March 7, 2026: South Korea is the tenth largest economy in the world. China is second, after South Korean ally the United States. Trade between China and South Korea last year exceeded $300 billion. China relies on South Korea for many items essential for keeping the Chinese economy going. What China does not like is the growing military power of South Korea. The only potential enemy South Korea has is China. North Korea is a threat, but the per capita GDP of South Korea is more than 50 times larger than North Korea. China has long backed North Korea but can do little to alleviate the self-destructive economic policies the Kim dynasty has imposed for over 70 years. While North Korea is now building destroyers and large submarines, South Korea has had a large fleet for decades and is now building nuclear submarines. China sees that as a threat but can’t do much about it. The South Korean, Japanese and American Pacific fleet forces can block any Chinese effort to take control of the western Pacific. For China, South Korea has become a crucial trading partner and dangerous regional naval power.

China and South Korea have other problems. The quantity and qualities of people in East Asia are changing. The populations of China, Japan, Taiwan, South Korea, and Russia are aging and shrinking, while India, the Philippines, Vietnam and Australia continue to grow.

China has an official population of 1.42 billion and an actual population of 800 million or less. The Chinese government went to great lengths to conceal the negative population impact of the one-child policy and covid19. But reports from tourists or commercial travelers indicated there were far fewer Chinese than the government claimed. Satellite photos showed fewer lights where major cities were and many lights for smaller towns were now absent. Unless living in the dark at night became a new Chinese custom, the lower population estimates are apparently accurate.

Japan, Taiwan, and South Korea have declining populations because of prosperity and comfortable living conditions. Worldwide, industrialized countries face lower birth rates because of this. The Japanese birth rate is 1.15, Taiwan’s .89, South Korea’s is .75. Other industrialized countries are experiencing similar birth rates. In Italy it’s 1.18, Germany is 1.62. The United States is no exception with a birth rate of 1.58.

India has a population of 1.46 billion. That’s nearly 18 percent of the world population. That is changing as India's birth rate of 1.9 is also below the 2.1 replacement rate. The Philippines birth rate is also 1.9. In Vietnam it’s 1.4, and Australia 1.8. There are nations with high birth rates. Most are in Africa, which has an overall birth rate of 3.1. Worldwide the rate is 1.75.

This will have an impact on economies, military capabilities and relationships with major trading and military partners. Two nations matter the most when it comes to trade. The United States had total exports and imports valued at $5.2 trillion. China did $6.1 trillion in trade. The importance of trade to the Chinese, who now have a declining middle class, is critical. Disrupt economic stability and you have chaos and maybe even another civil war. China builds most of the world’s commercial shipping and has the world’s largest navy, at least in terms of ship numbers. The United States still has a larger fleet in terms of total tonnage, 11 aircraft carriers and over a century of experience. China may threaten war, but to actually start one would be a political and economic catastrophe for China. Peace through prosperity is more than a catchy slogan.

The Chinese fertility rate, or number of children born to each woman, is among the lowest in the world and nothing the government can do seems able to change it. Chinese women no longer accept the traditional role of wife and mother. Many refuse to marry Chinese men, instead seeking American or European spouses. Americans are preferred because they help with childcare and housework. Most Chinese women don’t have access to foreign men and simply stay single.

China continues trying to make the best of a bad situation they cannot seem to control; a shrinking population, a workforce that is shrinking even faster and markets for its exports leveling off. The workforce shrinkage raises dire doubts about Chinese export statistics as those simply remaining where they were six years ago entails an unbelievable rate of labor productivity increases.

These three factors mean China’s Ponzi scheme economy has reached its limits with substantial declines now in progress. Other East Asian nations have similar problems, some not involving on-going Ponzi scheme financial systems, after having experienced a sustained economic boom that has moved much of the population into the middle-class. China too has prospered and given several hundred million Chinese prosperous middle class lives. This is unprecedented in Chinese history. One of the downsides of this prosperity is that couples have fewer children. When poor, families have more children because that is how people can create some support for their old age. Children do that and, in the absence of savings, children have traditionally supported their elderly parents. Because of all the prosperity, that traditional form of old age care is eroding.

China’s total population began a rapid collapse and reached 800-1200 million in the 2020s instead of the predicted 2030s. The biggest current problem is the growth of retirees with a steadily shrinking number of workers to support them. Proposals to allow more births run into arguments about limited resources. Japan is way ahead in this population decline curve, and China does not want to join them, but no one has yet come up with an acceptable alternative. The impact of fewer births in urban areas over two decades ago is showing up in growing shortages of skilled labor. The costs of manufacturing high tech items is growing, forcing Chinese manufacturers to move more factories to nations with cheaper labor. The military is giving the troops a raise, especially the technicians. Otherwise, it can’t recruit or keep them.

Chinese manufacturing activity has been shrinking since 2022 and that is one of several indicators that the Chinese economy is in trouble. There are also some epic failures of infrastructure, with provincial electrical blackouts increasingly common. The problems are largely self-inflicted. The shrinking of Chinese economic activity is the result of several different economic problems, including consumers not resuming their pre-covid19 spending habits. Less consumer spending was not expected. None of this should be a surprise because all the problems have occurred in China before, but not all at once. Paying attention to Chinese history is a respected popular tradition for basing major decisions on. Chinese leader Xi Jinping came to power in 2012 and initially concentrated on reinforcing government control of the military. Xi, like most Chinese leaders, pays more attention to history than foreign counterparts do. Chinese military history is measured in thousands of years while Westerners in most cases have only a few centuries of it and don’t pay as much attention to past experiences as China does.

Chinese economic history over those long periods did not change much either. It was largely feudal and, since 1910, China has been trying to develop a form of government capable of handling economic problems more effectively. Xi Jinping has had some success and recently saw the Chinese banking sector improving to the point where it can assist in reviving the economy. The economy is still in bad shape, with too much debt, and many foreign companies pulling out of China while too many Chinese companies are barely staying in business with a growing number slipping into insolvency and bankruptcy.