.  Nor does anyone grow enough wheat to replace said rice if their entire crop failed(yea right).  Rather they would have to either eat, soy, or corn grown from Brazil/Argentina/Paraguay/USA with a side helping of wheat from Russia/Canada/USA.  AT least there is plenty of spare soy capacity as their hog population(reason for their imports of soy traditionally before African Swine Flu) died off to less than 50%.

The prime rice growing region is the Yangtze basin, it probably took most of the years' harvest. 25% deficit or so is not unlikely. China is the largest importer of rice soy wheat barley sorghum. They do not have any soy saved from the swine flu die off, they went on to raise piglets that eat more as % of body weight than hogs finishing up for market. With the collapse of private investment, the government is making the SOE banks lend to farmers for equipment, piglets, young birds, feeds, fertilizer and seeds. 

If they were not tight for dollars and starving they would not be aggressively fishing illegally as far as Chilean waters, not to speak of sending their fishing boats into Philippine, Indo, Malay and Viet Nam waters with military escort to fish illegally there.

The treasury sales threat was a smoke screen to thinly veil their desperate need for dollars to import vastly more food than they can afford.

The China trade surplus is not cashed in at SAFE, the China forex body. Most of the net proceeds of exports stay abroad. China's exports are essentially capital flight or sales of Western companies manufacturing in China.

 

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(edited)

Well, the facts are that China will have around 2% GDP growth this year and the US around 4% decline this year.

Next year, China will have around 8% growth and the US around 4% will make up for this year's recession.

The US result will not be the worst in the world, of course, it will be average, but it means that just in 2 years time China will catch up with the US thanks to a pandemic of 10% of GDP.

Not that he wants to worry American users, but so far the US is not winning this economic war with China.

As for me, imposing sanctions on half of the world is not a proof of strength, but rather sign of growing weakness and typical behavior of a person who begins to drown and wave his hands in desperation.

 

Except that China is a country of incredible extremes. It just so happens that my brother's wife is a sinologist by profession - on the one hand, you can pay by phone with your someone who sells parsley in China, and on the other hand, when you enter the interior, poverty is still terrible, but the Chinese village is a village of hardworking people, so rather well-kept and each such peasant has an additional profession such as a blacksmith, potter from which he derives his aditional  income.

Apparently, no country has ever gone badly with the influx of a calm Chinese workforce, which I recommend to all who are excited by the fact that Russia will suffer losses if even 10 million Chinese workers have settled in the Russian province. This is a particularly popular thread in Poland.

Edited by Tomasz
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Just above the video I posted, we have comments posted by @0R0 and @Tomasz.  To be fair, neither one of them, in this instance, shares where their "facts" come from and/or whether those sources of "facts" can be trusted.  Care to give us all a bit more detail, gentlemen?

 

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When it comes to economic growth, I recommend the reports of the International Monetary Fund and the World Bank on the growth of the Chinese or American economy in the near future.

When it comes to China in general, I have never been there because unfortunately it is a very expensive trip from Europe. That's what my brother's wife told me, who was there at least a few times and is not a great supporter of China, appreciating Taiwan more.

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3 hours ago, 0R0 said:

The prime rice growing region is the Yangtze basin, it probably took most of the years' harvest. 25% deficit or so is not unlikely.

🤣   You do realize they get 2 crops or 3 crops per year right?  Far north of China... 1.  Yangtze it depends as stated previously and S. China gets 3 crops per year.

Welcome to the tropics snowbird, there is a reason India is the greatest agricultural land in the world and why Civilization started in the Middle East/India 

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Uh, ORO,,, you do realize most of the USA double crops South of the Midwest right?  Florida triple or quadruple crops depending on vegetable grown.  Same reason Brazil grows so much sugarcane/soy... they can triple crop.  Sure, their yields in some cases are worse than an optimum region such as the Midwest USA, but when you can double crop, well, who cares.  Their annual yield is superior.  Takes a bit more work, but higher yield per hectare.

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1 hour ago, Tomasz said:

Well, the facts are that China will have around 2% GDP growth this year and the US around 4% decline this year.

Next year, China will have around 8% growth and the US around 4% will make up for this year's recession.

The US result will not be the worst in the world, of course, it will be average, but it means that just in 2 years time China will catch up with the US thanks to a pandemic of 10% of GDP.

Not that he wants to worry American users, but so far the US is not winning this economic war with China.

As for me, imposing sanctions on half of the world is not a proof of strength, but rather sign of growing weakness and typical behavior of a person who begins to drown and wave his hands in desperation.

 

Except that China is a country of incredible extremes. It just so happens that my brother's wife is a sinologist by profession - on the one hand, you can pay by phone with your someone who sells parsley in China, and on the other hand, when you enter the interior, poverty is still terrible, but the Chinese village is a village of hardworking people, so rather well-kept and each such peasant has an additional profession such as a blacksmith, potter from which he derives his aditional  income.

Apparently, no country has ever gone badly with the influx of a calm Chinese workforce, which I recommend to all who are excited by the fact that Russia will suffer losses if even 10 million Chinese workers have settled in the Russian province. This is a particularly popular thread in Poland.

The IMF uses NBS numbers that are well known to be overstated The 2% projection for 2020 does not conform to the Caixin PMI report correlations. More realistic estimates of China GDP gave near 0% for 2018 and borderline negative for 2019. The baseline estimate of actual vs. claimed GDP for 2018 was $10-11 Trillion About $5 Trillion in reported capital investment in the 2010s was discovered not to have been made, and the savings reported to fund it were never put away.

https://www.scmp.com/economy/china-economy/article/2189052/china-exaggerated-gdp-data-2-percentage-points-least-nine

There are more references in older posts.

China also poses a contrast of employment that has only gone positive in Aug according to Caixin, while production appeared so much stronger, nearing recovery; so raising the question of what were all these people doing before if production is near prior levels yet 140-160 mil migrants remain unemployed on top of the official 40 million (migrants are not reported as employed or unemployed in the official stats provided by their home provinces to the NBS, as they are not working in their home province and are not considered as provincial population where they .work so don't count there either).

Older estimates put the baseline lower, which could mean a lower current number.

Another problem to consider is that construction is most of the non-manufacturing PMI for China rather than services. It continues reporting at a very robust 60, but the intense investment in largely empty 2nd or 3rd apartments (38% and 20% in 2019, if memory serves) indicates continued miscalculation of capital on a massive scale as some 30% of units in 2nd tier cities remains empty. Even crowded Beijing finally has a surplus of residential units.

Some of China's enormous infrastructure projects were useful 10 years ago, particularly high speed trains between major metros and modern 2nd airports. But the recent projects are creating duplication and economic dislocation as business drains from existing working airports and train lines to split among duplicated new project functions so that neither the new nor the older projects produce enough cash flow to cover their costs, which is why the Total Factor Productivity in China is significantly negative even with official numbers, and severely in the red when calculated with more credible numbers. The Belt and Road projects also often fail to do anything worthwhile other than employ millions of Chinese cement steel and construction workers and create "assets" for the PBOC to post as reserves in its reports to the World Bank and BIS.

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