Friends who have a greater interest than I do in reading the tea leaves in Beijing tell me that the emphasis in relations with Hong Kong from now on will be on one country rather than two systems. I think this phrases things the wrong way. The one country bit was never in issue. What they actually mean to say is that Beijing’s system of state command of the economy will become dominant and Hong Kong’s more freewheeling system will fade away. I don’t think it will happen. In my view human society is so dynamic that no command system can last long in charge of an economy. Attempts at this particular form of hubris inevitably end in either war or financial crisis. For the Soviet Union it was financial crisis. I think the same fate awaits Beijing. Consider crude steel production, a test-tube example of how command economies get it wrong. In the mainland this stood in June at an all time monthly record of 73 million tonnes, five times the total production in all of Europe. China walks monetary tightrope to keep debt in check, growth on track Steel was recently targeted for a reduction in capacity but then a regime of easy money intended to help the industry overcome a difficult period of contraction instead stimulated production. As long as it keeps growing everything is fine. When it stops growing it collapses It has happened across the mainland’s rust belt industries. Why is so much steel needed? Simple. It is needed to build more steel mills so as to build more shipyards, ports, railways and bridges so that more ships can be built to carry more iron ore to more ports and thence along more rails and bridges to more steel mills so as to build more shipyards, ports, railways ... What we have here, in short, is a giant Ponzi scheme. In a Ponzi scheme you pay out the winnings of the first entrants with what others later pay into it. As long as it keeps growing everything is fine. When it stops growing it collapses. In this case you justify production with demand based purely on more production. As long as you keep pushing production up everything looks fine. At its peak in 2014 China turned out 30 times more cement than the United States, and the latest production figures are only a smidgen less than 2014’s. Command systems may be good at deciding where to direct economic effort in wartime but they are hopeless in peacetime at deciding when to stop and do something else. They just keep going down the same old track and then what you get is economic cancer, uncontrollable growth. Aluminium prices soar due to deeper cuts in capacity by China You don’t see it right away. Any Ponzi scheme looks just fine as long as more people can be found to put their money in. But the end is inevitable and the longer it is delayed the more resounding the collapse. It has so long been delayed in the mainland that, when the end finally comes, I believe more than half of the loans and advances of the financial system will prove irrecoverable, which would be very resounding indeed. When will it happen? I cannot tell you. No one has ever conducted so big a Ponzi scheme from so high a level of authority before. The closest comparison is the Soviet Union and its collapse was not only extraordinarily rapid but took the whole world by surprise. I think the Chinese Communist Party is unlikely to survive this coming debacle although I do not think it will result in the break-up of China or replacement by a full democracy. Political and economic affairs are more likely to resemble the Russian emergence from a command economy. I am sure, however, that it will happen long before 2047. We will then make a less difficult transition to one country, one system across all of China, a system that will look more like present-day Hong Kong’s than present-day Beijing’s.