Editor’s Note: Today, we have a guest essay from Peter Zeihan. Peter is a geopolitical strategist that advises investors, businesses, and even government officials on how to prepare for the macro events right around the corner.

Today, he shares why China will “disappear” as a global power within the next decade.

And if you enjoy Peter’s work, we encourage you to pick up his latest book, The End of the World is Just the Beginning, at a steeply discounted price right here.

By Peter Zeihan

China is screwed…

Several weeks back, I showed you how one risk to the Chinese government is its own leadership.

But there’s another risk. And it comes down to simple demographics.

Let me explain…

Pyramids and Chimneys

Population structures are one of the most important things to determine how well an economy performs. It also determines if a country thrives, struggles, succeeds, or falls apart.

A “normal” demographic structure might look a little bit like the image we see below. This is just an example, but what we’ll see is a population breakdown of Libya in 2011. The age of the population is in the middle. And the size of the population that matches those ages are the horizontal bars. 

A “Pyramid” Population Distribution

Source: Wikimedia Commons

What we’ll notice is that there are very few retirees at the top. Below them, we have a larger population of children, teenagers, and working-aged people. It looks a bit like a pyramid.

When you have a breakdown like this, it’s going to be relatively inflationary. That’s because the younger generations—45 years and younger—are doing a lot of consuming. They’re buying homes. They’re going to college. They’re raising children.

This is important because that’s where most of the economic activity comes from. It’s from these people building their lives.

The people in their late forties and their fifties tend to be capital rich. They may not be consumers. But they’re investors. They make up the largest portion of bond investors, stock investors, etc.

But over the past several decades in the developed world, something different has happened.

As the world industrialized, people had fewer children. In an agricultural economic model, children are free labor. But in a more industrialized economy—when most people are living in cities—they’re expensive hobbies.

At the same time, medical technology has improved. That means people are living longer.

What this means is that our demographic pyramid starts to look more like a chimney. Again, just as an example, we can see this for The United States in 2017 below.

A “Chimney” Population Distribution

Source: Visual Capitalist

In a “chimney” model, you have about the same number of children compared to young adults compared to mature adults. This gives you a more balanced economic model that we’re all familiar with. After all, it’s what we’ve been living through.

We think of this as “normal,” but it’s not. It’s just a moment in time.

Because as the population keeps aging, and as people have fewer children, the bottom starts to narrow. And the top begins to widen. That’s when we get something that looks more like an inverted pyramid.

And that’s a problem…

When Pyramids Invert

In an inverted pyramid environment, things get pretty weird.

When you run out of people below the age of forty, a lot of that consumption simply goes away. Even worse, you now have a lot of people approaching retirement. They are capital rich, but they’re not consuming like the lower part of the pyramid.

So, the productive part of the population has no hope at all of consuming everything they produce. And that means inverted pyramid populations must be export oriented.

And since roughly 2000, this has been the dominant system in Europe and Asia. It’s also why trade relations have gotten progressively worse since then. Because you have countries that must export. And the countries left to do the importing say—in essence— ‘Hey, what about my exports?’

We can sort every country on earth into one of these categories: pyramid, chimney, or inverted pyramid.

The problem we’re facing this decade is that the inverted pyramid economies keep aging. And the birth rate can’t keep up.

So, the largest block of the population is no longer in their fifties. Now, the largest portion of the population is in their sixties.

What we’re seeing in developed and developing countries is that the top of that population distribution is now moving into retirement.

And we do not have an economic model to maintain a country when there is no consumption…or production… or investment. And some of the biggest countries in the world will hit this category in the next eight years.

And that brings us back to China.

The Chinese Collapse

The news from earlier this month is that the Chinese government released a new batch of demographic data. And it is—in a word—atrocious.

The first bit of bad news was birthrates. To maintain your current population, a country needs a birthrate of roughly 2.1 children per woman. With the new data, China is now at 1.16.

That’s the lowest in their history. And it’s the second lowest in human history…ever. And it gets worse if you look at the cities.

The biggest Chinese cities now have birthrates that are below 0.7 children per woman. What this means is that China has the fastest aging society in human history.

The second big problem is that China’s population peaked last year. And the population has dropped by about 800,000 people since then.

And here’s the scary thing about both figures: They’re wrong.

A couple years ago, the Chinese started releasing bits and pieces from their 2020-decade census. And they came to the grudging—and public—conclusion that they had overcounted their population by in excess of 100 million people.

The worst part is that these missing 100 million people or so would have been aged forty or under. And as we saw above, that’s the most productive part of a population. They’re also the folks that have the kids.

When you combine that with the birthrate information… wow.

What we are looking at is the complete dissolution of the Chinese demography in a very short period.

After all, if you’re losing a lot of people—or you never had them in the first place—under the age of forty, that means the ability for China to maintain a workforce and tax basis is dissolving before our eyes.

And we have never seen a system any time in history make it through something like this without a massive change in the political and economic environment.

The Chinese economic model depends entirely on globalization and internationalization. This is a country that imports 75-85% of their oil. This is a country that is the largest importer of food.

And this is a country with an economic model that is utterly dependent on importing raw materials and tech, and then export semi-finished and finished goods elsewhere.

This model might work for several more years. But it has a “use by” date of 2030 or so.

After that, we don’t even have an economic theory for how an economy might function if the Chinese population data continues its current trajectory.

And that’s assuming that nothing goes wrong with China’s leadership…agriculture…trade…finance…with the Americans… or with energy.

The common view from the West for years has been that China is in the ascendency. That’s wrong.

As I said at the top…China is screwed.


Peter Zeihan

Editor’s Note: If you enjoyed Peter’s work, we encourage you to pick up his latest book, The End of the World is Just the Beginning. Go right here to grab your discounted copy along with several bonuses.