There are decades where nothing happens, and there are weeks where decades happen.” This quote from Vladimir Lenin is particularly relevant as globalism, the dominant economic system of the past several decades, faces radical transformation entering 2025.
At the forefront of this transformation is China, the “workshop of the world” and a major destination for agricultural exports. However, China is now grappling with a host of existential threats. The question is not if but when we will witness a total system collapse, and this year appears to mark the beginning of the end, as recession looms overhead.
The challenges facing China could fill volumes, but three key factors make its problems insurmountable.
1. Population Collapse
As shown in Chart 1, China’s population structure is dire. Even a dramatic increase in birth rates would be too late to reverse the trend. Conservative estimates suggest China’s population could shrink to 500 million to 700 million within 75 years. This demographic decline would devastate any economy, but it hits China’s industrial economy particularly hard.
2. Economic Model Missteps
As labor costs rise with the decline in population, China’s competitive advantage in the industrial sector will erode. This makes transitioning to a service-based economy critical. While China had begun this shift over the past decade, the process was abruptly reversed during COVID-19, when Beijing funneled stimulus investment into industry. The result? Depressed returns and mounting debt, with little progress toward a viable economic model.
3. Leadership Challenges
President Xi Jinping’s consolidation of power through the systematic purging of opposition has undermined China’s ability to make well-informed policy decisions, precisely what a country facing crisis needs most. As sole decision-maker, China’s ability to manage crisis rests entirely on President Xi, outside of him, China’s policy-making apparatus would need to be reforged from the ground up.
Implications for U.S. Producers in 2025
While the exact trajectory of events remains uncertain, several outcomes seem likely if a recession hits this year:
Declining Input Costs: Prices for commodities such as oil, steel and other inputs will drop as consumption slows in China. Feed costs would also decline if Chinese producers exit the market due to poor liquidity and reduced demand for pork. However, while inputs could become cheaper, disruptions in production chains as companies relocate outside of China will cause supply shortages. This means the cost of finished goods will remain high for the foreseeable future.
Stable U.S. Pig Prices: Pork exports to China will continue downward, but growing demand in other markets, such as Mexico, which benefit from the relocation of production chains, should help stabilize exports.
The Importance of Liquidity: In a recession, liquidity will be vital. It will enable businesses overexposed to the Chinese market to pivot to new opportunities and allow others to pursue expansion at bargain prices.
This year is shaping up to be one of rapid and dramatic changes. Although challenges loom ahead, it is during challenging times that opportunities arise for those who can adapt and respond effectively.
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