Ingram's November 2022

R E F L E C T I O N S

by Dennis Boone

At the Intersection of Business and Life

What Happens When Markets Just … Vanish?

What’s happening in China today could compel U.S. companies to re-assess domestic markets. You don’t have to make automobiles, raise hogs, grow soybeans or churn out microchips to appreciate what it means to have a market of 1.4 billion potential customers across the Pacific in China. Folks who are in those spaces already understand the promise and potential of that market. For the rest of us, it should be good enough to know that—pre-pandemic anyway—nearly 19,000 Missouri jobs were tied to exports bound for China. The value of those goods rose 20 percent between 2007 and 2016, twice as fast as they did to the rest of the planet. And services? The value there rose $829 million in that span—up 410 percent over the previous decade, while growth in Missouri exports to all other nations was a more modest 56 percent. China, in fact, became Missouri’s No. 1 export market for services during that decade. In Kansas, the value of the Beijing Connection wasn’t as big in dollars, but it had a more pronounced relative impact. While exports of goods to China were up 73 percent in that decade, Kansas shipments

to accomplish, moving from agrarian economies to industrial and tech-based ones. A process, by the way, that absolutely obliterates large-family dynamics. It’s too late for Beijing to fix that now. Even if Xi instituted mandatory-pregnancy camps today, the first educated workers from them wouldn’t punch a clock until 2044. Young generations, as Zeihan has eloquently argued in his work, are the consumers in an economy; those of retirement age are largely past their consumptive stages and often are net drags on an economy. In one very real sense, it doesn’t matter, beyond some short-term pain, if Xi Jinping nabs Taiwan before the collapse comes— before long, there won’t be a China as we know it to exercise his authoritarian vision. And does anyone believe we won’t see wide-scale ostracization, perhaps even state-planned starvation with a Great Leap Forward II, to help thin China’s graying herd within the next generation? It’s a problem America doesn’t have, thanks to the rise of its biggest genera tional cohort ever, the Millennials. More numerous than even the Baby Boomers, they will help sustain some semblance of normal consumption patterns while the rest of the demographically challenged planet writhes in de-globalization agony between now and 2065. As work forces shrink globally, labor costs are already soaring. Adjusted for productivity, the cheap-labor markets of the world are losing their biggest competitive advantage, the reason for U.S. off-shoring in the late 20th century. With that, the ability to produce things like computers, cell phones, laptops, and smart TVs represents an opportunity for America to restore its manufacturing muscle. So … let’s bring all this back to the business owners in Missouri and Kansas today. What’s your long-term vision? Are you building your company around a market that might not exist in another generation? Or are you looking for markets that can offer some sense of stability? A lot is riding on the answers to those two questions.

to the rest of the world actually declined by 21 percent. Services were up 292 percent to China but only 36 percent elsewhere. At $1.2 billion, China was the Sunflower State’s third-largest export market in both goods and services, supporting 13,300 Kansas jobs. So say data points from the U.S. China Business Council, anyway. But forget data points for a second. Suppose you own a business in Missouri or Kansas with significant ties to Chinese markets. What would it mean to know that, thanks to overcounting in the most recent Chinese census, the population you’re serving today

What would it mean to a business owner here to learn that his target market in China is smaller, by 130 million, than he thought it was?

is 130 million smaller than you thought it was just this morning? And what would it mean to know that, perhaps as early as 2050 (and certainly by 2100, when your kids or grandkids have the business) your company’s target market could be less than half what it is today? Demographers who understand the economic blowback of national fertility rates that fall below 2.2 per couple—the bare minimum needed to maintain a population and work force—started ringing alarm bells about China back in 1990, when the one-child policy was enacted. Flash forward 26 years and the loss of half an entire generation; the majority of those losses involved females, further compounding the replacement challenge. It’s easy to understand why Beijing lifted the one-child sanction in 2016. And easy to see the panic driving the three-child authorization put in place this year. Anyone following Chinese metrics on COVID since 2019 knows the abysmal quality of any data that nation discloses to the world, so color me shocked to read that China had overcounted its population in its latest census. At 1.3 billion instead of 1.4 billion, it has ceded the world’s Most Populous Nation title to India. Put it all together, say deep-thinking geopolitical strategists like author Peter Zeihan, and it’s clear that China is a failed demography. It crammed into a single generation the type of economic growth that most western nations needed four, five, and six generations

Dennis Boone is the edito rial director at Ingram’s. E | DBoone @ Ingrams.com P | 816.268.6402

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I n g r a m ’ s

Kansas City’s Business Media

November 2022