Ray Dalio, a famous investor, has
the theme of “The changing world order” in his YouTube video and his
corresponding book.
https://www.youtube.com/watch?v=xguam0TKMw8
The Ukraine invasion is speeding
up the process. However, I believe it will take a long time for China to
overtake us especially in GDP per capita; hopefully the day is not in my
lifetime as I and my children are living in the U.S., and it would adversely
affect our lifestyle. Let me argue on both scenario and hope we do not let our
dumb nationalism cover judgement.
Dalio outlines the hints of China
taking over us and let me comment on these with my own hints while some have
been discussed in this book.
·
Education. Obviously Chinese students are academically
far better than the U.S. students as evidenced by the uniform test scores by
many organizations, especially on science and technology. If you believe the
extra hours of our students playing video games can compete with students of
other countries not doing so, you believe in miracles. However, the U.S. is
still far ahead in higher education. and that explains why we have so many
foreign students including China today. We encourage creativity and are shown
by our high-tech companies such as Facebook and Google.
We attract the best brains from the entire world
including China. Unfortunately, our government limits foreign students from
China on the grounds of security. These politicians are short-sighted as many
Chinese students want to settle down in the U.S. for a better living standard
and better opportunities for their children; they have contributed to our
research and the economy. Hopefully we will not limit students from India, as
most of them do not want to return to India as the opportunities and living
standard back home are far inferior than the U.S.
Besides the obvious STEM (technical fields), our
students and citizens are less civil than our previous generations. The
evidence is in the high crime rate, the murder rate and constant shootings.
Many enjoy our generous welfare and benefits. If you can collect more benefits
by not working, why should you work? Our gun control should be tightened.
·
Technology. It is helped by the education and
the research grants from the government in addition to the hard work of the
Chinese. Stealing our IP is a thing of the past, and it is similar to how we
stole Germany’s technology after WW2 and many other examples. We have laws to
protect personal privacy and hence it slows down many applications such as AI.
We have moral considerations to limit our research on stem cells and drugs. Most
likely, new drugs are produced in foreign countries such as China, as it is too
expensive to develop them here.
China is closing the gap in the number and quality of
the research papers and grants. China leads us in many sectors in technology
such as 5G, AI applications, high-speed trains, electronic payment, etc. Once
they fix the fabrication of computer chips (due to our sanctions), we may lose
our chip industry by the cheap chips from China. It will take at least 2 years.
·
Reserve currency. USD is depreciating due to our
excessive printing of the USD. Many countries are abandoning it. Saudi Arabia
and Iran accept Chinese Yuan for trading and Petro Dollar is instantly dead by
their decisions. The sanction on Russia’s Ruble and excluding them from SWIFT
are hitting our foot more than on Russia. BRICK may form their own SWIFT
system. The West has found out now the importance of Russia’s economy as they
found out the hard way.
The “One Belt, One Road” trades would make China’s
Yuan for trading, although as of 2022, USD is still the majority currency for
international trades. But, it is changing fast. The sanctions make many
countries worry about the chance of suffering the same fate Ruble is facing. They
would cut down USD in the reserve currency partly due to the high inflation in
the U.S. (i.e., the purchase power of their reserve funds in USD is
depreciating). The rich folks in a country similar to Russia would fear their
assets and USD would be seized if there is a conflict between their country and
the U.S. I did not expect our great country would do such stupid act.
·
High inflation. Besides the Ukraine war, the
pandemic, our government has to face high inflation. As of 4/2022, we have 8.5%
based on the latest report of CPI. It would get worse in the coming months due
to the contract with longshoremen negotiation and the lockdown of Shanghai that
would affect the supply chain. The lack of truck drivers and workers is another
problem. The impact on the poor is
higher than the rich. Ukraine and Russia are major countries to export wheat
and we will feel the pain when Russia cuts down fertilizer to us. Europe depends
about 40% of energy and a lot of precious ores from Russia.
·
Manufacturing. We have to protect our workers,
our environment, etc. Hence, we cannot compete with the cheap labor from
foreign countries. Globalization solves some problems but the poor in the U.S.
depending on manufacturing suffer. Hence, bringing manufacturing back home is
not feasible as a $20 wage can never compete with a $2 wage. Moving factories to
low-wage countries is not a perfect solution. To illustrate, an iPhone needs
thousands of parts and they are supplied by many Chinese companies today, where
most of them are in close proximity to the iPhone factory. In addition, these
poor countries do not care about the environment and they are not rich enough
to buy our products. Basically most of them are similar to China 20 or 30 years
ago. Some Chinese factories have been moved there due to high-rising salaries
in China.
·
Trade. To me, it is not an important factor for
us. We are self-supplied and do not need a lot from foreign countries. China is
just the opposite. They need oil and gas, and many minerals.
·
Military. We are the strongest in the world with
many foreign military bases. The high cost does not justify our national
security and our economy except for the defense military. Our advanced weapons
can make one-sided wars with Iran and many Middle East countries, but not with
Russia and China that could promote a nuclear war. If we cut down these
expenses after the Afghan, we could have balanced our budget. Deploying our fleet
in the China Seas is a fast way of burning money. Our carriers could be sitting
ducks facing the hypersonic missiles that cannot be defended as of today.
Even with the above, I still believe we are still
#1 in many fields if #1 is important to you. If we cooperate with China, we can
share the technologies (that would achieve carbon neutrality by at least 2
years) and their low-cost labor to rebuild our infrastructure. I am optimistic
due to our high share of resources and farmland per capita and the possible cut
in our defense expenditures.
We have invaded about 16
countries in recent decades claiming national security, and these countries are
thousands of miles away. Russia would react naturally when the neighboring Ukraine
invited NATO. The comedian makes his citizens cry over the membership of NATO. The
only winner is China and her currency would be far stronger. Any new sanctions
on China are not as effective as before. Besides India, there are more
countries that would side with Russia, especially the EU countries feeling the
pain of high inflation and energy cuts.
