(AIER)—Not so long ago, commentators across the political spectrum were warning us that China’s economy was set to surpass America’s. The United States needed, one Senator claimed, “a 21st -century pro-American industrial policy,” to ward off this existential threat.
Such rhetoric was reminiscent of the late-1980s, when a slew of books appeared to warn Americans that, unless the United States adopted Japanese-like industrial policy (government intervention that shifts resources toward a particular sector or industry), it was doomed to be economically dwarfed by a country which America had militarily crushed four decades earlier.
Yet in 1990, Japan’s economy began entering its “Lost Decade” of stagnation. While that owed much to seriously flawed monetary policy, it also resulted from extensive government interventions into the Japanese economy via industrial policy: a point conceded by no less than Japan’s finance ministry in 2002.
Similar patterns may be manifesting themselves in China today. The shine is definitely off China’s economy, and many of Beijing’s economic dilemmas have resulted from the Communist regime’s dirigiste policies.
The biggest time-bomb confronting Beijing is its self-inflicted demographic disaster. Thanks to the one-child policy pursued between 1980 and 2016, China now faces all the complications associated with an upside-down demographic pyramid, in which an increasingly elderly population is supported by a shrinking pool of younger people.
That means ever-accelerating spending on pensions, welfare, and healthcare which will steadily crowd out investment in things like research and development, infrastructure, and defense. No wonder Beijing is now urging families to have three children. The trouble is that once demographic patterns are set in place, they are hard to shift. Consequently, as the foreign policy scholar Ryan Hass notes, China is now “at risk of growing old before it grows rich.”
Dismal demographics isn’t the only challenge with which China must grapple. The country is reaping the whirlwind of conscious decisions on Beijing’s part over the past 15 years to embrace more state-centric economic policies.
Take, for instance, China’s much touted Belt-and-Road Initiative (BRI). Since 2013, Beijing has sought to systematically promote and invest in infrastructure projects around the world, particularly in countries China considers geopolitically significant.
From its beginning, however, BRI has been characterized by runaway costs: so much so that, as early as 2015, state-run Chinese banks started reducing their exposure to BRI while Chinese commercial banks began trying to avoid it altogether. There is also evidence that BRI has long been marred by corruption on the part of those Chinese officials responsible for directing it.
Such problems, however, are to be expected when the government plays a heavy-handed role in directing investment — a process which steadily accelerated in China after Xi Jinping came to power in 2012. This has produced widespread misallocations of capital across the economy as a result of state-controlled banks lending to inefficient and zombie state enterprises.
Chinese state officials have even acknowledged that Beijing wasted at least $6 trillion on unsuccessful investments between 2009 and 2014. That makes it unsurprising that the IMF’s 2021 Article IV Consultation report on China concluded that Chinese state-owned businesses were, on average, only eighty percent as productive as private companies. This, the IMF report stated, had played a significant part in China’s ongoing productivity decline since the late-2000s.
A related problem is China’s aggressive use of industrial policy, especially since the early-2010s, in the form of subsidies, direct state investments, and cheap loans. The goal has been to try to bolster growth in sectors like advanced manufacturing, technology, the service sector, infrastructure, and agriculture.
Naturally if you throw enough money at any given economic sector, you will get some results. But Scott Lincicome and Huan Zhu’s extensive analysis of industrial policy in China shows massive failures in areas like semiconductors, 3G mobile technologies, domestic aircraft, and automotive manufacturing. The same policies have also contributed to growing corruption in many economic sectors, including China’s highly subsidized R&D sector.
These and other trends are making foreign investors nervous. This brings us to yet another problem facing China’s economic policymakers.
Inbound foreign direct investment in China has been falling now for two straight years. It is now at its lowest level since 1993. This development reflects a complex relationship, from trade tensions to unease about Beijing’s intentions vis-à-vis Taiwan.
Decreasing confidence among foreign business leaders about China’s future economic prospects also underlies this foreign investment downturn. The European Union Chamber of Commerce in China’s 2023 Business Confidence Survey, for instance, reported “a significant deterioration of business sentiment.” More specifically, “64 percent of respondents reported that doing business in China became more difficult in the past year, the highest on record;” “11 percent of respondents have shifted existing investments out of China;” “8 percent have taken the decision to move future investments previously planned for China elsewhere;” and “one in ten report they have already shifted, or plan to shift, their Asia headquarters (HQ) or business unit HQ out of Mainland China.”
“Uncertainties in China’s policy environment,” according to the Survey, were central to this deteriorating confidence. Foreign businesses are anxious about growing ambiguity concerning what Beijing will allow foreign businesses to do in China. This uncertainty has surely been exacerbated by the fact that China’s National Bureau of Statistics is becoming progressively more selective about what economic data it releases, and regularly delays the release of other relevant data. In August 2023, China simply stopped releasing information about its youth unemployment rate.
Do these trends indicate that China is about to lapse into Japanese-style 1990s stagnation? It is far too early to tell. They do, however, indicate that American policymakers — whether their focus is national security or trade — should recalibrate their approach to Beijing and avoid getting locked into a narrative which assumes that China is an unstoppable economic colossus. Put simply, the evidence suggests that it is not.
Bypass Big Tech Censors
Two Storms, One Harvest
Every food crisis in living memory has been a one-shock event. The 2008 price spike was a commodity bubble. The 2020 shortages were a logistics failure. The 2022 grain scare was a war on one exporter’s ports. Each time, the system bent, adjusted, and recovered, and each time the experts assured us afterward that global markets are simply too big and too diversified to fail.
What nobody in Washington seems eager to discuss is that 2026 is shaping up to be something the modern food system has never actually faced. Two independent shocks, one climatic and one geopolitical, are converging on the same harvest cycle at the same time. Not sequentially. Simultaneously.
Start with the weather. The Pacific Ocean is currently building toward what forecasters now openly call a record event. NOAA’s Climate Prediction Center puts the odds of at least a strong El Niño near 88 percent, with roughly two in three odds it reaches “very strong” status, the tier reserved for perhaps three or four events in the entire satellite era. Every major global model now projects a median peak in Super El Niño territory, and most of them project it exceeding the 2015-16 event, which until now held the modern record. Sea surface anomalies were already brushing the super threshold in mid-July, months before these events normally peak. The atmosphere has already shifted into El Niño mode, and the event is forecast to crest in late fall and early winter.
This is not about “climate change.” It’s about the standard cycles of weather, and the cycle we’re currently in is one that has likely devastated societies in the past. We’re better prepared as a society today, but not all Americans are equally prepared.
Serious households have started doing the quiet math on their own. Grocery bills tell part of the story, and the forecast maps tell the rest, which is why long-term food storage has moved from fringe hobby to mainstream line item in the family budget, with established suppliers like Heaven’s Harvest seeing demand from people who five years ago would have rolled their eyes at the idea. That instinct is not paranoia. It is pattern recognition, and the pattern is worth walking through carefully.
Editor’s Note: Heaven’s Harvest IS a sponsor, but the warnings of this article are real and would be written even if we didn’t have a survival food sponsor. With that said, those who take advantage of what they offer can use promo code “Patriot” for 15% off.
The Fertilizer Clock Is Already Running
While the Pacific warms, the second shock has been unfolding in the Strait of Hormuz. The conflict with Iran turned the world’s most important energy chokepoint into a contested waterway, and the consequences reach far beyond the gas pump. Roughly a third of global fertilizer trade moves through Hormuz, and the disruption sent urea prices up 86 percent year over year by March, with a 53 percent jump in a single month.
The World Bank projects energy prices rising about 24 percent in 2026 and fertilizer about 31 percent. By its own accounting, fertilizer prices ran 35 percent higher in the first five months of this year than the same period last year.
Here is the mechanism the nightly news will not explain. Fertilizer is not a grocery item. It is a time-delayed input. The nitrogen a farmer in Iowa or Punjab could not afford to apply this spring does not show up as a problem this spring. It shows up as a thinner harvest six to twelve months later.
The World Bank’s own food security brief concedes that the effects of reduced applications earlier this season “are likely to become visible only later in harvest outcomes.” Translate that from institutional language into plain English and it means this. The damage is already done, it is already in the ground, and we are simply waiting for it to arrive on the shelf.
Now check the calendar. Six to twelve months from the spring planting season lands us squarely in late 2026 and early 2027. Which is precisely when the strongest El Niño in the instrumental record is forecast to peak, bringing its signature droughts to Southeast Asia, Australia, southern Africa, northern Brazil, and South Asia, the very regions that grow the world’s rice, sugar, and oilseeds.
The World Bank warns openly that a strong El Niño “could disrupt multiple crop belts simultaneously” on top of the conflict-driven input costs. Their baseline projection assumes the Middle East disruptions ease by autumn. What in the last two years of Middle East history suggests that assumption is safe?
The System Has No Slack Left
The comfortable answer is that global markets always adjust. But adjustment requires slack, and the slack is gone. Global cereal production is expected to decline from last year’s records even before El Niño does its work. The UN World Food Programme, hardly a den of right-wing preppers, is calling this the most significant disruption to its supply chains since Covid and the invasion of Ukraine, and its supply chain director put the stakes bluntly.
Today’s supply chain challenges are tomorrow’s hunger crisis.
There is also a political dimension that markets cannot price. When food gets scarce, governments do not behave like economists. They behave like politicians. Export bans, hoarding mandates, and panic buying at the national level turned the modest rice shortfall of 2008 into a global crisis, and analysts are already warning that import-dependent nations are the first dominoes.
The 2015-16 Super El Niño, a far weaker event than what is now forecast, threw tens of millions into food stress across Africa and Asia. This one is projected to be stronger, and it arrives with fertilizer already rationed by price and shipping lanes already contested by missiles.
What Joseph Knew
Scripture does not treat preparation for lean years as faithlessness. It treats it as wisdom delivered in advance to those willing to act on it.
Behold, there come seven years of great plenty throughout all the land of Egypt: And there shall arise after them seven years of famine; and all the plenty shall be forgotten in the land of Egypt.
Joseph did not respond to that warning with a hashtag or a committee. He stored grain during the years of abundance, and when the famine came, Egypt stood while its neighbors begged. The lesson is not that famine is certain. It is that the time to prepare is precisely when preparation still looks optional.
Nobody who filled a pantry in a year of plenty has ever regretted it, and nobody standing in an empty aisle has ever been glad he waited for certainty.
None of this calls for panic, and panic is the enemy of sound judgment anyway. It calls for the same unglamorous prudence our grandparents considered ordinary. Keep some cash margin, know your local growers, and put real food in deep storage while it is cheap and available, because the entire arc of this story is that cheap and available is a closing window.
Families looking for a straightforward place to start can visit Heaven’s Harvest and use promo code Patriot for 15 percent off long-term storable food. The forecasts may yet soften, the strait may yet reopen, and we should pray they do. But hope is a fine thing to hold and a foolish thing to eat.