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China's Growing Pains

China's Growing Pains

Naseem Malik
September 14, 2023

Hello dear readers!

Hey there, and welcome back to The Supply Times. In this issue, I’ve got some good news and some bad news about China, a look at how AI is helping workers shape their future careers, and a bunch of great stuff I’m reading, watching, listening to, and thinking about.

No further ado needed. Let’s dive in.

Industry Highlights: The Middle Kingdom’s Middle Income Trap

For the last two decades, China’s economic rise has been nothing short of remarkable.

Its rapid industrialization in the early 2000s made it a one-stop-shop for factory-made goods, and the massive urbanization fueled domestic consumption and a burgeoning middle class. It can even take credit for buoying the global economy during the 2008 financial crisis thanks to its stimulus package. For the last two years, projections had the Middle Kingdom overtaking the US’s GDP somewhere around 2030.

But if recent reports are to be believed, China’s ability to exceed US growth could be nothing more than a dream.

Earlier this month, Financial Times reported China’s manufacturing sector contracted for a fifth straight month. Consumer prices in the country also fell year on year for the first time since the beginning of 2021.

“Overall economic momentum remains weak and more policy support is needed to avoid a renewed slowdown later this year.”

Sheana Yue, China economist at Capital Economics

According to the Japan Center for Economic Research, China’s Zero-Covid measures that were announced last December resulted in a slowing economy following the Shanghai lockdown. Many Chinese families are curbing spending for fear of how the measures will affect them moving forward. Additionally, US restrictions on exports and a global shift towards reshoring and near-shoring have made a significant impact.

These factors, coupled with a declining population (and resulting labor shortages) have resulted in projections that China won’t become top dog until at least 2050—if they ever do at all.

Many economists aren’t surprised. They describe what’s happening to China as a “middle-income trap,” where it’s unable to get over the economic hurdles necessary to become a true player on the global stage. Escaping the middle income trap isn’t impossible—South Korea and Japan both did it—but it’s extremely difficult. Just ask Brazil and South Africa, who’ve been mired in the middle for decades.

This is seemingly good news for the US, who’s nervously watched China’s meteoric rise over the last 30 years. Some economists speculated that a lot of the recent investment in tech and eco-friendly production was too little, too late, and that we were far too reliant on China to keep the trains running on time. On paper, China’s slowdown is exactly what the US needs to ensure it stays on top.

But it might not be time for the US to take a victory lap just yet. Quite the opposite.

If China’s economy has indeed peaked, that could pressure Chinese leaders to make some rash—and scary—decisions.

According to a recent paper from Tufts University political scientist Michael Beckley, countries with peaking powers—those whose economies grew fantastically but then stagnated—pose the largest threat to global security. Historic instances of this include US imperialism in the 19th Century, Wilhelm-era Germany in the 1900s, and Japan’s surge during the Great Depression.

These countries—especially those run by aging rulers—begin seeing their window of opportunities close. And they make a grab for power.

It’s a good thing China doesn’t have any urges to, I don’t know, reclaim a disputed territory or anything, right?

I wouldn’t suggest we're on the brink of conflict with China. Both nations have much at stake, and it's evident that a mutual desire for diplomacy and cooperation still prevails.

However, as we navigate these complex geopolitical waters, history serves as a reminder to remain vigilant. Just as a meteorologist can't pinpoint the exact moment a storm will form—but can recognize conditions that might lead to one—we should be conscious of global dynamics and their potential implications.

Let's hope for clear skies, but also be prepared for any storm clouds on the horizon.

The Future of Work: AI’s New Job: Career Coach

A lot of commotion has been made lately about how generative AI and other technologies will disrupt and displace workers in the coming years, and while that may be true, it’s also providing tools that could help you land your dream job.

A recent Wall Street Journal article reports that many companies are using more tech to help employees plan their career paths, including the education, training, and mentoring they’ll need to get there.

One such company is Nestle, who developed an online talent marketplace where employees can not only apply for jobs but also create a virtual career map based on their goals. The marketplace, developed by New York-based software company Gloat, requires users to input information about their skills and long-term goals. AI then takes that information and generates several career path options for the employees to consider, including specific company leaders and mentors who could assist them along the way.

Some colleges are also developing similar tools to help shape student careers long before they enter the workforce. University of Memphis business school chair Kurt Kraiger co-founded PathwayU, a virtual counseling platform that assesses students’ values and interests and then uses predictive analytics to chart potential career paths for them—including what subjects they should major in. Kraiger said formative choices such as majors have a significant impact on people’s trajectory.

“When I’m in a job that fits my interests, that predicts both longevity and performance.”

Kurt Kraiger, co-founder, PathwayU

It’s clear that such tools are filling a significant void in workers’ lives. A 2022 Society for Human Resources Management survey found that 61 percent of HR professionals cited a lack of career development and advancement as a primary reason for employee turnover.

In order to give workers a reason to stick around —and stanch the flow of those who jumped ship during the Great Resignation—business leaders have a renewed responsibility to provide access to such development resources. But leaders—especially those of smaller companies without the resources of Nestle—shouldn’t feel like fancy, proprietary software is necessary.

In fact, the Labor Department has funded several free career-mapping tools that can aid in getting started. One such tool is O*Net, a database containing over 1,000 positions and their related career paths and skill requirements.

Other independent developers are hard at work finding ways to leverage generative AI for career mapping. HSBC director David Daoud recently created Sam-Bot.ai, a platform that takes information about your skills and goals and spits out personalized support and steps to reach your goals.

While Sam-Bot looks like one of those products that might be trying too hard to be all things to all people, it makes one thing clear: we’ve only scratched the surface of the problems AI will solve in the near future.

The Supply Aside: What I’m Reading, Watching, Listening to, and Thinking About Re: Supply Chain, Work, and Beyond

📕 Read - The Code Breaker by Walter Isaacson

Super-biographer Walter Isaacson is back on the scene this week following the release of his long-awaited biography on Elon Musk. I haven’t had a chance to get my hands on that one yet, but in the meantime, its release reminded me of the last great Isaacson biography I read a ways back: The Code Breaker: Jennifer Doudna, Gene Editing, and the Future of the Human Race. The book is a captivating exploration of the life and pioneering contributions of Jennifer Doudna, one of the brilliant minds behind the revolutionary CRISPR-Cas9 gene-editing technology. Isaacson skillfully unveils the intricate world of molecular biology and its ethical implications, while tracing Doudna's scientific journey from her early curiosity to her groundbreaking discovery.

Through Doudna's story, Isaacson delves into the profound impact of gene editing on medicine, agriculture, and beyond, while also raising crucial questions about the ethical dilemmas and societal responsibilities associated with this transformative technology. With a compelling narrative and insightful analysis, Code Breaker offers a vivid portrait of a visionary scientist and the cutting-edge science that promises to reshape the future of humanity.

What Else I’m Reading:

How To Do Great Work—Paul Graham: You know what a fan I am of the phenomenal and famed Paul Graham. If you haven’t read his essays, you’re missing out. He really outdid himself in the latest on how to do great work. It’s only a lot longer than his usual essays but it’s jam-packed with profound insights. If you read one thing this week—well, two including TST—check out this masterpiece.
Elon Musk’s Lessons From Hell—The Wall Street Journal: I’ll get you my take on the new Musk book once I read it, but for now, here’s the WSJ’s five takeaways from it.
Moderna’s CEO on AI’s Potential to Cure Cancer—Semafor: In this recent interview, Moderna CEO Stéphane Bancel highlights the company's early adoption of AI for drug development and its broader applications in contract review and regulatory interactions.

📺 Watch - “Wanted—The Escape of Carlos Ghosn”

Apple TV has done a great job with this much awaited documentary on the once mighty Carlos Ghosn. Highly recommend this new series on the astonishing escape of a former automotive industry titan. It's a masterclass in corporate intrigue, international politics, and human resilience. "Wanted" offers a thought-provoking glimpse into the complexities of leadership, ethics, and the global stage. This series is not only a thrilling watch but also a fascinating reflection on the ever-evolving landscape of our world today.

In the end, I believe they did justice to this unique case. While the Japanese judicial system does come under fire for their draconian process, Ghosn does have plenty to answer for while running two major corporations. Perhaps the lesson learned is that no one is above falling victim to their own success and the greed for more. Who knows if he will ever face the music in either Japan or France. For now, he’s in another prison of his own making, his Lebanese palace. Well, that and his yacht.

👂 Listen - Exponentially Podcast

It’s no secret that the future of our world intrigues me, and as such, the new podcast series, “Exponentially” by Aeem Azhar does not disappoint. In this podcast, Azhar explores new perspectives on our collective future, tackling questions that are more crucial than ever. From discussions with luminaries like Sam Altman, Dario Amodei, and Vinod Khosla to profound inquiries about owning our thoughts and the potential of AI to reshape global inequality, "Exponentially" offers profound insights that will expand your horizons. This show is a must-listen for anyone seeking to make sense of our chaotic times and striving to make future-proof decisions.

💡 Think - Life after The Sadness Machine

Speaking of future uncertainty, one of my favorite things about this time of year is the dawn of a new NFL season. I’m more of a passive observer than a sports junkie, but as a long-time fan of Washington’s NFL team—whatever they’re called this week—I’m slightly more optimistic this year than I have been in the last two decades. The reason, of course, is thanks to the departure of owner Dan Snyder, who spent half my life (yes, 24 years) driving a true gem of professional sports into the ground. While Snyder sits in his multiple palacial compounds counting his billions, I’ll be slightly more content knowing that he won’t be anywhere near the front offices at FedEx field.

WSJ’s Jason Gay coined the perfect name for this dismal team: “Dan Snyder’s Washington Sadness Machine.”

With brand new ownership that includes PE overlords and the inimitable Magic Johnson, there’s hope in the air. There’s been talk about changing the name again. I doubt the old Redskins name makes a comeback, but perhaps something better than the Commanders. Please. Also, they still desperately need a quarterback. Baby steps…