War with China leaves Washington ‘freaking out’ 

Welcome to the fifth edition of Between The Lines. This week we look at why “The Pentagon is freaking out about a potential war with China.” Other tipping point issues are Beijing’s own conflict with soaring unemployment and a lost decade of millionaires. So, here, we go.

War games have become all the rage in Washington as relations between China and the United States sink to the depths of a nuclear-powered Virginia-class submarine. At the center of the conundrum is a conflict over Taiwan.

If the People’s Liberation Army and Navy did launch an amphibious assault across the 100-mile Taiwan Strait, the outcome could be devastating. 

As Politico’s Michael Hirsh pointed out in his gripping weekend essay: 

Some US intelligence and defense officials fear that Beijing understands the deficiency in American readiness all too well and could try to exploit it by attacking or blockading Taiwan in the next few years. 

“In April, China’s military completed three days of large-scale combat exercises around Taiwan that rehearsed blockading the island and said in a statement it is ‘ready to fight … at any time to smash any form of ‘Taiwan independence’ and foreign interference attempts’.”

Key to the problem is that the US no longer has a “skilled manufacturing base to spin up and support wartime production.” In short, the “Arsenal of Democracy” is looking threadbare.

Why the kids are not all right

Even for China, the numbers are mind-boggling.

“Since the Covid [pandemic], there have been approximately 54 million young people who have lost their jobs,” Wang Mingyuan, of the Reform and Development Institute of Beijing, said in an article translated by Baiguan this week.

The fallout lingered in May with unemployment among those aged between 16 to 24 hitting a record high of 20.8%. In headline terms, that means one in five of China’s young adults are struggling to find a job. Baiguan summarized:

This year, there will be over 10 million graduates who cannot find jobs. [And] the problem of employment will not ease on its own and will only become more severe.

“If it is not properly addressed, by 2028, society will have accumulated around 50 million unemployed youth.”

It will also create social stability risks for President Xi Jinping and his ruling Communist Party regime as the economy flatlines.

‘Lost decade’ and missing millionaires

Whatever happened to China’s missing millionaires? They simply left the country. Up to 13,500 “high-net-worth individuals” will say zàijiàn, or goodbye, this year as they flee abroad. Last year, the figure was 10,800, according to the Henley Private Wealth Migration Report.

The main reason for the exodus is the sluggish “rebound from Covid restrictions” and the overall confusion surrounding the state of the world’s second-largest economy. Business Insider captured the mood perfectly:

The yuan and Chinese stock indexes have tumbled this year, with some commentators calling the rebound narrative a ‘charade’ and even predicting that China is headed for a ‘lost decade’.

“[In] the past few years, general wealth growth in the country has been slowing, which means that the recent outflows could be more damaging than usual,” Andrew Amoils, the head of research at New World Wealth, said in Henley’s report.

As for where the rich are going, Australia leads the race for attracting millionaires. Upwards and onwards to Down Under.