Asia Times Deputy Editor David P. Goldman made the remarks at the National Conservatism 4 Conference in Washington DC on July 8.
The “Long March” analogy is not my own. Chinese policymakers are talking about Mao’s civil war strategy of encircling the cities from the countryside.
Why this matters: The working-age population in high-income countries will fall by a quarter this century as a result of falling fertility rates. In the case of Taiwan and South Korea, the decline will be around three-quarters.
So I don’t think China will invade Taiwan. The Chinese are not going to fight for something that will come sooner or later like a ripe fruit. But the working-age population of so-called middle-income countries will grow by half.
The world’s scarcest resource is young people who can work in a modern economy. Past empires fought over territory. China’s goal is to control people.
In 1979, China transformed a nation of peasants into a nation of industrial workers, increasing its GDP per capita by 30 times. Now China plans to transform a nation of factory workers into a nation of engineers. Think South Korea. It’s a laborious and expensive transformation, but China is going to do it.
In 2020, I wrote about China’s plan to sinicize the Global South. China knows very well how to get people who earn $3 a day to earn $10 or $20 a day.
China’s population is shrinking, but its highly educated population is growing.
There are 10.5 million university graduates, a 60% increase in 10 years and double the total, and one-third are engineers – more than the rest of the world combined.
Between 1990 and 2010, South Korea’s industrial production increased five-fold, but the number of factory workers fell by a fifth.
Will China Collapse? Comparing the total debt burdens of the US and China, the US is at 262% of GDP and China is at 278% of GDP.
But China lends the world $1 trillion a year, the United States borrows $1 trillion a year, and countries with positive growth and large current account surpluses do not suffer from financial crises.
China was wrong about a lot of things, but it was right about two big things.
The first is the application of AI to manufacturing. The company can profitably produce a $9,000 electric car or produce 2,400 5G base stations a day in a factory with 50 employees. I’ve seen this. The company also claims to have a factory that can make 1,000 cruise missile motors a day.
We can’t produce enough shells to supply Ukraine. China can build as many ship-killing missiles as it wants. It’s the biggest change in relative firepower since the musket replaced the crossbow. A US destroyer can carry 100 anti-missiles. There is no limit to the number of missiles China can launch from its mainland. You talk about prioritizing China, but prioritizing what?
The placement of the deck guns on the Titanic is being rearranged.
China has 3 million 5G base stations. Our country has 100,000. China has monopolized major industries such as communication infrastructure, EVs, solar power generation, drones, steel, and shipbuilding, and is targeting semiconductors. Biden’s Treasury Secretary will visit China and say, “Your industrial production capacity is too large, so please refrain from exporting!” What is the state of our country’s production capacity?
Another big thing China has done well is transform the Global South. Since COVID, their exports to the Global South have doubled and now their exports to the Global South exceed all developed markets. They have assimilated billions of people into their economy. They have done this by sending 200 troops outside of China and 230,000 troops here.
We’ve spent $7 trillion on a never-ending war. China’s spent $1 trillion on the Belt and Road Initiative. Who has the bigger impact?
Forty countries have applied to join the BRICS group.
This is not about authoritarianism vs. democracy. China’s exports to democracies like India have grown just as fast as its exports to Russia. The Chinese aren’t interested in how barbarians govern them. They want the world to be dependent on Chinese technology and supply chains.
This is a huge undertaking: four out of five workers in the Global South are trapped in the so-called informal sector: they pay no taxes, receive few services, and have no access to capital or global markets.
China is fusing them with digital and transportation infrastructure, which connects its people to global markets. Today, Huawei and ZTE provide more than half of the world’s telecommunications infrastructure and more than two-thirds of the markets in the Southern Hemisphere.
BYD is building EV factories in Mexico, Brazil, Thailand, Turkey and Hungary. The $9,000 EV will be the Southern Hemisphere’s equivalent of today’s Model T, a car the average family can afford. It’s the same size as a Model T in the US.
Meanwhile our position will worsen.
When Donald Trump left office, our nation’s goods trade deficit was $800 billion a year. It’s now half that, at $1.2 trillion a year.
Most of the new imports are coming from the Global South: Tariffs on Chinese products have led China to instead ship components to a dozen countries, including Mexico, Vietnam and India, which then sell the finished products to the U.S. Even as the U.S. imports from China have fallen, it has become more dependent on Chinese supply chains.
Like the Sorcerer’s Apprentice, we smashed the magic brooms that were coming at us and now we have twelve of them.
The Fed’s index of industrial production is lower than it was pre-COVID, and orders for capital goods are down more than 10% after adjusting for inflation.
The worst part is that we currently import more capital goods (products used to make other products) than we produce domestically. To increase production and reduce imports, we need more capital goods, but to reduce imports in the future, we need to import more capital goods today. So a blanket tariff would likely do more harm than good.
We have cut off China’s access to advanced chip technology, but China has largely circumvented those barriers. China can produce the chips we need for industrial automation, 5G communications, and other real economy applications. We have repeatedly overestimated the impact of sanctions and underestimated China’s ability to adapt.
Attacking the elephants doesn’t do much good, we have to catch them ourselves.
We need a national effort on par with the Kennedy Moonshot Program and the Reagan Strategic Defense Initiative. In 1965, 12 percent of total federal spending was spent on research and development. Today, it’s 2.4 percent.
When there is a national emergency, we will implement appropriate industrial policies.
Trump’s missile defense is on the right track: reduce forward deployments and focus resources on high-tech defenses.
We have faster chips. But it’s not just about processing speed. It’s about know-how, education, industrial culture, industrial community, and we’ve overlooked these. Trump is right to put high tariffs on Chinese EVs. We have to protect our manufacturing base. He’s right to invite Chinese auto companies to build factories in the United States. China is ahead of us in industrial automation. Let’s appropriate some of China’s intellectual property.
Two simple suggestions:
We should join forces with Japan, South Korea and Germany to counter China’s Long March in the Southern Hemisphere, as we will have more resources and capital to work together.
We should invite our NATO partners to help us develop the technologies that will shape the outcome of the 21-Party Talks.st It’s the 21st century. We’re not going to convince them to rebuild a conventional military, but joining us on the cutting edge of technology is an offer they can’t refuse.
As a young scholar on the National Security Council in the Reagan Administration, I produced a study that suggested SDI would pay for itself through private spinoffs. I was wrong. SDI paid for itself more than ten times over. This is not the first time we have done this. We can do it again. We just need a reminder, not a prompt.
