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Chinese stocks lost 30% this year, has China’s lost decade begun?

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I predicted dire times for China six years ago, when Xi Jinping amended the constitution to make himself leader for life, in charge of the government, the party, the military, and the banks. Emperor, I called him, here. It now seems the collapse has begun, or at least stagnation. Chinese history is cyclic. Good times of peace and plenty give rise to a supreme emperor whose excesses bring war and famine, or at least stagnation. The cycle repeats every 50 to 100 years. Since Nixon opened China in 1973, the country has seen 50 years of prosperity and spectacular growth, but the growth has stopped and may be in decline. The stock market (Shanghai Shenzen 300) peaked in 2021 and has declined 50% from there. It’s down 30% for the last 12 months to levels seen in December 2010. US growth seemed slower than China’s but it’s been more steady. The main US stock market, the S+P 500, has more than tripled since 2010, up 24.5% this year.

Five years of the Shanghai 300 index with hardly any change. There has hardly been change in 15 years. One could argue that the lost decade is here and on-going. .

Each year Chairman Xi’s behaves more dictatorial. Last year he arrested his predecessor, Hu Jintao in front of the Communist party. He now tracks all his citizens actions by way of face recognition and phone software, and gives demerits for wrong thinking and wrong behaviors. You lose merits by buying western cars or visiting western internet sites. Taking money abroad is generally illegal. Needless to say, such behavior causes people to want to take money abroad, just in case. Last week, Xi proposed a limit on video game playing and clamped down on banks, demanding low interest rates. This is bad for the gaming corporations and teenagers, and banks, but so far there are no protests as there is no war.

Kissinger said that war was likely, though. Xi is building the navy at a fast pace, adding fast surface ships, nuclear submarines, aircraft carriers, and new attack airplanes. They’ve added hypersonic missiles too, and added listening stations and bases. There’s now a naval base in Djibouti, at the entrance to the Red Sea, where they oversee (or promote?) Iran’s attacks on Western shipping. Then there are the new Chinese Islands that were built to take oil and fishing rights, and to provide yet more military bases on key trade routes. These could easily be a trigger for war, but so far just one military interaction in the region. Last month, the Chinese and Philippines navy clashed over fishing!

In the Gulf of Finland last Month, a Chinese ship, New New Polarbear, destroyed the offshore cables and gas pipes between Finland and Estonia, in protest of Finland’s entry into NATO. It’s belligerent but not war. Undersea cables are not covered by the UN charter, law of the sea. Then there is the evidence that COVID-19 was the result of Chinese bioweapon development, and the Chinese spy ballon that was sent over the US. We maintain at peace, but an unsettled sort of peace — is it a preface to war? Wars don’t have to be big war against the west or Taiwan, more likely is Vietnam, IMHO.

China’s negative population growth means that property values will drop along with product consumption. Kids buy stuff; old folks don’t.

News from China is increasingly unreliable so it’s hard to tell what’s going on. There were claims of a coupe, but perhaps it was fake news. Reporters and spies have been arrested or shot so there is no window on anyone who knows. There are claims of high unemployment, and COVID deaths, and claims of a movement to “lie flat” and stop working. Perhaps that was behind the ban on excessive gaming. Who knows? Xi claims that China is self sufficient in food production, but record food shipments from the US to China suggest otherwise.

Major businesspeople have disappeared, often to reappear as changed men or women. Most recently, Jimmy Lai, the Hong Kong clothing magnate, was indicted for sedition by tweets. Perhaps he just wanted to fire workers, or pay down debt, or move abroad (his daughter is). Many businesses exist just to make jobs, it seems. Not all of these businesses are efficient, or profitable. Some exist to violate US patents or steal technology, particularly military technology. I suspect that China’s hot new car company, BYD, is a money-losing, job factory, behind Tesla in every open market. Some 91 public firms have delisted over the last two years, effectively vanishing from oversight. Are they gone, or still operating as employment zombies. Will BYD join them? If China manages to avoid war, I have to expect stagnation, a “lost decade” or two, as in Japan saw from 1990 to 2010, as they unwound their unprofitable businesses.

A sign suggesting that a Chinese lost decade has begun is that China’s is seeing deflation, a negative inflation rate of -0.2%/year according to the world bank. It seems people want to hold money, and don’t want Chinese products, services, or investment. Japan saw this and tried a mix of regulation and negative interest rates to revive the interest, basically paying people to borrow in hopes they spend.

In Japan, the main cause of their deflation seems to have been an excess of borrowing against overvalued and unoccupied real estate. The borrowed money was used to support unprofitable businesses to buy more real estate. This seems to be happening in China too. As in Japan, China originally needed new lots of new apartments when they opened up and people started moving to the cities. The first apartments increased in value greatly so people built more. But now they have about 100% oversupply: one unoccupied or half-built apartment for every one occupied, with many mortgaged to the hilt against other overvalued apartments and flailing businesses.

Chinese Dept, personal and corporate match Japan’s at the start of the lost decade(s). Personal debt is at 150% of GDP, corporate debt is at65% of GDP, all propped up by real estate.

As in Japan 30 years ago, China’s corporate + personal debt is now about two times their GDP. Japan tried to stop the deflation and collapse by increased lending, and wasteful infrastructure projects. People in the know sent the borrowed money abroad confident that they would repay less when they repaid. We are already seeing this; low interest loans, money flowing abroad and a profusion of fast trains, unused roads, and unused bridges. I suspect most fast trains don’t pay off, as planes are faster and cheaper. These investments are just postponing the collapse. China is also seeing a birth dearth, 1.1 children per woman. This means that within a generation there will be half as many new workers and families to use the trains, or occupy the apartments. As the country ages, retirees will need more services with fewer people to provide them. China’s culture promotes abortion. China’s working population will decline for the next 30 years at least.

Japan came through all this without war, somewhat poorer, but unified and modern. It helped that Japan was a democracy, unified in culture, with an open press and good leaders (Abe). There was no collapse, as such, but 20 years of stagnation. China is a dictatorship, with a disunited culture, and a closed press. I think it will get through this, but it will have a much rougher time.

Robert Buxbaum January 9, 2024. China isn’t alone in facing collapse and/or lost decades. Germany is in a similar state, especially since the start of the Ukraine war. It’s a democracy like Japan, and pacifist for now.

Change home air filters 3 times per year

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Energy efficient furnaces use a surprisingly large amount of electricity to blow the air around your house. Part of the problem is the pressure drop of the ducts, but quite a lot of energy is lost bowing air through the dust filter. An energy-saving idea: replace the filter on your furnace twice a year or more. Another idea, you don’t have to use the fanciest of filters. Dirty filters provide a lot of back-pressure especially when they are dirty.

I built a water manometer, see diagram below to measure the pressure drop through my furnace filters. The pressure drop is measured from the difference in the height of the water column shown. Each inch of water is 0.04 psi or 275 Pa. Using this pressure difference and the flow rating of the furnace, I calculated the amount of power lost by the following formula:

W = Q ∆P/ µ.

Here W is the amount of power use, Watts, Q is flow rate m3/s, ∆P = the pressure drop in Pa, and µ is the efficiency of the motor and blower, typically about 50%.

With clean filters (two different brands), I measured 1/8″ and 1/4″ of water column, or a pressure drop of 0.005 and 0.01 psi, depending on the filter. The “better the filter”, that is the higher the MERV rating, the higher the pressure drop. I also measured the pressure drop through a 6 month old filter and found it to be 1/2″ of water, or 0.02 psi or 140 Pa. Multiplying this by the amount of air moved, 1000 cfm =  25 m3 per minute or 0.42 m3/s, and dividing by the efficiency, I calculate a power use of 118 W. That is 0.118 kWh/hr. or 2.8 kWh/day.

water manometer used to measure pressure drop through the filter of my furnace. I stuck two copper tubes into the furnace, and attached a plastic hose. Pressure was measured from the difference in the water level in the hose.

The water manometer I used to measure the pressure drop through the filter of my furnace. I stuck two copper tubes into the furnace, and attached a plastic tube half filled with water between the copper tubes. Pressure was measured from the difference in the water level in the plastic tube. Each 1″ of water is 280 Pa or 0.04psi.

At the above rate of power use and a cost of electricity of 11¢/kWhr, I find it would cost me an extra 4 KWhr or about 31¢/day to pump air through my dirty-ish filter; that’s $113/year. The cost through a clean filter would be about half this, suggesting that for every year of filter use I spend an average of $57t where t is the use life of the filter.

To calculate the ideal time to change filters I set up the following formula for the total cost per year $, including cost per year spent on filters (at $5/ filter), and the pressure-induced electric cost:

$ = 5/t + 57 t.

The shorter the life of the filter, t, the more I spend on filters, but the less on electricity. I now use calculus to find the filter life that produces the minimum $, and determine that $ is a minimum at a filter life t = √5/57 = .30 years.  The upshot, then, if you filters are like mine, you should change your three times a year, or so; every 3.6 months to be super-exact. For what it’s worth, I buy MERV 5 filters at Ace or Home Depot. If I bought more expensive filters, the optimal change time would likely be once or twice per year. I figure that, unless you are very allergic or make electronics in your basement you don’t need a filter with MERV rating higher than 8 or so.

I’ve mentioned in a previous essay/post that dust starts out mostly as dead skin cells. Over time dust mites eat the skin, some pretty nasty stuff. Most folks are allergic to the mites, but I’m not convinced that the filter on your furnace dies much to isolate you from them since the mites, etc tend to hang out in your bed and clothes (a charming thought, I know).

Old fashioned, octopus furnace. Free convection.

Old fashioned, octopus furnace. Free convection.

The previous house I had, had no filter on the furnace (and no blower). I noticed no difference in my tendency to cough or itch. That furnace relied for circulation on the tendency for hot air to rise. That is, “free convection” circulated air through the home and furnace by way of “Octopus” ducts. If you wonder what a furnace like that looks like here’s a picture.

I calculate that a 10 foot column of air that is 30°C warmer than that in a house will have a buoyancy of about 0.00055 psi (1/8″ of water). That’s enough pressure to drive circulation through my home, and might have even driven air through a clean, low MERV dust filter. The furnace didn’t use any more gas than a modern furnace would, as best I could tell, since I was able to adjust the damper easily (I could see the flame). It used no electricity except for the thermostat control, and the overall cost was lower than for my current, high-efficiency furnace with its electrical blower and forced convection.

Robert E. Buxbaum, December 7, 2017. I ran for water commissioner, and post occasional energy-saving or water saving ideas. Another good energy saver is curtains. And here are some ideas on water-saving, and on toilet paper.

What’s the quality of your home insulation

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By Dr. Robert E. Buxbaum, June 3, 2013

It’s common to have companies call during dinner offering to blow extra insulation into the walls and attic of your home. Those who’ve added this insulation find a small decrease in their heating and cooling bills, but generally wonder if they got their money’s worth, or perhaps if they need yet-more insulation to get the full benefit. Here’s a simple approach to comparing your home heat bill to the ideal your home can reasonably reach.

The rate of heat transfer through a wall, Qw, is proportional to the temperature difference, ∆T, to the area, A, and to the average thermal conductivity of the wall, k; it is inversely proportional to the wall thickness, ∂;

Qw = ∆T A k /∂.

For home insulation, we re-write this as Qw = ∆T A/Rw where Rw is the thermal resistance of the wall, measured (in the US) as °F/BTU/hr-ft2. Rw = ∂/k.

Lets assume that your home’s outer wall thickness is nominally 6″ thick (0.5 foot). With the best available insulation, perfectly applied, the heat loss will be somewhat higher than if the space was filled with still air, k=.024 BTU/ft. hr°F, a result based on molecular dynamics. For a 6″ wall, the R value, will always be less than .5/.024 = 20.8 °F/BTU/hr-ft2.. It will be much less if there are holes or air infiltration, but for practical construction with joists and sills, an Rw value of 15 or 16 is probably about as good as you’ll get with 6″ walls.

To show you how to evaluate your home, I’ll now calculate the R value of my walls based on the size of my ranch-style home (in Michigan) and our heat bills. I’ll first do this in a simplified calculation, ignoring windows, and will then repeat the calculation including the windows. Windows are found to be very important. I strongly suggest window curtains to save heat and air conditioning,

The outer wall of my home is 190 feet long, and extends about 11 feet above ground to the roof. Multiplying these dimensions gives an outer wall area of 2090 ft2. I could now add the roof area, 1750 ft2 (it’s the same as the area of the house), but since the roof is more heavily insulated than the walls, I’ll estimate that it behaves like 1410 ft2 of normal wall. I calculate there are 3500 ft2 of effective above-ground area for heat loss. This is the area that companies keep offering to insulate.

Between December 2011 and February 2012, our home was about 72°F inside, and the outside temperature was about 28°F. Thus, the average temperature difference between the inside and outside was about 45°F; I estimate the rate of heat loss from the above-ground part of my house, Qu = 3500 * 45/R = 157,500/Rw.

Our house has a basement too, something that no one has yet offered to insulate. While the below-ground temperature gradient is smaller, it’s less-well insulated. Our basement walls are cinderblock covered with 2″ of styrofoam plus wall-board. Our basement floor is even less well insulated: it’s just cement poured on pea-gravel. I estimate the below-ground R value is no more than 1/2 of whatever the above ground value is; thus, for calculating QB, I’ll assume a resistance of Rw/2.

The below-ground area equals the square footage of our house, 1750 ft2 but the walls extend down only about 5 feet below ground. The basement walls are thus 950 ft2 in area (5 x 190 = 950). Adding the 1750 ft2 floor area, we find a total below-ground area of 2700 ft2.

The temperature difference between the basement and the wet dirt is only about 25°F in the winter. Assuming the thermal resistance is Rw/2, I estimate the rate of heat loss from the basement, QB = 2700*25*(2/Rw) = 135,000/Rw. It appears that nearly as much heat leaves through the basement as above ground!

Between December and February 2012, our home used an average of 597 cubic feet of gas per day or 25497 BTU/hour (heat value = 1025 BTU/ ft3). QU+ QB = 292,500/Rw. Ignoring windows, I estimate Rw of my home = 292,500/25497 = 11.47.

We now add the windows. Our house has 230 ft2 of windows, most covered by curtains and/or plastic. Because of the curtains and plastic, they would have an R value of 3 except that black-body radiation tends to be very significant. I estimate our windows have an R value of 1.5; the heat loss through the windows is thus QW= 230*45/1.5 = 6900 BTU/hr, about 27% of the total. The R value for our walls is now re-estimated to be 292,500/(25497-6900) = 15.7; this is about as good as I can expect given the fixed thickness of our walls and the fact that I can not easily get an insulation conductivity lower than still air. I thus find that there will be little or no benefit to adding more above-ground wall insulation to my house.

To save heat energy, I might want to coat our windows in partially reflective plastic or draw the curtains to follow the sun. Also, since nearly half the heat left from the basement, I may want to lay a thicker carpet, or lay a reflective under-layer (a space blanket) beneath the carpet.

To improve on the above estimate, I could consider our furnace efficiency; it is perhaps only 85-90% efficient, with still-warm air leaving up the chimney. There is also some heat lost through the door being opened, and through hot water being poured down the drain. As a first guess, these heat losses are balanced by the heat added by electric usage, by the body-heat of people in the house, and by solar radiation that entered through the windows (not much for Michigan in winter). I still see no reason to add more above-ground insulation. Now that I’ve analyzed my home, it’s time for you to analyze yours.