came about because of beliefs that China is entering a more difficult phase in a more challenging world and that at
such times unity and continuity of leadership is especially important, and will be even more important over the
next few years. As mentioned earlier, during periods of great crisis more autocratic and less democratic
leadership tends to be preferred.
Conflicts between the US and China over trade, technology, geopolitics, and to some extent, capital
intensified. Then we got the pandemic, the economic downturn came, the massive printing creation of money and
credit, and the various types of conflicts (most obviously the racially motivated protests and riots) occurred, and
we are now where we are. Where is that, and, in a nutshell, how did China get here?
Conflicts over stealing intellectual property, especially through cyber espionage, have also increased a lot. I
am told that China and the United States have both been much more aggressive in cyber and non-cyber
spying, though they have done it differently. I’m not an expert on this issue, but I have spoken to many
Americans in positions to know who allege that Chinese stealing of intellectual property from companies is
much more extensive. For example, in a February 2019 survey, 1 in 5 North America-based companies on the
CNBC Global CFO Council said that China had stolen their IP within the last year.28 If you want to read some
American studies some are recommended in this footnote.29
As we conclude our look back at what happened, it is worth a quick recap.
Over the last 40 years, China’s shift from isolation to opening up and from hard-core communism to
“market reforms” and capitalism has had a greater impact on the economies of the Chinese, the US, and the
world than anything else. What happened a) in China and in the US, b) between them, and c) between them
and the rest of the world have caused the biggest changes in the world. More specifically, as a result of China’s
opening up and reforming its system to learn from foreign countries, obtain foreign capital, and incorporate
capitalistic techniques, it learned a lot, efficiently produced a lot, exported and earned a lot, lent and invested a lot
globally, became a lot richer and more powerful, and radically changed itself and the rest of the world. For most of
those years, that occurred in a classic period of global peace and prosperity in which the leading empire wasn’t
threatened and globalization and cooperation flourished. The period lasted until around 2008-10 when the United
States and the world became more nationalistic, confrontational, and protectionist, following the archetypical Big
Cycle progression. Over just these 40 years China transitioned itself from one of the most backward countries
judging by my eight measures of power to one of the two most powerful countries, most importantly economically,
technologically, militarily and geopolitically.
The results of their policies are reflected in the table below, which shows just a few representative statistics. They
and most other stats are extremely impressive. For example, output per person has increased 25 times, the
percentage of people living below the poverty line has fallen from 96% to less than 1%, life expectancy has
increased by an average of 10 years, and the average number of years of education has increased by about 80%. I
could go on and on rattling off statistics in virtually every area that were equally impressive. China is now clearly a
rival of the United States in a number of areas.
As for the value of money, the charts below show the value of Chinese currency measured in dollar terms
since the introduction of the RMB in 1948. As shown, the RMB was fixed against the dollar and gold until 1971
when a) the US dollar devalued against gold and most other currencies, including the RMB and b) all currencies
(including the RMB) devalued against gold. That is when China, as well as the US and most currencies, went to a
fiat monetary system and inflation rates accelerated. The initial appreciation of the RMB relative to the dollar hurt
exports and the economy, which led to devaluations of the RMB from 1980 to 1994 totaling 83% (or roughly 12%