Knowing that such predictions have been made in the past by China observers, including yours truly, why should anyone think that it’s happening today? A bit of historical context helps provide an answer to this question.

In 2012, I was asked by Wiley & Sons to write a book on China’s economic structure from my contrarian point of view. You may or may not recall that, at the time, China was the economic marvel of the world. Unlike most observers, I could see several critical problems with China’s political economy model and wrote about them in “The China Crisis.”

I identified seven key areas—given the basis upon which China or, more accurately, the Chinese Communist Party (CCP) operated—that made China’s economic model unsustainable. I wasn’t the first to see this. Gordon Chang wrote about it in 2001 in his book, “The Coming Collapse of China.” Mr. Chang predicted a collapse by 2011, which, of course, did not occur. This is an update of sorts.

Instead, China’s economic clout and technological prowess continue to grow and develop. That explains why, at that time and for the next seven years, all kinds of terms were coined to describe China’s burgeoning economic status. There was the “Beijing Miracle,” “The China Model,” “Chinese State Capitalism,” and other glowing pronouncements that gave near-unanimous affirmation of China’s progress and prognosis for a bright future.

In fact, many experts, economists, and observers were predicting that China’s state capitalism would be the model for emerging nations around the world because of how fast it had transformed China’s economy. It was also predicted that China would soon eclipse the United States in GDP and replace it as the global hegemon.

Regarding this last prediction, it’s important to acknowledge that it appears as if it’s actually coming to fruition. In that regard, however, keep in mind that it’s mostly due to U.S. policy failures rather than what China is doing.

But even our leaders’ traitorous actions that have aided our adversaries in Beijing can’t compete with or prevent the venal nature and deleterious policies that the CCP has inflicted upon the Chinese people for many decades. The United States and other Western nations’ financial and technological investments have certainly delayed the inevitable but won’t stop it.

At its root, of course, is the corrosive nature of corruption. For the CCP, corruption in the form of political graft, wholesale theft from the private sector, and abuse of the financial system are the means to maintain control and gain wealth. Obtaining absolute power is the end goal, not a healthy economy.

Below is a brief look at how seven factors erode the social and economic sustainability in China.

1. Excessive Overuse of Factors of Production

When greasing the palms of Party officials is the main requirement for a project or policy, waste and fraud are not only unavoidable but lead to inefficiency in leveraging factors of production. In 2013, China used 10 times more factors of production than the United States to produce the same product. Has that improved? It’s hard to say, as accurate statistics that reflect poorly on the CCP and Xi Jinping, in particular, are difficult to find.

2. Inefficient Allocation of Economic Goods, Activity

This is related to No. 1 and is manifested in many ways, such as the theft of profitable companies by the Party and turning them into inefficient, debt-ridden “zombie” state-owned enterprises that destroy value and efficiency. It also transfers wealth from the middle class to the Party elite.

3. Stifling Innovation in Middle Class

Lack of freedom of information and the punishment of violators stifles innovation and creativity. Individuals are not allowed to solve problems by themselves. Successful private firms can count on being confiscated by the state at some point. Successful entrepreneurs who speak out about the abuses of the CCP are disappeared and reeducated. This engenders total fear of and reliance upon the state, both of which are what the CCP wants. Crushing individual creativity and innovation stifles a nation’s greatest resource—its people.

4. Lack of Enforcement of Regulations, Standards

From critical areas such as food production to pharmaceuticals, corners are cut, and quality is compromised. Over the years, this not only negatively impacts the health and safety of the people, but it undercuts the authority and legitimacy of the Party.

5. A False Economy: Debt-based ‘Growth’ Is a Cancer on Economy

In a capitalist economy, most development is based on market need, which is determined by local prices and market conditions, which then attract capital. Distorted “development” driven by political expediency isn’t development but a waste of time, money, and resources.

The Evergrande collapse is a prime example of the CCP’s distortion of the economy. China’s overreliance on overdevelopment could be compared to healthy growth in muscle tissue from working out versus that of a cancerous tumor from exposure to toxicity. The former builds up strength and vitality; the latter destroys it. Thus, at some point, even state-owned debt from a state-owned central bank becomes unsustainable.

6. Rampant Pollution Making China Unlivable, Causing Social Unrest

China is one of the worst polluters in the world. For example, it is rapidly losing its arable land to toxicity from mining, manufacturing, and desertification. This is happening because decades of state ownership have led to indifference about what happens to the natural resources, also known as the “tragedy of the commons.” Losing arable land by either toxicity or desertification is not easily reversible and leads to greater dependence on external food sources to feed itself.

Water pollution is another environmental disaster brought about by the CCP. When I wrote “The China Crisis,” about 40 percent of China’s waterways either could not sustain life or were unsafe for human consumption. Today, that number is up to 70 percent. Moreover, 80-90 percent of its groundwater is undrinkable.

China’s air pollution is known for being the worst in the world, responsible for millions of premature deaths. State officials claim that air pollution is decreasing in China. Yet, at the same time, China is adding more coal mines for energy production, leading to more pollution, not less. The CCP’s inability to address its pollution crisis reveals its economic model’s failures, adding to civil unrest rather than social support.

7. Dystopian Depression Among Young Generation

When young people lose faith in their nation, they lose faith in their future. One outcome of that pessimism is the decision not to have children. China is not alone in this phenomenon, but like South Korea and Japan, it’s a big problem. Without the energy, drive, creativity, and belief of the young, the fall in population and its effects on consumption, taxes, and other economic factors make China’s economic future bleak.

Unfortunately, its unbalanced social and economic structure will lead to more excessive actions, internally and externally, as economic and social conditions worsen.

About the Author

James R. Gorrie is the author of “The China Crisis” (Wiley, 2013) and writes on his blog, TheBananaRepublican.com. He is based in Southern California. Article cross-posted from our premium news partners at The Epoch Times.

A Few Facts and Curious Coincidences

First of all, the massive financial scandal has left investors with billions of dollars in losses. That in itself makes the debacle one of the costliest on record. The speed at which FTX both attracted investors and lost all of its money is also unprecedented. Its CEO, Samuel Bankman-Fried (also known by his initials SBF), went from a net worth of up to $26 billion to essentially broke in a matter of days.

It’s also amazing how Bankman-Fried was able to acquire such a large amount of investor cash so quickly and publicly.

Why didn’t that attract some sort of regulatory inquiry despite warnings from market experts in congressional testimony?

The Madoff of Cryptos

This is a very good question since the dynamics of the collapse involved evident malfeasance on the part of Bankman-Fried. Not only were basic capital protections ignored, but FTX investors’ cash was diverted into Alameda Research, an investment firm owned by SBF. That’s an illegal and unethical conflict of interest that should have already drawn criminal charges against him, especially in light of the scope of the financial losses. He has rightly been described as the Bernie Madoff of cryptocurrency.

Yet somehow, amazingly, SBF has yet to be arrested. What’s more, regulators missed these obvious red flags. Or did they simply ignore them?

And if regulators ignored the FTX transgressions, why would that be?

The simple answer, though certainly not the only or complete one, is that Bankman-Fried and FTX were and remain politically connected to very powerful people. That’s a well-established fact.

Son of Stanford Professors

Another well-established fact is that Bankman-Fried’s parents are both Stanford professors. His mother, Barbara Fried, teaches courses in federal income taxation, legal theory, tax policy, distributive justice, and moral psychology. His father is an expert in taxation policy and has testified before Congress. Both are deeply connected to the Democratic Party establishment, and both profited handsomely from FTX to the tune of some $300 million in properties.

Turning a Blind Eye

But did politicians help protect FTX along the way?

That, too, has yet to be established. It is a fact, however, that the political elite in Washington, our elected representatives, benefitted greatly from FTX. Since 2019, Bankman-Fried has been the second largest donor to the Democratic Party, contributing $38 million of essentially stolen investor funds from FTX to the party.

But it wasn’t just the Democrats that were funded by FTX. In that same period, Bankman-Fried’s co-CEO, Ryan Salame, who ran various parts of FTX, donated about $20 million to the Republican Party. So both parties gained from large financial contributions by FTX.

One can’t help but wonder how many blind eyes and legal protection such contributions may have bought Mr. Bankman-Fried. That is speculative but not unreasonably so.

Tainting the Bitcoin Well

Furthermore, hundreds of millions of dollars have been stolen from the exchange and funneled into bitcoin. That dynamic is turning the world’s top cryptocurrency into a haven of thieves and tarnishing its already damaged reputation. Bitcoin is already under duress as energy costs associated with mining have risen while bitcoin’s price and credit sources have contracted.

The timing of the FTX collapse is another coincidence. It certainly helps the anti-cryptocurrency crowd. Critics warn that money, especially cryptocurrency, is just too important to leave to the market and private issuers.

That argument sounds reasonable, but it’s also highly coincidental with the FTX crash occurring in the same period as the Federal Reserve’s public announcement and initial testing of its Central Bank Digital Currency, known as the digital dollar.

Why’s that important? There are at least a few reasons.

A Perfect Crisis for the Digital Dollar

One is that the FTX crash is the perfect crisis to help “demonstrate” to the public that unregulated, decentralized, and anonymous exchanges, and trades and holdings of cryptocurrencies that are beyond the purview of the federal government pose a threat to investors.

That’s true, but the same could be said about unregulated real estate transactions or the buying and selling of used cars. Nonetheless, the cryptocurrency chaos can be used to justify a federal crackdown on the industry.

Another reason is that the American public will not be easily convinced of the need or desirability of the digital dollar. The FTX collapse may be one way to help shatter public confidence in all cryptocurrencies as safe and viable alternative investments in order to persuade the public to accept the issuance of the digital dollar.

The digital dollar will be transparent and programmable to provide the Fed with new levels of control over our spending habits, strip away privacy, and greatly restrict personal autonomy. In short, digital currency is a formula for tyranny that will be presented as needed for currency security.

Who Are the Shadow Players?

There are other curiosities about FTX and its sudden downfall, such as the identity and influence of FTX and Alameda Research co-founder and CTO Garry Wang. He has been silent so far, and not much is known about him.

Finally, it’s certainly coincidental that Bankman-Fried sought a bailout from his industry rival Changpeng “CZ” Zhao, owner of Binance, the world’s largest cryptocurrency exchange. Some believe that China-born Zhao’s loyalties still lie with Beijing. That is not known at this time.

But as enigmatic as the people surrounding the fall of FTX appear to be is how it was allowed to happen in the first place, which leads to at least one more question …

Was FTX designed to fail?

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of our premium news partners at The Epoch Times.

Similar Geopolitical Factors

Let’s consider the geographic similarities between Cuba and Taiwan.

Cuba sits 90 miles offshore from the United States, a global superpower. It was an ally of the former Soviet Union, a communist regime that competed with the United States for global power and influence from 1945 to its collapse in 1991.

Likewise, from 1949 until today, Taiwan has been a U.S. ally located about 100 miles from the mainland communist China regime. This global superpower is also competing with the United States for control and influence over the world.

In 1962, Havana’s alliance with Moscow was a critical asset for the Soviets in several ways. Cuba was an ideological thorn in the side of the United States, as it showed the world, and especially the region, that American power had its limits, even in its own front yard.

Cuba’s communist revolution also showed the world that Russia’s power extended all the way to the Americas. As a result, Russia’s influence and military support spawned movements and governments sympathetic to the Soviet Union across Latin America. Most notable were Chile, Peru, Argentina, Nicaragua, Brazil, and of course, the one-time jewel of the region, Venezuela.

Much the same can be said about Taiwan, with a few critical differences, of course. For example, just as Cuba was an inspiration and perhaps even a catalyst for communist revolutions in the region, a secure, free, and independent Taiwan is a key factor for U.S.-led security, independence, and freedom of the entire Asia-Pacific region.

A Thorn in Xi’s Side

Furthermore, Taiwan is an ideological thorn on the side of the Chinese Communist Party (CCP). The small, free, and capitalist island nation of about 23 million shows the 1.4 billion Chinese living under the bootheel of the CCP that they don’t need the Party to rule over them in order for China to succeed. The tiny but wealthy island nation is undeniable proof of that fact.

That is why Xi Jinping, in his ascent to absolute power, has pledged to bring Taiwan under Beijing’s control by 2027, if not before. As his power over the economy grows, the more it will contract in real terms.

Taiwan’s Global Strategic Significance

But in the Cuba-Taiwan comparison, the key distinction is Taiwan’s unique strategic technological and economic value to the world. Unlike Cuba, which produced nothing the world really needed, barring excellent cigars, a bit of sugar and rum, as well as Latin jazz and mercenaries for export, Taiwan produces microchips that are critical for virtually all of the developed economies.

The strategic importance of Taiwan Semiconductor Manufacturing Company (TSMC) and a handful of other manufacturers cannot be overstated. It’s estimated that the chipmaker provides up to 92 percent of the world’s most important chips for satellite communications, guidance, artificial intelligence, robotics, and many other high-tech verticals. No advanced economy in the world can function without them.

The Lynchpin in US Hegemony

Because Taiwan is the lynchpin of American power in the region and, arguably, in the world, it would fundamentally alter the world order if it were to fall under Beijing’s control. U.S. military and economic credibility would be shattered.

Other nations in the region would have to rethink their alliance with the United States, as well as all other nations allied with America. We might see a cascade of Asian nations abandoning the United States in order to make a separate peace with Beijing.

The Losing Blockade Calculus in Cuba

There’s at least one other parallel in the Cuba-Taiwan matrix that may come to pass. The resolution of the Cuban Missile Crisis in the fall of 1962 wasn’t accomplished with military force per se but rather by the U.S. naval blockade of the island.

The blockade forced the Russians to either escalate the situation by engaging the U.S. Navy 90 miles off the coast of the United States or stand down. If Moscow sought to break through the blockade, it would be viewed as starting World War III or at least facing the possibility of a nuclear attack.

It was a lose-lose situation for Moscow. If the Russians attacked the U.S. Navy, they’d be seen as the aggressors in a naval battle against the United States. That would be bad enough. But they would also most certainly lose that battle and suffer both a military and ideological defeat. Worse, engaging the U.S. militarily could also trigger nuclear escalation.

Would the Soviet Union trade Moscow for Havana? Of course not.

Would the US Violate a Chinese Blockade of Taiwan?

China needs access to TSMC’s microchips badly, and needs the production facilities intact. An invasion may lead to Taiwan destroying its factories.

But what if China decided to deploy a naval blockade around Taiwan? What if Beijing declared that any violation of the blockade, or associated airspace, would be considered an act of war?

More to the point, would the Biden administration be prepared to break such a blockade were one to manifest?

Much of the same arguments above may also apply to this scenario. The onus of initiating actual warfare would be on the United States, and the risk of escalation would certainly be there. Such an escalation would likely involve Taiwan, Japan, and perhaps South Korea. It could also trigger a North Korean attack on both South Korea and Japan.

Several additional negating factors would have to be considered as well. U.S. economic weakness, a depleted navy, and the decline in overall military readiness in U.S. forces would play a role in such a decision. Increasing and extended U.S. involvement in Ukraine’s war against Russia would also be a significant factor.

The potentially huge and unknown direction of events should the United States break a Chinese blockade around Taiwan may cause hesitation on the part of the Biden administration, which has shown a preference for avoiding or ending. Another critical factor is China’s arsenal of hypersonic anti-ship missiles, against which U.S. ships may have little or no defenses.

A US Withdrawal in Asia?

What might be the position of the United States in such a scenario?

Despite the president’s hawkish rhetoric about defending Taiwan, in the event of a blockade by China, rather than an invasion, it’s conceivable that the United States would come to a negotiated settlement in order to save face. The administration would characterize itself as a peacemaker, believed only by diehard supporters at home, but no one else, particularly in the region.

Shortly after that, Beijing would likely break the agreed-upon terms to finish the job on Taiwan, humiliate the Biden administration (again), and potentially end U.S. pretensions of hegemony in the region, if not the world.

Article cross-posted from our premium news partners at The Epoch Times.