Chairman Xi might play the malevolent doppelganger of a much loved children’s cartoon character in memes, but in real life, he’s becoming the guy who yuans to keep control so badly, he seems willing to let it all crash down around him.

In an interesting metric, millionaires have already been leaving China with for quite a while, and, unsurprisingly, that pace has picked up. What’s surprising to me is that Xi allows them to leave.

China, with the world’s second-largest economy and the second-highest population, will again see the biggest exodus of millionaires this year, according to new research.

According to a report by investment migration consultancy Henley & Partners, China is expected to lose the largest number of dollar millionaires this year due to migration, when compared to any other country.

Data from the firm showed that a net 10,800 high-net-worth individuals migrated out of China in 2022, and another net 13,500 are expected to leave this year.

This is not an issue that started with the coronavirus pandemic, and has been going on for the last 10 years. China has seen the biggest departure of millionaires each year for the past decade, causing general wealth growth in the country to slow down, Andrew Amoils, head of research at global wealth intelligence firm New World Wealth which helped create the report, said in an accompanying statement.

“The recent outflows could be more damaging than usual. China’s economy grew strongly from 2000 to 2017, but wealth and millionaire growth in the country has been negligible since then (when measured in U.S.-dollar terms).”

India is the second ranking country as far as millionaire outflow from Asia, but the difference there is they make many more millionaires than they lose. China isn’t replacing those movers and shakers as they exit, which leaves the different industries they worked in stagnant, with a dearth of entrepreneurs willing to take risks needed to forge ahead.

Without innovation and visionaries, industry withers, especially in an economic downturn. That’s what China is facing now, as the world turns from a globalization model to more of a protectionist one. It’s hitting China especially hard, because they are the focus of much of the reactionary backlash, mostly due to their industrial theft, heavy handed dealing with foreign corporations and the stench of their human rights abuses. But there was another reason.

The COVID pandemic was the shot across the bow that woke the world up to how entwined everyday life was with the Chinese. In many cases, if those freighters could not make it over from Shanghai, manufactured goods, medicines and the sundry necessities of everyday life suddenly disappeared from shelves in supermarkets, hardware stores and, more terrifying, pharmacies and hospitals.

There was a collective awakening and howls of “Who the hell thought it was a great idea to offshore manufacturing EVERYTHING?!” rose to the Heavens. Americans were shocked to find we “make” very little of the flotsam and jetsam of daily life in the United States, nor do we have the capacity to just fire up an empty plant, and get started anew.

Those days are gone.

But it doesn’t mean that the U.S. and the rest of the world isn’t shifting away from being so dependent on Chinese goods and manufacturing. They are. In classic European Union-speak, they’re also giving it a friendlier moniker than what they saw as Trump’s (completely legitimate, but much too aggressive for Euro-tastes) imperative to “de-couple” from the Chinese.

They’re politely calling the strategic moves “de-risking” instead.

If diplomats were on TikTok, “de-risk” would be trending. The word has suddenly become popular among officials trying to loosen China’s grip on global supply chains but not cut ties entirely, with the joint communiqué from this weekend’s Group of 7 meeting making clear that the world’s largest democratic economies will now focus on “de-risking, not decoupling.”

The former is meant to sound more moderate, more surgical. It reflects an evolution in the discussion over how to deal with a rising, assertive China…

*warm fuzzies*

I’m sure Xi can’t see through that, right? Yeah. Not so much. It saves face for the WEF types and hopefully prevents Xi from lashing out in some other, God forbid physical fashion.

…To the Chinese government, unsurprisingly, “de-risking” isn’t much of an improvement.

“There is a sense that ‘de-risking’ might be ‘decoupling’ in disguise,” the state-run Global Times wrote in a recent editorial. It argued that Washington’s approach had not strayed from “its unhealthy obsession with maintaining its dominant position in the world.”

The Chinese have not recovered from the pandemic as robustly as some analysts had expected. The export numbers from China to the U.S. haven’t recovered, either, and they desperately need that inbound revenue flow.

…Far from an economic explosion, China’s recovery from COVID has been weak. Industrial production has disappointed. Trade — both imports and exports — has slowed markedly. There is debt everywhere, especially in property development, which makes up 30% of the economy. Trading partners are upset for a litany of reasons, from human-rights abuses to concerns about the government’s increasing role in the country’s commerce. The private sector — which was expected to drive most of China’s bounceback — is running scared.

The fizzled reopening isn’t just a short-term disappointment, it’s a sign that the old China is gone. The mechanisms that drove the “Chinese miracle,” a triple-decade transformation that made the country an international force, have broken down. The bubble in China’s property market finally popped. And because of real estate’s central role in the economy, the painful process of absorbing those losses will continue to suck money away from Chinese households, banks, and China’s massive web of local governments. China’s working-age population is getting old, and there are fewer young people to replace them than at any time in the country’s modern history. Exports remain key to the economy, but countries that once championed free trade have turned from globalism to protectionism.

…In this environment, trade is critical to China. Now would be an ideal time to ramp up exports, to bring in capital from the outside world. But as I’ve argued many times, Xi is a closer, not an opener. Geopolitical tensions have the US — China’s biggest trading partner — “de-risking” from China (not decoupling, the powers that be have decided that word is too toxic). Many US corporations are looking to move operations elsewhere, either by reshoring them to the States or by “friendshoring” them to more ideologically aligned countries. Last year, China made up 50.7% of US imports from Asia; that’s down from over 70% in 2013, according to the management-consulting firm Kearney.

For the rest of the world, moving away from China is inflationary — it will take time and money to set up factories closer to home. The complexities of dealing with a sputtering Chinese engine will be a problem for many countries that have become tangled in Beijing’s economic web. The end of the miracle will be a pain for many investors and markets — it will make things less stable, and the world will have to find new sources of growth.

In fact, some former China financial hawks are now steering clients clear of the country, as the recovery prognosis gets grimmer, even as Beijing bestirs itself to throw some money on stimulus spending.

Beijing is planning major steps to revive the country’s flagging economy, including the possibility of billions of dollars in new infrastructure spending, and looser rules to encourage property investors to buy more homes, people familiar with the discussions say.

…Slowing growth adds to a list of challenges for Beijing that also includes icy relations with the U.S. and moves by Washington and its allies to throttle China’s access to advanced computer chips on the grounds of national security. Multinational manufacturers are rethinking China’s role in their supply chains in response to concerns over future trade disruptions from frictions with the West.

But many economists remain skeptical that the latest measures will be enough to reverse weakening confidence and prevent a further slowdown. The moves also signal that officials are still wedded to old ways of juicing growth by using borrowing to fire up investment, rather than taking more difficult steps to boost household incomes and consumption, some economists say.

…“It’s hard to be positive about China’s economy at the moment,” said Katrina Ell, senior China economist at Moody’s Analytics.

The Chinese real estate collapse…

…The breakdown in local financing has a real and immediate impact on Chinese society. As the credit flow slowly got choked off, property companies started selling apartments before they were built, funding themselves on the backs of Chinese consumers. But as the market has gone bust, some developers aren’t making good on their promises to the people they sold to, leaving households up the creek. Property was supposed to be a safe investment for China’s savers. Over 70% of China’s wealth is tied up in real estate. It was the investment that secured a family’s place in the middle class. And the problem isn’t just for older people nearing their twilight years — the property bust is hurting the prospects for the next generation, too. Some starved local governments are raising college tuition fees as high as 54% at a time when youth unemployment is over 20% and a record number of students are trying to get a higher education.

…is the single greatest threat to Xi’s regime.

…After decades of Maoist hostility to private property, restrictions on the purchase of private property were finally lifted in the early 1990s: It didn’t take long for a mainland middle class to emerge, one as obsessive over house prices as any of their Western counterparts.

That middle class, now the Chinese government’s bedrock of support, is under threat from its crumbling real estate market—and with it, the Chinese Communist Party’s credibility. For years, Beijing has tried to rein in prices but kept giving up under pressure from stakeholders. Now, it’s ditching those attempts entirely in the hopes of re-inflating the bubble that once underpinned China’s economic growth.

“War hawks” in the Chinese government are growing bolder as they both sense U.S. weakness with an obviously befuddled geriatric grifter at the helm here, and seek to project strength in the Pacific to distract from homegrown economic problems.

The risk of conflict in the Western Pacific is growing as China raises the military stakes with a goal of dominating the region. The Biden Administration will have to keep its nerve, while preparing for a more aggressive response if the Chinese Communist Party keeps pushing.

Everyone knows that Biden is tough talk, little do as far as the Chinese go. He will prevaricate and stall until forced to act. Bets are it will be predominantly domestic economic deterioration that forces the CCP to manufacture a big distraction.

With Xi’s ham-handed stimulus measures generally conceded a failure even before they’re enacted, the middle-class Chinese citizen lumbering along under a higher debt load than a comparable American, and prospects for a resurgence in trade to its former glory non-existent, how long does Xi hold the leash on his forces in the Pacific?