China's Deflation Trap

Peter Zeihan makes it clear in nine minutes.

China Update tracks the Chinese economic news day to day, but it’s hard to stack those things up and make long term predictions. Peter Zeihan does just that, what he suggests here jibes with the daily signal I’ve been hearing.

China has excess capacity. Their output has nowhere to go. Even if they shift their internal consumption from the current 40% of economy to nearly doubling that in an effort to act like western economies, they have a demographic crash. And a shift like that would be a wholesale repudiation of the strategy they’ve followed for the last forty years, so not something that could be done overnight, if it can be done at all.

China is like a fat bear that’s climbed so high in a palm tree that it’s bent over sideways. No matter if they try to go further, or turn back, they’re hanging on for dear life. There’s no good end for this story.