Transcript for:
China's Manufacturing Crisis and Global Effects

for the longest time China has been known as the world's Factory I mean take a look at the clothes you're wearing right now the gadgets you have in your hand and even the property in your house odds are you will find that a good many things in your possession have been either entirely manufactured in China or at some stage underwent a manufacturing process in China this could range from your jeans your shirt your smartphone or even your car whatever it might be the point is it's hard talk about global manufacturing without talking about China or at least it was ch's manufacturing concerned China's manufacturing activity fell unexpectedly investors are now wary of investing in China demand for Chinese manufacturing reportedly dropped 40% the very Catalyst that shot China to its wealth and fame being the world Factory is eroding beneath its feet due to several factors China is losing its place as the world's manufacturing Hub as it undergo a crisis that could threaten its very GDP and even it standing in the world today that is what we will talk about in depth and in case you thought this was something limited to just your genes in your silk shirts you are wrong China's manufacturing crisis has the potential to change the global dynamics of power forever this is no exaggeration this is a fact follow follow through with me and I promise this will be one insightful ride but before we dive into the nitty-gritty of China's manufacturing crisis please take a second to hit that like button one video I forgot to ask for a like and that video was throttled by the algorithm so that proves that your likes really do make a huge difference in the success of these videos thank you so long as most people remember China has been a manufacturing Juggernaut in fact China is respons for nearly 30% of all the manufacturing that is done on a global scale yeah you heard that right one country is responsible for 30% of the manufacturing process that happens here on planet Earth don't take my word for it take it straight from the world economic Forum you see according to data published by the United Nations statistics division China accounted for 28% of global manufacturing output in 2018 that puts the country more than 10 percentage points ahead of the United States which used to have the world's largest manufacturing sector until China overtook it in 2010 when China stepped up unfaltering during an age of its great boom it simply took the button and hit the ground running as more factories were built manufacturing started to contribute more and more to China's GDP by 2018 with the total value added by the Chinese manufacturing sector amounting to almost 4 trillion dollar manufacturing as a sector now accounted for nearly 30% of China's GDP to see how huge this figure is all you need to do is compare it to the United States where manufacturing contributed to just 11% of the nation's GDP it's a big difference isn't it in all fairness a part of why that is so is because a lot of us manufacturing work was delegated to China it's not just the US several Nations let China take care of their manufacturing with multiple big companies setting up shop in China but why is that so why China and not their own home Nations well several factors contributed to China's rise in manufacturing Grace I must mention them now as I'll be breaking them down in just a bit very soon the factors that really catapulted China to a place of Advantage were basically low labor costs strong business ecosystems a lack of Regulatory Compliance low taxes and duties and competitive currency practices combined China had the perfect melting pot or should I say a factory that was unbeatable on a global scale countries like the US stopped investing so much in their own manufacturing Industries and they found it cheaper to just let China do the manufacturing although this led to the rise of manufacturing in China it did accelerate the collapse of several local Industries and the closure of factories in said countries I will perhaps explore this more in depth in another video let me know in the comments if you want to see a video about that okay so now we've established that China was the Undisputed manufacturing Hub of the world and we have established the factors that led to that let's now talk about how they got into this crisis just before we get into that juicy bit I want to touch on how China using its manufacturing prowess changed the geopolitical landscape understanding how China leveraged its position on the global stage will make you better understand what this devastating manufacturing crisis means for the Communist Nation there really is more on the line than just economic trouble okay so the China we all now know is a superpower a world Shaker but that success it enjoys on the global stage comes as a result of its economic successes much of which was spearheaded by the manufacturing industry you would not be wrong to say that no other country in modern history has reshaped the landscape of global politics as China has done on the back of the manufacturing China rapidly transformed its economy from a lowcost factory to the world to a global leader in Advanced Technologies all while transforming Global Supply chains drastically it is no accident that China enjoys benefits on the global stage that can only be eclipsed by the United States and in some cases even that is debatable China has won the game of international diplomacy leveraging its success to become the primary trading and development partner for emerging economies across Asia Africa and Latin America Africa particularly has given China the platform to shine further elevating the Eastern nation to a status of international dominance when it comes to Africa China has four overarching strategic interests in a second we'll get into that right now let's quickly talk about some new changes to YouTube I'm sure some of you guys have noticed that whenever you go to your 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let's get back to the topic at hand when it comes to Africa China has four overarching strategic interests first it wants and has had access to Natural Resources particularly oil and gas it is estimated that soon China will import more oil worldwide than the United States to guarantee future Supply China is heavily investing in the oil sectors in countries such as the Sudan Angola and Nigeria all of this is done on the backs of its economic Partnerships second investments in Africa a huge market for Chinese exported Goods might facilitate China's efforts to restructure its own economy away from labor intensive Industries especially as labor costs in China increase yeah hold that thought there I'll Circle back to this very soon China also wants political legitimacy the Chinese government believes that strengthening Ceno African relations helps raise China's own International influence and this is actually happening most African governments Express support for beijing's one China policy a prerequisite for attracting Chinese Aid and investment what is the island nation of Taiwan in the face of a billion doll Aid package right finally China has sought a more constructive role as a contributor to stability in the region partially to mitigate security related threats to Chinese economic interests in that same basket Africa looks to China for certain things several African ameran governments look to China to provide political recognition and legitimacy and to contribute to their economic development through Aid investment infrastructure development and trade where China shines in a way that even the US can't is that China through its vast resources as a result of its booming manufacturing sector relates to African nations differently unlike most European and American Aid packages China only engages African nations economically without condescendingly preaching about good governance it is hard to get a US Aid package that does not tie in some sort of political favors to African nations at least China also funds high-risk projects and projects in remote regions that are not appealing to Western governments or companies you would be well within your rights to say that corrupt politicians take advantage of this and also take a good portion of these packages to Feast on but it does not eliminate the fact that China sends the money this relationship that China has managed to cultivate only through economic prowess can be traced back to its manufacturing industry what I'm trying to say in essence is that China's rise in manufacturing has given it an economic advantage that has allowed it to Blossom the geopolitical relationships that has leveraged have elevated the country's status to an Untouchable superpower powerful African nations like these have all borrowed from China thereby putting them in a position where though not obligatory is more beneficial for them to advance Chinese dominance globally by pushing forward a Chinese agenda China's economic power has also resulted in somewhat negative Global implications as more and more countries rely upon China's manufacturing industry to process or make certain Goods at low low prices this has given China a position of Leverage that to some degree has been abused well this entirely depends on what angle you're looking at this from under the reign of the CCP and president X China has become more vocal about its power aspirations and it has taken a more assertive International posture this is especially so regarding Taiwan and China's several territorial disputes in the South China Sea combined with beijing's military modernization program that has put Asia as well as the United States on notice that China's economic power will have geopolitical implications seeing how Russia recently abused its military might to invade a Sovereign Nation none would put it past China to use its economic and Military might to do the same in fact many say that China is using Russia as a blueprint for when they invade Taiwan also because China is the economic Powerhouse of bricks the brics group is gaining power and influence that is destabilizing the current world order whether that will be for the best or not is a topic I'll visit in in a separate video but the point is China is most certainly and has most certainly changed the geopolitical landscape none of this could have been possible were it not for the economic power that the nation derived from its manufacturing industry which has both brought economic benefits and leverage to the Eastern nation now that we've established what manufacturing as an industry has done for China let's dive directly into why the nation is facing a manufacturing crisis and what shall become of it this is the juicy part you don't want to miss this if you're enjoying the video so far I'm sure you'll enjoy my other videos but according to YouTube almost 70% of you are not subscribed please take a second and subscribe down below China's manufacturing crisis did not just emerge overnight no it was as a result of several factors that built up in the past few years I won't go into every minor incident but two m umbrella things deserve mention as they are accelerated by the collapse of China's manufacturing incident what are they let's get into them the first of course includes the us because what's a little China without us rivalry we take you straight to the White House the president United States announcing new trade tariffs against China China China China China trade tensions are flaring up between the US China trp announcing plan to increase tariffs on billions of dollars worth of Chinese Goods I happen to think that tariffs to our country are very powerful and trade World China is now punching back China has a 10 year 20 year 50e plan they've done some things that we don't agree with you have a chance to see the new Cold War China due to the manufacturing and growth of its economy has emerged as the sole rival to the United States's homogeny in the New World Order In fact when you measure the two in terms of PPP otherwise known as purchasing power parody China pulls ahead all this naturally puts China at odds with the US and creates well some sort of tension in 2019 China's total exports reached $25 trillion with the United States being the top importer with nearly 20% share of course importing so heavily from your competitor is not good for Optics so the US Administration decided to impose a 25% tariff on selected goods from China trade deficits between the US and China are what had primarily propelled the imposition of these tariffs on China the tariffs were followed by restrictions on both China's access to high-tech us products and foreign investments involving security concerns and by allegations of unfair Chinese commercial practices this was not taken kindly by China who retaliated in their own way but the point is the damage was done when the country that Imports a fifth of your goods pulls back even a little you are bound to feel the effects the US's actions on China though improving things domestically disrupted the global supply chain and slowed the growth of China's manufacturing industry you can't keep improving and expanding when a fifth of your Market vanishes overnight the ensuing trade war that took place between China and the US was brutal and it shook the financial markets of the world ultimately though it came to a heal and had heavily affected the relationship between these two top economic superpowers drawn them both to a state of caution in fact I would be remiss to say the trade war is over it is more like it has shifted to a cold war where tensions just run deep and paper thin diplomacy protects the peace and even when a new American Administration came into place nothing changed despite pleas from the US business Community to ease tensions US President Joe Biden so far has Amplified Trump's policies by strengthening anti-china alliances and implementing additional sanctions in fact in October of last year President Biden rolled out extensive new restrictions on China's access to Advanced semiconductors and the equipment used to make them these particular restrictions require an almost impossible to acquire license for the sale of advanced semiconductors to entities within China this move as was expected of it largely deprives the Asian giant of the computing power it needs to train artificial intelligence at scale the rules imposed also further China as it robs them of their much-needed Us Talent and it further crippes their own semiconductor supply chain I have mentioned this before semiconductors are the lifeblood of any manufacturing or even processing industry now that Biden has cut China off from that well it's a crisis it is no exaggeration to say that about the two Nations political ties this could be the single most impactful and substantial move by the US government to date in its quest to undermine Chinese technology capabilities its effect shall reverberate throughout the years and we can only start to understand the extent of the damage as time moves on and China falls behind other emerging hungry nations in his eyes Biden now characterizes the US China conflict as a battle between the utility of democracies in the 21st century and autocracies this all plays out NE negatively for China as the US and their allies become less reliant on the nation as they start to look for manufacturing elsewhere and remember the money goes where the manufacturing is and the money leaves where the manufacturing isn't it really is just that simple now China is losing support for what it had made the backbone of its economy this is the first factor that is resulting in the manufacturing crisis the nation is now in the second major factor needs no introduction we all know it and it was quite a pandemic literally Health authorities are still working to identify the virus in the Central City of Wuhan at least 59 people are believed to have been sickened by the new virus fast breaking developments in the Corona virus emergency Wuhan shenen Beijing and a lockdown as covid-19 spreads covid-19 cases in China are surging and that's leading to key Factory closures busy roads were hushed as most people acted on the government's new measures factories have been closing down in China China is struggling with a rapid rise in new coron virus infections many of the country's 1.4 billion residents remain vulnerable to the virus covid-19 quite literally reshaped the way the world does business when it hit at its peak the pandemic shut down the global supply chain taking all of China's business with it question this what happens to a country that is dependent on manufacturing the world Goods when well the World closes up shop it doesn't take a genius to figure that out it was an absolute disaster China which has arguably been hit the hardest by the pandemic faced a severe closing of factories together with the ccp's zero covid policy a policy that was so bent on eradicating covid that it heavily punished its own citizens China just went downhill by the time Factory started trying to open again the world world had somewhat moved on and now China was left to figure out the absolute disaster of a mess they were left with in addition to that the pandemic showed many multinational companies just how much they depend on Chinese manufacturing this came as a shock as many realized that everything from raw materials to contract manufacturing to production facilities were entirely based on the Chinese supply chain in a bid to rectify that so that unlike Co times they would never be caught out in the rain several multinational companies started looking for alternative locations this brings us to one of the reasons why China is in a manufacturing crisis but simply it is the change in micr Trends everyone seems to be running out of China but the question is why this is something we started to see seriously during the height of the US China trade War because of the conflicts and the harsh measures the two countries were imposing on each other companies from both countries suffered the brunt of it this inevitably saw many major companies moving out of China in the search for survival in fact the country's export business was stagnant in 2019 for the first time in decades and the impact trickled down to an array of Industries in fact between 2018 and 2019 there was no noticeable trade growth as you can see from this this decline has only worsened as major companies continue to leave China in fact it has been estimated that around 40% of companies have relocated or are considering relocating their manufacturing out of China according to a 2019 survey on tariffs conducted by amcham Shanghai and the Chinese government Hasbro Nike they want to leave the country Apple speeding up plans to ship manufacturing away from China traded by recent unrest in thetion Foxon wants to boost its production in India as the company seeks alternative production sit outside of China many of these nations are moving to other Southeast Asian countries not just because of the push factors but because of certain pole factors as well in fact when you analyze them in a nutshell the manufacturing in China can be narrowed down to Simply push and pole factors push factors that are pushing major companies and their manufacturing out of China and pole factors that are attracting them to other places let's examine these together shall we remember when I talked about the factors that led China to Global dominance in the manufacturing space well one of them was the low cost of Labor with a massive Workforce the biggest at that time and super low cost of Labor China was unbeatable well until now you see that low cost of Labor China used to boast about is no more the cost of production in China especially in the major coastal cities is on the rise fueled by escalating wages and skyrocketing real estate rent and valuation labor costs alone have been growing 7% year-over-year for the past 5 years and these are expected to keep Rising it makes sense though when a nation starts to develop and moves from developing Nation to a developed Nation well costs increase as the cost of living goes up so to do the wages of the workers one thing that big companies like Nike or Adidas do not like is well High Cost of production as wages have risen these major companies have started to leave China in search of better lands oh I mean cheaper lands this has seen a lot of big companies direct their attention to other nations that offer much lower costs of production these nations include countries such as Vietnam and Indonesia that unlike China are still ridiculously cheap to produce Goods in mass in fact let's talk about those countries for a little bit I'll bring this home for a bit so we understand it better of all the exports that China has lost to the US market more than a third of that has been in the hands of Nations like Vietnam India and Thailand these are nations that simply produce products at a much lower cost than what China does I will now talk about how China is moving into high value manufacturing soon whereas these countries are still lowcost traditional manufacturing countries this means that for most companies it is simply cheaper from a resource and labor perspective to move to other nations and to be honest this is the nature of business everyone wants to keep their cost low and unfortunately for China this is coming at the expense of their industry as other countries take the bag from them the largest beneficiary of China's manufacturing crisis is arguably Vietnam let's look at that in depth in just a few minutes for now we also have other factors that are in play in China's manufacturing crisis let's look at them China's new direction is well not really helpful right now China has decided to evolve its manufacturing into High-Tech high value industry over the past few years China has poured more than 1.5 billion dollars into its made in China 2025 strategy in a bid to transform manufacturing into highend Tech focused industry the goal of this is to stimulate the creation of higher level jobs that add more value to the manufacturing industry what China is basically looking to do is substitute traditional low margin manufacturing with Innovative sectors such as Next Generation it Advanced engineering the internet of things and smart appliances this is meant to elevate China when it comes to the value chain the powers that be in China have made this the New Direction without a shadow of a doubt China's manufacturing future is aimed at the higher value addition ition sector that is already on the rise on the other hand traditional labor intensive manufacturing which requires a lowcost ecosystem to flourish will continue to diminish or be moved to other sectors longterm this might be in line with what China as a nation plans to do but in the short term it's chasing away companies from the nation the primary reason why most countries made their base there in the first place was because of the low cost associated with production in China due to its traditional manufacturing industry their moving away from that is somewhat of a betrayal to companies that are attracted there because of that it's like liking someone because their teeth look a certain way and then boom they get braces though it is good for them it takes away from that charm that brought you there in the first place hey don't shoot the messenger I'm simply letting you know why big companies are moving out of China in Mass because of the uncertainty that sometimes comes with such massive sector changes is these big companies are starting to diversify and expand their manufacturing hubs to other geographies for Supply security this means that Investments That Could Have Been otherwise locked into China are now distributed to various places this not only erods China's position as the sole option for most of these countries but it essentially diminishes the role that China plays in this chain but to be fair China's new direction is partially necessitated by the fact that well the nation's youth despise traditional factory jobs and don't just take my word for it listen to this Limitless wave of cheap labor that helped Propel the extraordinary boom in its economy is coming to an end China's economy is suffering from a strange mismatch between jobs available and the qualifications of the job Seekers there's been a huge expansion in higher education an enormous increase in the number of graduates this suggests a mismatch between supply and demand for low School workers you don't find people who are willing to work in factories the upcoming generations of China have a deeply rooted resentment of factory jobs and this is now contributing to a deepening labor shortage that is frustrating manufacturers in China do you see the irony of it all a country of over 1.4 billion people has a labor shortage wow I guess economics and the market have a sense of humor don't they the situation is so severe that more than 80% of Chinese manufacturers face labor shortages ranging from hundreds to thousands of workers in most cases this is equivalent to 10 to 30% of these big companies entire Workforce you can imagine how badly these industries are underperforming right now China's Ministry of Education which is notorious for biased estimates forecasts a shortage of nearly 30 million man manufacturing workers by 2025 larger than Australia's population you can bet your bottom dollar that the actual figures are likely much higher when all this is said and done manufacturers say they have three main options to tackle the labor market mismatch that is to either sacrifice profit margins to increase wages invest more in automation or move to cheaper pastures like Vietnam or India as I've said before regarding cheap labor Vietnam India and other nations are starting to prove to be the answer to this problem so since you guys have made it this far I'm guessing you guys love keeping up with geopolitical news right well I've recently launched my own geopolitical newsletter called Global Recaps where I send weekly emails covering the most important geopolitical news in a simple manner you can sign up below and best of all it's completely free there have also been several internal pressures that worked against China for starters the trade War together with diminishing local Industries and growing unemployment have led some developed countries to offer subsidies and tax incentives to their local companies this has been done in a bid to encourage their local companies to move manufacturing back home to boost the economy this is a trend that has been forming more strongly in developed countries even in the US we've seen this happening starting from the Trump Administration proposing tax credits for us companies that relocate their manufacturing facilities to the United States from China in Asia Japan's $2.2 billion stimulus package aims to help manufacturers bring production home or to other countries after the coronav virus pandemic disrupted Supply chains and exposed an over Reliance on China these examples are less of an equation of low costs and more I focus on navigating a geopolitical agenda and alleviating supply chain risks ultimately however they all add to the manufacturing CR that China now has on their hands also we have seen especially in the US a change in sentiment towards Chinese made products this might be particularly worse in America because of the trade War geopolitics the spying accusations uh well okay you get the point china doesn't have the best relationship with the US in fact according to a reuter's ipsis survey 70% of Americans prefer goods made in the United States now the challenge remains that uction in the US or most developed Nations is still far higher than just exporting to other Asian Nations but still those are factors that warrant a different discussion whether production is moved away to the US or Vietnam the key point is that China loses either way having been cut off from the conversation now let's take a look at the winners amidst China's Misfortune now India's growing prominence as a manufacturing Hub gets yet another confirmation Fox con wants to boost its production in India as the company seeks alternative production sites outside of China Samsung set up a plan in the bakn region of Vietnam to reduce its dependence on China being in India is vital to Tim Cook and to Apple for the production Tesla has proposed to set up a factory to produce electric cars for local sale and Export Thailand Vietnam and India benefiting from China's mistake I'm tempted to call these nations the nightmares of the CCP but I mean that's seems just a tad dramatic right anyway let's go through them starting with Vietnam Vietnam alone has taken up over half of the US Imports that shifted from China to other nations this was such a huge market and opportunity for Vietnam that it has since boosted Vietnam's GDP by over 7.9% this has been most notable in industries that have focused on the export of things such as Furniture Footwear apparel Electronics components and machinery to date the US remains Vietnam's largest export Market accounting for 29.4% of total merchandise exports Vietnam's exports to the US Rose by 13.6% in 2022 with the bilateral Trade Surplus with the Us increasing to 95 billion US looks to me like Vietnam is coming for all that China has what mainly appeals to the International Community and US companies specifically is the nation's low labor costs the very same advantages that drove China to Greatness are now attracting a large pool of Manufacturers to Vietnam several large manufacturing companies have announced plans to shift or expand manufacturing out of China and into Vietnam this includes foxcon Apple's largest contract manufacturer who signed a $300 million deal to expand in Northern Vietnam with a new Factory that will generate 30,000 jobs this huge spending was in addition to the $1.5 billion that the Vietnamese government had said foxcon had already invested in the country those sound like some pretty heavy Investments if you ask me when you look at the facts of the matter it becomes easy to see why this excerpt from The New York Times puts it perfectly a billboard outside of foxcon Factory in Bach ning advertised that the company is looking to hire 5,000 workers urgently with an offer of roughly $300 in monthly payment for an entry-level position it is less than half of the monthly pay about $4,500 Yuan or $650 that foxcon is offering new hires at its assembly lines in Shenzhen and Southeastern China Yes you heard that right Vietnam employees in this instance are paid less than half of what Chinese employees are what this simply means is that the cost of production in China would be substantially higher than in Vietnam any good businessman will tell you to expand operations where it's cheaper in this case that's Vietnam now you understand why foxcon keeps investing in Vietnam it too is looking to reap the benefits that come from cheap labor why pay more when you can get the same for free GH I bet some capitalist sweat shop is probably going to make that their new logo uh I should probably take that back while I still can what makes Vietnam's future bright is that it is not only more traditional labor intensive Industries such as apparel Footwear and outdoor hard Goods that are getting boosted in the nation much like we have seen with foxcon and apple the electrical and electronics sector is set to become the next big thing to flourish in the nation even Samsung plans to move its display production out of China and that's no small feat this move alone will make Vietnam the world's leading display supplier just think about that and let's just look at the numbers for a brief second due to its capitalization of China's manufacturing crisis Vietnam has a strong economic expansion projected over the next decade the nation's total GDP is forecast to increase from 327 billion in 2022 to 470 billion by 2025 rising to 760 billion by 2030 those are not small numbers all this translates to very rapid growth in Vietnam's per capita GDP from $3,330 per year in 2022 to 4,700 per year by 2025 and 7400 by 2030 resulting in a substantial expansion of the size of Vietnam's domestic consumer Market Vietnam has the opportunity and potential to become a juggernaut and more of a threat to China than it already is look out China Vietnam might just be your Boogeyman in the making its role as a lowcost manufacturing Hub is also expected to continue to grow strongly helped by the further expansion of existing major industry sectors notably textiles and electronics as well as the development of new industry sectors such as autos and petrochemicals Vietnam already has a domestic automaker of electric vehicles vinfast which launched its first EV in Vietnam in 2021 the company is growing and as it does it attracts competition or in this case manufacturing companies to China the last point to note when it comes to Vietnam is that its rise has been boosted by China's downfall as the pandemic exposed well a lot of things for starters the world's big companies saw significant supply chain vulnerabilities during that period having seen the challenges that came with centralizing the global Supply chains in China most multinationals have been seeking expansion and guess what Vietnam has just been in a prime position to answer that call and this issue is not closed either it will drive the further reshaping of manufacturing Supply chains over the medium term as firms try to reduce their vulnerability to such extreme supply chain disruptions due to anything whatsoever add to all that that the US China trade and Technology tensions still remain high and what you have is the perfect concoction for the reconfiguration of Supply chains there is no doubt in my mind that Vietnam is going to come out as a winner from China's wires but here's the kicker they're not the only nation that stands to benefit significantly India is another of the Nations that are looking to capitalize on China's misfortunes India maybe more so than Vietnam has a lot of things going for it for starters India both a large land mass and an abundance of Labor due to its young population this year India surpassed China as the most populous country and so they are covered in terms of Labor unlike China India's labor is not expensive and hence they have the advantage certain companies have since noticed this and taken advantage one example of this is Apple which has already moved some of its iPhone production to the Indian states of Tamil Nadu and caraka and and is exploring moving its iPad manufacturing to the South Asian Nation JP Morgan analysts even made calculations and their projections show that one in four iPhones would be made in India by 2025 India is simply capitalizing on the vulnerabilities that covid-19 exposed against China the need for Apple to reduce its dependence on China as a manufacturing center has been clear for many years but the impact of the pandemic at the world's biggest iPhone assembly plant underlined the problem the covid-19 related disruption was estimated to cost the company a billion weekly it makes sense that Apple wants to avoid such a mess again Julie German the CEO of everstream a platform for supply chain risk management said in a statement India has a large labor pool a long history of manufacturing and government support for boosting industry and exports because of this many are EXP exploring whether Indian manufacturing is a viable alternative to China the Indian government is welcome to Deals as Indian Prime Minister Modi has been working on attracting foreign direct Investments since he took office in 2014 sending FDI to a record 83.6 billion in the past fiscal year with lowcost labor available low cost of production and a willing government it's not hard to see why a good portion of business is leaving China for or India at the current rate India stands to take a lot of China's business and again it's not the only one we also have the land of Muay Thai Thailand is perhaps an unexpected winner from China's manufacturing crisis when you take a second look however you realize this was meant to happen as Southeast Asia's second largest economy Thailand has been moving up the value chain in manufacturing and is a production hub for car parts vehicles and electronics even major companies like Sony and sharp have set up shop there Sony said in 2019 it was closing its Beijing smartphone plant to cut cost and relocate some of the production to Thailand following that sharp said in the same year it was moving some of its printer production to Thailand because of the US China trade War all these actions prove that Thailand's competitive Advantage keeps getting stronger and hence multinationals are flocking to it now before you start claiming that it's just foreign companies doing this let me ask this little fact even Chinese companies are moving out of China to manufacture elsewhere yikes companies producing solar panels such as shanghai's jeno solar are moving their production to Thailand to take advantage of lower costs and avoid geopolitical tensions that China is always in the middle of amidst all of this Thailand has just seen its foreign direct Investments rise substantially between 2020 and 2021 alone its foreign direct Investments tripled putting the country in a significantly better position this was during Co one can only imagine the doors that will keep opening up for the country now that the global Supply chains are being Rewritten and if you thought these were all the wins for Asia you got another thing coming we have other countries taking China's pie Bangladesh is another of what you can deem China's competition it has been a big beneficiary of the supply chain shift away from China and its competitive Advantage just keeps growing the nation found its niche in the Garment manufacturing sector and it has heavily capitalized on this the Garment manufacturing industry is a key pillar of their economy accounting for nearly 85% of shipments or over $42 billion of the country's exports in 2021 the country is also the world's second largest garments exporter after China considering the size and resource disparity that is quite impressive of its many advantages Bangladesh's rise could perhaps be accredited to Rising labor costs in China whereas Bangladesh labor in comparison is significantly cheaper let me give you some numbers so you can really appreciate the difference the average monthly salary of a worker in Bangladesh is $120 whereas in China it is $670 say you owned a Manufacturing Company where would you rather set up in light of of these costs as Bangladesh continues to attract Investments beyond the Garment sector into other Industries I wonder how explosive their growth will and can be talking about explosive growth let's look at Mexico if you're not rooting for Vietnam then you're probably on Team Mexico what Mexico has in its hands is a golden opportunity as it stands to greatly benefit from China's manufacturing crisis the North American nation is directly taking on China in the manufacturing market and it's doing quite well at it as us China trade relations have continued to sour it has been estimated by the UN that approximately $27 billion of lost trade between the two will be captured by Mexico yeah you heard that right that's billion with a capital B and these aren't just random projections either no sir the food basic Metals mining pharmaceutical and Automotive sectors are projected to invest the most in the country the latter a vital strategic part of North America's strategy to decouple its supply chain from the east and set up locally even Ford the vehicle giant has invested $260 million in its new global technology and Business Center in Mexico while Volkswagen was reported to be investing in eye watering $763 million in its Electric veh vehicle plant Flavio baros managing director and Latin America supply chain lead at actioner said in a statement there is mainly an upside to investing in the country as North American manufacturers have a history of working cross border with both Canada and Mexico from raw materials through semi-finished Goods to finished goods Mexico will represent a key area of growth representing onethird of new employment particularly in automobile and food manufacturing and you can't argue with how true this rings I could talk about Malaysia and even other nations but I'm sure you get the point there are other nations whose own Industries are on the rise and any slip-ups by China are the windows for these nations to capitalize on and thrive on despite China's own slip-ups these nations are emerging with just better competitive advantage and that is giving them the platform to level up and potentially surpass China in the years to come so what are we left with at the end of the day let me State this unequivocally L there is a misunderstanding as of now China is still the world's Factory as much as there is emerging competition China is still far above competing Nations neither southeast Asia nor India can replace China as the global manufacturing Hub overnight this is because they are mainly engaged in labor intensive and low value added manufacturing the very Trend that China seeks to move away from these Emerging Markets also don't have industrial chains and Supply chains that are as complete as those of China they might in the future but I'm basing this off of today what further gives China The Edge that keeps them in the game is that they not only are a manufacturing Hub but China itself is a market for these Goods based on its spending habits in large population it provides the market for it Goods don't believe me in 2020 global companies had $1.4 trillion of domestic sales within the nation far more than their exports of $900 billion this means that they exported less than they sold tell me what manufacturer doesn't like that that being said countries like India boast similar advantages or rather the potential for similar advantages over time assuming the same factors come into play then yes there is potential for such a drastic shift in fact the presence of Nations like India is what is causing the manufacturing crisis in part from China only time will tell what will become of China's manufacturing industry as it is pitted against the younger but more competitive manufacturing industries of other nations I will certainly work on an update as the situation evolves but until then only time can tell what will come of this globe threatening manufacturing crisis Mexico's economy is on the rise an increasing number of foreign businesses like to do business in Mexico and it looks like this will only increase in the future right now Mexico sits in The Perfect Storm preparing it for an economic boom this is due to multiple factors both inside of Mexico and also outside in the changing International landscape Mexico has relatively low labor costs which attracts manufacturers looking to Outsource their operations additionally the country's population can provide a lot of skilled labor which makes doing business in Mexico even more attractive and something that separates Mexico from all the other lowcost manufacturing countries is one simple Geographic reality Mexico is located right next to the largest economy in the world the United States of America it's not hard to figure out why businesses like this fact when you manufacture your products in Mexico you can easily and cheaply export your products to the huge Market in the United States so Mexico is a huge opportunity for manufacturing which can attract businesses and Spark economic growth and the changing global economic environment is turning this opportunity into a reality right now the United States outsources a lot of its manufacturing to China but due to a variety of reasons this trend seems to be shifting it's only a matter of time before China's position as the manufacturing Behemoth will crumble China's downfall will inevitably cause Mexico's economic rise because Chinese manufacturing will have to move somewhere else but in a weird way Beijing is actually trying to benefit from Mexico's Rise by gaining an economic footprint in the country in this episode we'll go over how these complex geopolitical and economic changes are causing an economic boom in Mexico what's happening in Mexico is very interesting because it doesn't only affect One Nation but really the entire world and just a side note if you enjoy my videos be sure to hit that like button down below without your help this video won't get very far in the algorithm it took a lot of work to cover this topic so your support is really greatly appreciated thank you so much a tectonic shift is underway in the North American economy we are seeing a lot of investment from Chinese companies and Mexico is more motivated to attract them the latest example of Chinese business expansion is the 850 hectare hauan Industrial Park it's the potential for creation as many as 7,000 jobs over the next 5 years and bringing their products closer to the world's largest market the United States multiple Chinese companies are now moving their manufacturing to Mexico they've already invested billions of dollars in the country building up factories and Supply chains this is a fascinating development because it tells us two important things Mexico is now a very attractive place to do business and China is well not that attractive anymore after all why are Chinese companies moving out of China if things are going well at home the truth is it's not going well for the country since the covid pandemic hit in 2020 things are going downhill in China the first thing we should look at are the supply chain weaknesses that were exposed during the recent years this isn't the first time you'll hear about globalization and Outsourcing manufacturing as these Concepts have shaped our modern economy basically companies from Western countries have moved their manufacturing to other cheaper countries for decades globalization has been a trend that countries like China benefited from enormously because other countries started to Outsource their manufacturing China became a manufacturing giant China had an abundance of cheap labor which made it the best place for manufacturing businesses but this globalization had one huge disadvantage it makes countries reliant on other countries China is the world's top Manu ufacturer producing 28.7% of the world's manufacturing output because of this huge market share Global Supply chains are largely reliant on the Chinese economy and when the covid-19 pandemic happened this overdependence on the Chinese economy clearly showed the long and ruthless lockdowns in China caused economic unrest and supply chain weaknesses all over the world a lot of governments came to the same conclusion it's not smart to have all your manufactur uring in one country diversifying your manufacturing by Outsourcing it to different countries is a lot safer even though it comes with a heavier price tag due to more Investments for example apple is now diversifying its manufacturing by adding Indian companies to its supply chain the Chinese companies moving to Mexico might be doing the same thing diversifying their manufacturing if something unfortunate were to happen in China these companies would still have their manufacturing plants in Mexico up and running but supply chain safety isn't the only motivator driving these companies in Mexico cheap labor certainly has a huge role to it the quoted monthly earnings in Mexico are $874 which is significantly lower than China's quoted earnings of $1,336 per month Chinese manufacturers want to make money and by moving to Mexico this gets easier due to the lower labor costs and the costs of Labor aren't the only explanation in China many Manufacturing companies are facing acute labor shortages the new Chinese generation is smaller than the older ones and many young Chinese people aren't willing to work factory jobs the reason for this is that the new generation has a higher education than the previous one making them well overqualified for manual work basically there are less people in China and even less of them considering low-paying jobs this has led to more than 80% of Chinese manufacturers facing labor shortages from 10% up to 30% if these manufacturers don't have the people at home they're forced to move abroad and Chinese companies moving to Mexico fit perfectly in this trend but the reasons for things going downhill in China aren't only economic they're also heavily political the turmoil that began with the US China trade War has caused significant damage to Chinese Manufacturing in 2018 US president Donald Trump began to impose High tariffs on imports from China with which hurt Chinese businesses wanting to export to the huge US market in one single move he increased the taxes on 200 billion dollar worth of goods and President Biden well he didn't make the situation a whole lot better for these Chinese companies his administration maintained the tariffs Trump imposed which didn't help with stopping the trade War he even went as far as to add new restrictions on the Chinese economy most notably on the chip industry that is so crucial to the country in deals with other countries like Japan or the Netherlands Biden effectively destroyed the supply chains of Chinese chip manufacturers for Chinese companies exporting to the United States this ongoing trade war is very bad for business this is yet another reason for Chinese manufacturing companies to now move to Mexico Mexico is located right next to the US market and it doesn't have the same restrictions placed on itself as China has adding on to this diversifying your manufacturing to other countries is a smart move due to the same political reasons with the situation around Taiwan getting very tense a conflict between the United States and China is not completely out of the picture an American forar General predicts that the two will be at War by 2025 now this is the topic for a whole another video but these speculations do concern companies about potential geopolitical risks of doing business in China maybe it's safer if you have some of your manufacturing elsewhere because a war will be pretty devastating for everyone involved and in the terrible scenario that comes with a war there's a good chance Mexico won't be involved in short there are a lot of Economic and political reasons for Chinese companies now moving over to Mexico and it isn't just Chinese companies that are moving out of their own country from Mexico other companies are seeing the benefits of Mexico too American businesses that were formerly Outsourcing their manufacturing to China are now considering moving to their neighboring country for example the car manufacturers Tesla General Motors and for are all building manufacturing plants in Mexico and companies from Europe and other Asian countries are doing the same especially when the United States is their primary export Market it's safe to say that the trend in global manufacturing is Shifting China's downfall in manufacturing is turning out to be Mexico's rise as with every Trend there are push and pull factors the push factors are that China isn't that attractive anymore for manufacturing we've already discussed the reasons for this which are both economic and political so let's go over the poll factors and uncover why Mexico has great potential to be a manufacturing economy Mexico has surpassed China as America's top trading partner signaling a changing Dynamic within the global economy Mexico hosted the North American Summit with the leaders of the United States and Canada the North American leader Summit is expected to focus on economic issues and climate change but also the situation on the US Mexican border perhaps one of the greatest PLL factors driving manufacturers to Mexico is the end of globalism many experts are speculating that globalism is reaching its final days this major shift has to do with the increasing International tensions in the world one of the preconditions for globalism has always been International Peace and Order connecting each individual economy with each other to form a global economy isn't an easy task you need to have everyone on the same page and you must provide every country with safety and assurances after the second world war the United States was so strong that it could enforce this the us-led world order provided relative stability which led to an increasingly globalized economy as International Trade flourished but now this global economy appears to be crumbling the Russian invasion of Ukraine is a very good example of this Russia challenged the Western influence in Ukraine by starting an illegal Invasion as a result the world became a lot less stable and the global economy suffered with China's increasingly aggressive aggressive stance regarding Taiwan the us-led world order is also being challenged Chinese and American interests regarding Taiwan are completely opposite and China is showing no signs of backing off in the scenario that this situation escalates boy oh boy we will definitely see the globalized economy crumble right now the world is dependent on Taiwanese chips which could turn out to be disastrous and it's not only us enemies that make globalism difficult to execute its allies are also giving it a hard time for example the European Union is not blindly following us policy anymore mcon has repeatedly said that he doesn't want to be a vassal for the us and that he rather wants the EU to form an independent strategic block even us allies don't accept an american-led World Order anymore from all of these geopolitical developments we can conclude that the United States's dominance is being challenged from multiple sides so what on Earth does this have to do with Mexico well a lot actually with the US no longer leading the world order the old version of globalism isn't viable anymore consider this American chip manufacturers used to move their factories to other countries now Biden is paying billions of dollars for them to come back nowadays world leaders prefer to have a secure and robust economy at home above all the benefits globalization can offer this is because globalism can't be safeguarded by a dominant power like the United States anymore as a result of the crumbling World Order and international relations aren't as stable as they used to be think about Russia or China for example because of these significant changes countries want to reduce their dependency on each other by moving chip manufacturing to the US Biden effectively reduces the dependency on Taiwan and China if this trend continues globalism is over but Mexico might be the rare exemption to this the United States doesn't mind being dependent on Mexico because the two are neighbors while the globalized economy is is in Decay stronger Regional economies might be the solution Regional economies are basically a watered down version of globalism regional economies can have greater security and stability but they still have some of the benefits globalism can offer this includes things like bilateral trade with other nations and economies of scale therefore an improved relationship between the US and Mexico can be vital for the future because it can create a strong Regional economy as globalism appears to be ending countries will need to focus on their Regional econ economies especially North America a stronger Regional economy will provide a lot of opportunities in and of itself you could even argue that this Regional economy can outperform the former globalized economy in a lot of ways getting goods from Mexico to the US is simply a lot faster and a lot cheaper than importing it from China from Mexico to the US you can transport goods via trucks trains or ships within a few days when you're importing from China to the US however it can take multiple weeks if you have bad luck as we've already discussed Mexico simply has a cheaper labor force which makes for a greater manufacturing opportunity on top of that Mexico doesn't face the same labor shortages as its Chinese counterpart the tariffs for trade between Mexico and the US are also significantly lower for trade coming from most countries the United States asks tariffs as a form of Taxation on Imports but due to the usmca agreement import tariffs between the US Canada and Mexico are minimal or even nonex existent for a lot of products you don't have to pay an import tax when you're trading between these three countries this is yet another benefit of a stronger Regional economy Mexico can become a powerful manufacturing hub for the United States and the opportunities don't only stay at manufacturing Mexico also has a highly educated Workforce fun fact Mexico graduates more Engineers annually than the United States this means that not only manufacturing companies but also technology firms can grab the opportunity to Outsource to Mexico this is great news for Mexico but also for the United States right now the US is facing a critical shortage of Engineers ranging in the millions of job offers when you look at their respective economies Mexico and the United States complement each other pretty perfectly the United States needs both cheap and skilled labor and a reliable trading partner and Mexico needs jobs and companies to boost their economy all the more reason reason to start a strong Regional economy conventional wisdom would say that a good neighbor is better than a far-flung friend which definitely applies to the US and Mexico sadly enough the political reality isn't as promising the United States and Mexico have had their issues so to say illegal immigration coming from Mexico is one of the biggest political issues in America with more than 2 million border Encounters in the fiscal year of 2022 alone most of the migrants don't come from Mexico however but from other Latin American countries like Honduras and El Salvador the reason for this Mass migration is poverty and crime that many of the failed States in Latin America have failed to solve many Latin Americans think that they'll have a better chance in the United States being the more stable and prosperous country in the continent but a lot of Americans fear that mass immigration will cause problems at home especially the Republican side of the debate that's why Donald Trump tried to build a wall on the border to prevent migrants from illegally coming into the country The Unwanted side effect of this policy was a strained political relationship between the United States and Mexico there was a lot of political back and forth on the necessity and The Unwanted effects of the wall Donald Trump blamed the Mexican Government for not doing enough about the illegal migration issue in turn the Mexican Government blamed him for worsening their Mutual relation with the wall building a wall isn't good for bilateral trade as it slows down imports and exports coming from both sides the strained relationship isn't only to be blamed on the illegal migration though the high crime rate in Mexico along with its Infamous cartel violence also causes political concern the Mexican Government doesn't have full control over its own country because organized crime groups have become way too powerful the most powerful cartels in Mexico have military grade weapons and equipment and through corruption they also have a large political say in the country the United States doesn't like this because the these cartels bring illegal drugs into the country with the risk of spreading violence the ongoing fenel crisis has caused thousands of American deaths and it's directly related to the cartels in Mexico who import contaminated drugs some politicians call for the US military to intervene in Mexico to address the issue of the cartels the Mexican president Lopez orador doesn't like this he wants to solve the organized crime issue on his own and preserve his country's sovereignty he even made the false claim that none of the fentanyl was being produced in Mexico and that it was all America's own problem right now the drug war cooperation between the United States and Mexico is at its lowest point in decades law enforcement from both sides are barely cooperating to solve their Mutual problem so the issue of organized crime is also something separating the United States and Mexico but increasing economic ties might be the way out one of the reasons for illegal migration and organized crime is poverty which is related to economic underdevelopment therefore when Mexico gets more Prosperity it will theoretically have lower crime rates and less migration the Mexican Government will also have more money to fight issues like organized crime and illegal migration when bilateral trade grows Mexico's economy will be on the rise and these issues can be resolved that's why building a strong Regional economy is one of the best ways to improve the strained relationship between the US and Mexico the political relation are difficult but they can be resolved once the two countries just start cooperating we should also look at the politics inside of Mexico government policies have a lot of effect on the economic success of a country and looking in the past decades the economic growth it hasn't been great this chart shows that the Mexican economy hasn't experienced outstanding growth over this time period the GDP growth rate has been irregular with ups and downs and they haven't been fantastic in general in fact when we compare Mexico's GDP growth with that of the United States it appears like there has been no economic growth at all the opportunities for economic growth were certainly there but the Mexican government has struggled to turn them into reality Mexico could have been the most successful country in Latin America because it has a great opportunity for manufacturing as it shares a border with the us but Mexico's economy hasn't outperformed other countries in Latin America in any way that's because economic success has a lot of of preconditions like large amounts of foreign direct investment and an improved business environment first of all Mexico lacks infrastructure and sufficient Public Utilities to achieve economic success the root cause of this problem is the lack of government taxes to fund public infrastructure projects the government only invests 1.3% of its GDP into these projects which is a very small amount compared to many other countries now this problem could be relatively easily solved by attracting for foreign direct investment the private sector would love to invest in Mexico because of the growth opportunity ahead with increased foreign investments the infrastructure problem could be solved however Mexico doesn't attract that much Capital foreign direct investment inflows account for only 2.6% of its GDP which isn't a crazy high number this is definitely not enough to solve the infrastructure problem that Mexico is currently facing however with more and more companies moving to Mexico for manufacturing this foreign investment inflow will surely increase but even with the odds in its favor the government in Mexico is still struggling to get more companies to invest in the country some of the government policies are causing this deficiency for example in 2022 the Mexican president tried to let the government take over the energy sector which was defeated in Congress this move has scared multiple private energy companies which could have invested in Mexico's underdeveloped energy infrastructure this is just one of the many examples of government policies that scare away foreign investments coming from the private sector president Lopez orador focuses on state-led growth which decreases the impact companies can have in Mexico this isn't helpful with achieving economic growth because the huge opportunities for Mexican growth lie in the private sector the business environment is also a reason for the lack of economic success the Mexican Government tries to give businesses all kinds of incentives in order to spark economic growth this is the case with the maila Factories near the US Mexico border which have received multiple benefits from the government these factories manufacture goods for American companies just South of the Border and they don't have to pay taxes or import duties to the Mexican Government The Mexican government has also created various special economic zones to improve the business environment they provide various benefits to the companies in the economic zones such as having to pay no income tax for 10 years and no import taxes in lot of ways the business environment is great for large corporations but the problem is that the rest of the economy just lags behind nearly 30% of Mexico's economy is informal meaning that it's not registered nor taxed by the government in fact nearly 60% of Mexicans are employed in this informal sector this has a huge negative impact because the government can't collect taxes on this informal economy and 60% of Mexicans don't enjoy Social Security one of the of the reasons for the informal economy is the excessive regulations that make doing business in the formal economy very hard paying taxes alone takes Mexican firms 241 hours each year on average something that small businesses can't afford to do the huge informal economy is directly one of the reasons for Mexico's sluggish economic growth countries with large informal economies generally suffer from low productivity poor governance and high inequality these are things that have dragged Mexico's economy down and have historically caused low growth rates Mexico might attract a lot of large corporations but it also has to solve the informal economy in order to grow adding on to the complexity of the issues is that the situation varies dramatically per state in Mexico looking at the GDP per capita for every state you can see that there is a huge difference in some states the GDP per capita is about $110,000 while in other states it's $40,000 per capita or even higher that's four times the difference just on a regional scale this can be attributed to poor government policies that aren't organizing things well but it can also be blamed on different policies on a state level some states like Mexico City noo Leon or Baja California have received relatively high amounts of foreign direct investment as compared to others this is because some states are just better at attracting businesses than others these states also have better legislation solving the problems of the informal economy more efficiently but to truly achieve economic success in Mexico every state needs to grow and the other states shouldn't get left behind this is something that the country lacks right now however all these political issues can be solved eventually when the country takes an example from successful States like noeva Leon Mexico could work out a solution to the problems if the entirety of Mexico manages to attract businesses and to grow its formal economy an economic boom is inevitable at least that's what the governor of Nuevo Leon predicts many problems can be solved when this economic boom happens for Mexico it could reduce poverty and the issues related to it in general the quality of life will improve and Mexicans will get more prosperous for the United States Mexico could turn out to be an invaluable partner with all the benefits the bilateral trade can offer such as proximity and Reliance the stronger Regional economy in North America will be a serious competitor to China's economy which has a huge impact on global geopolitics talking about China the CCP has decided between two strategies when it comes to this change in Mexico it can either try to compete with Mexico and fight for its own manufacturing industry or it can cooperate with Mexico and gain influence within the country at first glance Beijing trying to compete with Mexico is a viable option after all China's economy is more than 10 times bigger than that of Mexico China's population is also more than 10 times bigger than Mexico's population and I know that economic and demographic figures coming from China aren't that reliable but China certainly has an advantage in size Mexico won't be able to take over China's manufacturing completely so China will try to remain competitive on a global level but when it comes to the US market well the story is a little bit different in the US market the competition between China and Mexico isn't a story of David and lth in 2021 China exported about $600 billion to the US in the same year Mexico exported about $400 billion to its northern neighbor in the US market Mexico is a serious competitor to China because of the shifting Trend in North America with a stronger Regional economy China stands to lose some serious market share in this market it'll be harder for China to compete that's why the CCP is adopting a different policy cooperation with Mexico the CCP doesn't want to lose control over the US export Market because this is one of its biggest strategic advantages with Mexico increasing its market share the only way for the CCP to retain this Advantage is through getting influence in Mexico one of the ways to do this is by building infrastructure projects which the CCP is trying to do in the country for example Chinese companies have signed multi-billion dollar railroad contracts with the Mexican Government this policy of gaining influence inuence through infrastructure projects isn't new for the CCP however this traditional way for China to gain influence isn't going to cut it Mexico is one of the few emerging markets that isn't part of the Chinese belt and Road initiative this is partially because Mexico doesn't want to have too much Chinese investment within its borders if Mexico would take tons of loans from China it could upset the United States their biggest trading partner but luckily for the CCP there's another way of getting influence in Mexico and that's taking over a part of the Mexican economy itself as of 2022 there were 1,289 Chinese companies investing in Mexico this includes Chinese car manufacturers like byd chungan Motors or mg Motors of course these are private Investments but in China companies aren't that independent from the CCP as they have to follow State policies set by xiin ping himself through these private Investments the Chinese government is gaining a foothold in the Mexican economy this could be beijing's master plan to counter an independent American economy after all importing from Chinese companies in Mexico isn't much different than importing out of China itself and this is bad news for the United States because it desperately wants to be independent from China but it's clear that the CCP has a different agenda to wrap it all up an economic boom in Mexico seems more than logical Mexico and the United States could grow grow their bilateral trade in a move to strengthen the regional economy cheap and reliable labor just South of the Border is all the US can wish for when it comes to manufacturing and Mexico which is still struggling to grow its economy would love to expand its exports to the biggest economy in the world because their interests are aligned the political differences between Mexico and the United States can be solved the political situation within Mexico could also improve with States like nuo Leon leading the way the question now becomes will this new alliance make the United States independent from China the United States hopes to replace Chinese manufacturing with manufacturing coming from Mexico for economic and political reasons but the CCP isn't letting this happen as it's moving hundreds of Chinese companies to the country one thing is certain though Mexico is the perfect storm for an economic boom with all these developments Mexico could become a manufacturer Paradise IND IND has launched a war against China and it's not a war that will be fought on the battlefield rather it's a war that will be fought economically India has started emerging as the next great Powerhouse of Asia in order to counter China's aggression New Deli has now positioned itself as an alternative for companies that are getting tired of being used like a pawn in the ccp's grand ambition towards taking over the world companies like Apple are already moving to India to set up for a world after China India has slowly launched its own Global projects to counteract China's growing influence from the Bel and Road initiative Prime Minister Modi has started India's own lending program for its neighbors in order to stop China from Gaining influence by using its debt trap diplomacy so today let's go over how India became China's greatest threat the head of MI6 last year accused China of using debt trap s to gain leverage over countries Sri Lanka sought China's financial help the country took loans worth $45 billion from various countries including more than 8 billion from China an agreement for A1 billion US credit line from India the fast petrol vessel will be the fourth ship to be gifted by India to se shells Pakistan is all set to receive a $700 million loan from China to help it Shore its foreign exchange reserves which are at a 10-year low this video took a lot of effort recently my videos have been getting age restricted which severely hurts their reach with the algorithm and doesn't really make that much sense so if you guys can please take a second and hit the like button below it will help me out a lot thank you so let's start from the beginning something that might surprise most of you is the fact that historically India and China were strong allies and friendly economic Partners the Silk Road linked the cities of Xian in China and autra in India trade on the tea and Horse Road as the Chinese called it was a significant factor in the growth of Chinese and Indian civilizations coming into modern history both civilizations had their hands full with their colonizers as India had the British and China had the Japanese that didn't stop their leaders from supporting each other even under British rule Indian leaders publicly showed their support for China struggles against the Japanese in 1939 future Prime Minister of India joah haral neharu visited China as an honored guest of the government both countries actually helped each other in their battles India helped China against the Japanese and Western imperialism and in return China supported India's independence movement against the British then in 1947 India gained its independence from the British Empire and 2 years later in 1949 the People's Republic of China or PRC came into power in China this is where the relationship could have soured up to this point Indian leaders had been friendly with the ROC the Republic of China when Mao zong's PRC came into Power The ROC fled mainland China and took over Taiwan I'm sure you guys are already familiar with the China Taiwan issue so I won't go into it right now but good relations between the two Nations continued even under new leadership in fact India was one of the first countries in the world to recognize the People's Republic of China as the official government government of China Indian Prime Minister jaah haral neharu also became the first foreign leader to visit the PRC in China in 1954 this time to meet with the PRC leader Mao zong neeru described the visit as the most important foreign mission of his life he considered India and China to be very similar he believed as a newly Free Nation they couldn't trust the West they needed to depend on each other to grow their economy and improve living conditions for their citizens they jointly signed and advocated for the five principles of peaceful coexistence but peace it didn't last long as soon as the CCP came into power in 1950 they forcibly took over the autonomous region of Tibet by sending loads of military personnel I have a full video on the story which was actually demonetized and restricted by YouTube the first time I uploaded it good times I highly recommend you check it out for the full details on this story but here's a quick recap after taking over the region in 1950 the CCP slowly kept increasing its military presence in Tibet as you can imagine this really pissed off the local Tibetan population as the CCP was not giving them their religious and cultural Freedom German Mao wanted Tibet to be a Chinese territory it didn't matter to him that the people there had their own culture and history so in 1958 a rebellion broke out in Tibet against CCP forces Tibetans wanted to kick out the CCP and take back their land but Mao decided to send in even more forces to reassert his dominance local Tibetan Rebels stood no chance against the people's Liberation Army or pla who had a numbers advantage and experience on their side India was closely following this clampdown India had always had a friendly relationship with Tibet including an economic relationship where North India would freely trade with Tibet Indian leaders decided not to get involved in this fight as to not cause a war with their neighbor Mao on the other hand did not share the same feelings about keeping the peace Declassified documents from decades later have shown that Mao was always paranoid that India was colluding with the USA and the Soviets to overthrow Chinese leadership looking back this really doesn't make any sense the USA and the USSR were in a pretty intense cold war in the 1960s and while India was a neutral Nation was friendly with both sides I highly doubt the USA and the Soviet Union would set aside the Cold War and collude together to overthrow the leadership in China anyway coming back to the Tibet story in 1959 the dolly Lama fearing for his life in Tibet fled to India where he was granted Asylum this of course didn't please Chairman Mao as he saw this action as India playing a role in supporting the rebels against the CCP this in turn made him more aggressive towards India and Mao decided to show his aggression by encroaching on India's borders speaking of borders there's one point I quickly want to go over that's actually pretty important in 1914 while India was still under British control representatives from Britain China and Tibet gathered to determine the status of Tibet China agreed to allow Tibet to be an autonomous region and remain under Chinese control but they refused to put the promise in a treaty Britain and Tibet on the other hand signed a treaty creating this line called the McMahon line India to this day accepts the McMahon line as the official legal border between India and Tibet the CCP on the other hand well they didn't accept the McMahon line and in 1959 they kept pushing the limits at these borders to show their displeasure this caused both sides to increase their military presence around the border and then in August of 1959 the first bloody Clash erupted between the two Nations on the west side of the Border Chinese soldiers pushed into Indian Territory then a month later clashes happened on the east border this is when India learned that China had built a road inside of Indian Territory which has remained a pretty big issue to this day to settle these issues China offered India the west side of the Border if India agrees to give China more territory on the east side India of course declined this offer and Fir fights kept happening for the next few years then in 1962 Chinese soldiers discovered an Indian Post in territory that they believed to be under China's borders this news traveled to Mao and he saw this as the final straw ma decided to send tens of thousands of soldiers in secret to both East and West sides of disputed borders the people's Liberation Army swiftly launched an attack on both sides surprising the Indian soldiers who were both outnumbered and inexperienced the pla on the other hand had plenty of fighting experience from their Wars in Korea Vietnam and Taiwan Indian troops suffered a humiliating defeat and the CCP was able to capture much of Indian Territory the Indian army tried setting up a counter offensive by bringing in more soldiers but Mao was ready for it and squashed it pretty easily this is when India asked the USA military for help to take back its territory at this time the USA was one of the only two countries who had nukes the second one being the Soviet Union surprisingly this was also one of the few issues that the USA and the Soviets agreed on they both saw China as the aggressor in this situation and since China didn't want to experience their own Hiroshima they decided to withdraw most of their troops from Indian Territory however the CCP did decide to keep control of a piece of Indian Territory here in the oai China region the same area where they had built a road connecting Xian Chang to lasa remember this as this is an issue still to this day another ideological goal Mao had with this attack was to stop India from aligning with the USA in the Cold War Mao's thinking was that if he can show India that China is much stronger India will be afraid to do anything that will piss off China but this attack kind of caused the exact opposite to happen India and the US had become even closer as they both now had a common enemy in China this war also changed the borders between India and China now this is where the problems start China attacked India captured territory and the new unofficial border was basically in Indian Territory in 1967 another war broke out and this time India was able to push back some of the Chinese soldiers and regain some of its territories this changed what China controlled in terms of territory versus what China believed to be its territory China believes that everything claimed in 1962 is a part of China but it lost some of that in 1967 India still honors the McMahon line agreement and believes that China is still illegally occupying Indian Territory this is the reason behind a lot of subsequent clashes that have happened here both countries have soldiers patrolling the area and both countries have different definitions of where their borders end I mean you can tell why this is a recipe for clashes right luckily both countries realize that but China refused to come to a peaceful agreement about the Border dispute however they did agree that soldiers from both countries cannot use military weapons against each other meaning no guns allowed in the 2-m strip around the supposed line of actual control these border disagreements are a big reason behind the India China bitterness towards each other but the problems don't stop here as China grew economically its Ambitions on the world stage grew as well after Ma's passing Deng shaing opened China up to the rest of the world with his open door policy this policy quite literally changed China's economy and its place in the world it was able to attract foreign businesses to China and quickly transform the country into a manufacturing Hub millions of people were lifted out of poverty and China went from a farming Nation to the second biggest economy in the world but as the population started getting older and growth from attracting foreign manufacturing slowed down the CCP was forced to look elsewhere for future growth so it decided to feed two birds with one scone you see for a nation to be a superpower for it to be a formidable force on the world stage it needs to increase its influence with other nations and it needs to decrease its dependency on its enemies in short China needed to get stronger and minimize its weaknesses now we skip forward a little bit in our story because this plan was set in motion by xiin ping when he was elected taking the center stage China's new president and commander-in-chief of the people's Liberation Army cin ping cin ping as votes were counted there was little surprise he got 99.86% of the vote China's belt and Road initiative the Bri is a gigantic plan for a Global Network of ports roads Railways another infrastructure to connect China to the world after being elected president Xi Jinping launched the most ambitious project in history to increase China's influence around the world China would give out loans to poor struggling nations in the guise of helping Nations that once struggled like they did but in return China gained control over countries with valuable resources or in a strategic location now you may ask what if these poor countries can't pay back the loans well China would then get control over important resources like gold silver oil and access China carefully used loans to gain influence on struggling Nations and also choke out its enemies a prime example being India if you look at the map of the belt and Road initiative you can clearly see that there's one country that's left out not only that it seems like India is being encircled by this project that is controlled by China before we get into how China is doing that exactly let's first go over why China is doing this you see China believes it needs to do this in order to survive China's economy is very interconnected to the rest of the world especially to Western countries around 1th of China's GDP is from its exports the USA being its biggest export partner accounting for more than $500 billion or 177% of all of China's exports the dependency doesn't stop there if you look at China's top 10 export partners nine of them are us allies more than 50% of China's exports are going to countries that are likely toci side with the USA if there's a war additionally China is one of the biggest importers of oil China Imports almost double the amount of oil that the USA does and the majority of that oil flows from the Middle East which is transported through the Indian Ocean all of this oil passes through what some might consider to be one of the most important geopolitical choke points here in the straight of Mala it's projected that 80% of China's oil flows through this straight this straight is in the territorial Waters of Indonesia Malaysia and Singapore this straight is a very big weakness for China in case of any war or political disagreement this straight could easily be blocked off by enemies like India or the USA without access to this route it's very hard for China to get the energy to fuel its economy let alone a war in today's world oil is the lifeblood of the economy and its government China's solution to this problem is to build its own alternate route using the belt and Road initiative China has built pipelines both in Myanmar and Pakistan from the coast to Inter City China it secured long Port leases in Pakistan and Sri Lanka similarly China has also set up a military base in jibuti to control Bob El mandz a vital straight off the coast of Djibouti that links the Red Sea to the Indian Ocean Persian Gulf and Asian exports Bound for Western markets must first pass through Bob El mandb before reaching the Suz Canal between 12 1 12 and 20% of all global trade passes through this straight only 8 miles from China's base is Camp lioner after seeing all the moves China has been making a lot of military experts have pointed out that the belon road is not just a Geo economic plan it also has a military strategic Advantage the ports have increasingly come to play a potentially more menacing role as dual use ports that can give the strengthened Chinese Navy a global reach it lacked entirely just a few years ago these strategic Investments are nicknamed The String of Pearls as the goal is to encircle India and put pressure on New Delhi India was aware of this already but the war in Ukraine showed every country in the world how important it is to secure your economic interest in the modern world wars can be won and lost before even stepping foot on the battlefield India realized that in the case of a war China's String of Pearls can be used as a way to choke off India's access to the World on top of safeguarding Chinese interests adding to this countries that received Chinese money were slow to criticize China whenever it would start skirmishes on the disputed border with India like it did in 2017 and 2020 there's also a rumor that China plans to start setting up military bases in countries that received Chinese loans and of course this was undoubtedly stressful for New Delhi as it didn't want to be surrounded by the Chinese military so India started laying out its own plan to safeguard its economic interests but it didn't just stop there later in the video we'll go over how India is taking advantage of China's trade war with the USA to hurt China where it's the strongest it's man manufacturing prowess but first let's go over how India is countering China's military to counter The String of Pearls India started its own Alliance to encircle China nicknamed the necklace of diamonds India is expanding its Naval bases and is also improving relations with strategically placed countries to counter China strategies in 2018 India partnered with Singapore and Indonesia to get access to their Naval bases of Changi and sabang this increased India's influence and access to the straight of Mala one of the most important choke points for China and the rest of the world in terms of trade that same year India also got military access to the port of dukum in Oman this port facilitates India's crude imports from the Persian Gulf in addition to this the Indian facility is located right between two important Chinese pearls jibuti in Africa and guar in Pakistan India has also signed an agreement with sells for a naval base in the region which will increase India's presence near the African continent while doing this India has also extended credit lines to Iran and agreed to build a port in the country to extend access to trade routes in Central Asia additionally India has extended credit lines in Central Asia to countries like Mongolia where Modi has agreed to develop a bilateral air Corridor New Delhi has invested a lot in policies to improve relations with Japan and Vietnam these relations have helped increase Indian trade and consequently India's influence on countries around China but India realized this alone isn't enough it has also taken big steps towards speeding up its economic growth while taking business away from China you see the China us trade war and Co provided countries like India with a unique opportunity because of economic growth in the past couple of decades living standards and wages in China have gone up dramatically this has become an issue for companies that moved to China for their low labor costs furthermore tffs from the trade War have added even more costs and the headache of operating in China increased multiple fold because of x's Co clampdown this is where companies started looking outwards for their manufacturing needs for many countries India provided a perfect solution India's population is fast growing and according to the UN it's officially now the biggest nation in the world overtaking China this year furthermore the Indian population is a lot younger when compared to China's aging demographic the median age in India is 28 a lot younger when compared to China's 38 a big portion of Indian workers speak English in fact India has the second largest English-speaking population only behind the USA this definitely makes things a lot easier for companies looking to set up shop in India certain companies have already noticed these benefits and taken advantage of them one example of this is Apple which has already moved some of its iPhone production to the Indian states of Tamil Nadu and carnit taka and is exploring moving its iPad manufacturing to the South Asian Nation JP Morgan analysts even made calculations and their projections show that one in four iPhones would be made in India by 2025 India is simply capitalizing on the vulnerabilities that Co exposed in China the need for Apple to reduce its dependence on China as a manufacturing center has been clear for many years but the impact of the pandemic at the world's biggest iPhone assembly plant really underlined the problem the covid-19 related disruption was estimated to cost the company A Billion Dollar weekly it makes sense that Apple wants to avoid this kind of mess again the Indian government is wel to Deals as Indian Prime Minister Modi has been working on attracting foreign direct Investments since he took office in 2014 sending FDI to a record $ 83.6 billion in the past fiscal year with lowcost labor available low cost of production and a willing government it's not hard to see why a good portion of business is leaving China for India at the current rate India stands to take a lot of China's business because of all this the UN prct that India's economy is expected to grow at 6.7% in 2024 compared to the measle 5% expected by China's economy and it's not just next year many organizations forecast that India's economy is expected to grow at a much faster rate for years to come compared to China's economy India has already started putting this growth to good use it's now lending money to Neighbors in order to avoid having them indebted to Chinese loans it has given $8 billion to Bangladesh $2.1 billion to bailout Sri Lanka after a recent collapse $1.7 billion to Nepal 13 billion to the Maldives and a few more while India lags far behind China in its overseas lending New Delhi has stepped up its efforts in recent years providing tens of billions of dollars in credit to neighboring countries including financially distressed brri recipients like Sri Lanka Indian companies have also expanded rapidly in the region providing a counterweight to Chinese commercial activity Indian policy makers see countering brri as vital to avoid being surrounded by pro-chinese governments and infrastructure they speculate could one day serve beijing's military interests India has definitely stepped up its efforts in containing China India publicly downplays the competition with China but its actions show India doesn't want to be held hostage to China's e economic or military might recently the first bloody clashes in 45 years took place at the india-china border but you might not have seen this news because a lot of traditional news organizations are not good at properly covering important geopolitical news that's why I launched Global Recaps a geopolitical newsletter that covers important geopolitical news in a simplified manner every evening I send out an email directly to your inbox covering important stories that you can read in just a few minutes minutes best of all this is completely free and you can sign up right now by clicking on the link in the description this is a Chinese vessel blinding a Filipino fisherman using lasers in Philippine territory earlier a big Chinese ship purposely collided with a Philippine Coast Guard vessel it's not just Philippines China has regularly and aggressively sent fighter jets into Taiwan territory and fired missiles over Taiwanese Island a Chinese warship cut across the bow of an American guided missile destroyer transiting the Taiwan straight China has also sent ships and jets in Malaysia and Indonesian Waters to harass the oil drilling operation in both countries territories this continuing and growing bullying by China has forced many nations to turn to the USA in an effort to stop the Chinese Advance the US military has come up with a new strategy a strategy to surround China and be ready to to fight in case there's ever a major escalation this strategy is the US plan to not only help smaller Nations but also stop CCP from exerting its influence over international waters so in today's video let's talk about the US's new strategy to trap China and how it will cement the world order before jumping in we have a quick rant about the state of today's news organizations news companies are just focused on being divisive and enraging that's because that's what gets the engagement which gets more eyeballs which means more money we're not going to lie regular viewers of the channel know that sometimes we' have taken clickbaits a bit too far just to get you guys to watch the video that's the problem with news that is served by an algorithm we put tens if not 100s of hours into making a video covering important news but at the end of the day if we can't convince you to click all the effort is wasted this phenomenon is far worse than the news companies who have special positions just to get clicks on their news these experts have figured out that the best way to get clicks is to scare the public focus on negative stories and blow every event out of proportion but that's what what news is supposed to be that's why we launched Global Recaps every weekday an email is sent directly to your inbox in it we cover the world's most important news in a short and concise manner with links to read more if you're interested in any specific news we also take the most important news story and break it down in simple terms to explain how it affects you and everyone else these emails take less than 5 minutes to read and they make you more informed about the world you live in about The Good the Bad and the neutral they are meant to keep you informed not scare you if you think these emails can be helpful to you then you can sign up now by scanning the QR code on screen or clicking the link in the description now let's get back to the basics before jumping into the US's plan let's quickly go over why China is willing to fight so many countries over the South China Sea the South China Sea is a marginal sea in the Pacific Ocean bounded by South China the Philippines Vietnam Thailand Malaysia and Indonesia this region is believed to have around 28 billion barrels of oil reserves 266 trillion cubic feet of natural gas and holds 13 of the entire world's Marine biodiversity thereby making it a very important area for the ecosystem even if fish stocks in the area are rapidly depleting if all these weren't recent enough the South China SE is a very important trade route and as of 2019 around 3.37 trillion USD worth of global trade passes through this region annually the main route to and from the Pacific and Indian Ocean ports is through the straight of Mala and the South China Sea generally oil and minerals move north and food and manufactured goods move South as we have covered in our previous videos China is heavily dependent on oil imports to fuel its economy and its Industries roughly 50% of Chinese oil imports come from the Middle East and that oil sails through the South China Sea and as you guys have already heard the last 10,000 times we've said it China is the world's manufacturing Hub and its economic growth is fueled by selling those manufactured goods to the rest of the world a big part of China his exports flow through the South China Sea to the rest of the world so we're sure you guys can see that the South China Sea is very important to China but does that mean it belongs to China um we're not quite sure let's look at China's supposed claims to this area in just a sec but first let's go over the international law that defines who controls what part of the ocean just a quick reminder to hit the like button to help out the video against the CCP Bots coming back to the topic according to the law of the sea that was signed in un convention in 198 82 each country's Sovereign territorial Waters extend to a maximum of 12 nautical miles 22 km Beyond its Coast but foreign vessels are granted the right of innocent Passage through this Zone Beyond its territorial Waters every Coastal country May establish an exclusive economic zone EZ extending 200 nautical miles 370 km from Shore now remember this as this will become really important later in the video within the EZ the coastal state has the right to exploit and regulate Fisheries construct artificial islands and installations and use the zones for other economic purposes now every country recognizes this law including China this is actually how every country has claimed their part of the South China Sea 200 nautical miles from their Coast every country but China there are some overlaps in Vietnamese Malaysian brunes and Filipino claims but no one is talking much about that because well all these countries are united together against China's claim you see when it comes to this part of the sea China doesn't want to follow the law of the sea no no no in fact China wants to follow this madeup n-h line to exert its claim this n-h line covers almost 90% of the South China Sea and the CCP claims that it's all part of China now you may ask what's the reasoning behind the n- line since there are no laws or anything that mentions this well according to the ccp's reasoning a Chinese Explorer discovered the South China Sea so therefore it belongs to China China we guess by the same reasoning China belongs to Italy because Marco Polo discovered China time for CCP to pack up and hand over the Reigns to the Italians Jokes Aside that is the reasoning the CCP has used to claim pretty much the whole South China Sea and it has led to some very confrontational situations with other countries fresh tensions over a long-standing dispute a renewed war of words between China and the Philippines today we're now being surrounded by Chinese vessels they've sailed really really close to us as close as a few meters from us as territorial disputes in the South China Sea continue passive and offensive the Chinese Coast Guard appears to block the supply boat's path I want you to leave this area immediately any consequences in t m will be B by you to assert their claim several countries in the conflict officially renamed the region that they claimed in September 2012 the Philippine president signed an administrative order maintaining that all government agencies used the same West Philippine Sea to refer to the parts of the South China Sea within the Philippines similarly in 2017 Indonesia renamed the northern reaches of its exclusive economic zone in the South China Sea as the north Nuna sea in an attempt to assert its sovereignty all while this is happening the CCP starts building its own island in the South China Sea not just any Islands military Islands they were home to few military personnel an air strip and a missile system based on international law these islands were within the Philippines border so the Philippines decided to take China to un Court in 2016 a ruling from the hog ruled in favor of the Philippines claiming China had indeed encroached their land a ruling that the CCP chose to ignore and is not put into effect yet to make matters worse the CCP declared the airspace above the disputed land to be a defensive air identification Zone and issued a notice that aircrafts flying through it would need Chinese permission this move move while they claim will only be enforced in defense has further strained relations between the countries on top of this there was a second part of this ruling that was just as important to the whole conflict you guys remember earlier how we said that according to the law of the sea 200 nautical miles from the coast is each country's exclusive economic zone well so there are a group of islands in the middle of the South China Sea called the spratly islands that all the countries are trying to claim the main reason being that if you can establish a claim on the island you can extend your EZ and control more of the South China Sea but according to a 2016 ruling the spratly islands were ruled Iraq so it doesn't extend any countes EZ this kind of killed the importance of the islands but that doesn't mean conflict calmed down China has been using something called the Cabbage strategy where the salami slicing strategy to choke out supplies to foreign lands to accomplish this China will surround a foreign controlled island with its ships and destroyers to deny access to rival Nations and then try to subsequently claim the islands now of course the United States has a lot of allies in this conflict and we have the strongest Navy in the world one important part that the US Navy plays is maintaining peace at Sea so World Trade can continue without interruption so since China was being so aggressive in the South China Sea the US Navy has increased its presence there to keep peace this is where the new US military plan starts in fact this was a plan that started soon after the end of World War II to counter the Soviet Union and communist China's Maritime Ambitions the United States crafted the island chain strategy as the Soviet Union collapsed and communist China grew a similar strategy has been used to contain China two Island chains in the Western Pacific are noteworthy the first comprises the coral Islands the main Japanese archipo Okinawa the northern part of the Philippine archipelagos the melee Peninsula and Taiwan the second chain consists of the islands of Japan stretching to Guam and the islands of Micronesia America was able to set up bases or form Partnerships with countries to solve its big hurdle the US military had a problem in the Western Pacific the tyranny of distance and time delivering military force across the vast Pacific Ocean has never been easy even for a country as blessed in resources and Ingenuity as the United States if the Chinese Army were to launch a rapid attack it would be able to move a lot faster than the American Navy could respond if it weren't for the island chain American forces located outside the conflict area would have to penetrate China's anti- access area denial A2 a network to restore the status quo that was there beforehand a daunting proposition under these circumstances Washington might face the unenviable choice of doing nothing or escalating to higher levels of violence either way the national interests of both the United States and its closest allies would suffer dramatically this is where the first island chain strategy was very helpful in stationing American troops and weapons near the possible Battle Zone the main goal of being so close to China is twofold first by being ready to defend the area from Chinese aggression the USA strategic forces are hoping to deter China from launching an assault in the first place but this strategy only holds true as long as China believes that the US Navy can defeat it history shows that deterrence is more likely to fail when an aggressor believes it can pull off an attack successfully if Chinese leadership believes it can achieve gains through aggression quickly and without paying steep costs in blood money and reputation it may be tempted to escalate a crisis to open conflict this is where Island chains are not only set up as a way to support allies but also as a way to blockade the Chinese inside in case of an assault as covered earlier China is a big importer of oil in fact China Imports almost double the amount of oil that the USA does and the majority of that oil flows from the Middle East which is transported through the Indian Ocean all this oil passes through what some might consider one of the most important geopolitical choke points here in the straight of Mala it's projected that 80% of China's oil flows through this straight this straight is the territorial Waters of Indonesia Malaysia and Singapore this straight is a very big weakness for China in case of any war or political disagreement this straight could easily be blocked off by enemies like India or the USA without access to this route it's very hard for China to get energy to fuel its economy let alone a war in today's world oil is the lifeblood of the economy and its government the CCP can only survive for so many days with a mostly halted economy that's why as China's economy grew the CCP became more Ware of its shortcomings and invested heavily in improving its military and navy to avoid getting in the situation where another country controlled the sea routes that China depended on CCP realized that to become the dominant power in Asia China must first become the preeminent power in the first island chain according to the US Department of defenses military and security developments involving the People's Republic of China 2019 report China has been establishing communication Aviation and Port facilities fixed weapon positions and barracks in the spr Island since 2018 developing a strong and permanent military presence in the first island chain would give China control of the major shipping routes in Asia and help in establishing itself as a dominant Global power the Chinese Coast Guard ccg frequently harasses fishing and Survey vessels of other claimant states in the South China Sea in 2020 a Chinese warship laser tagged a Philippine Navy ship a Chinese survey vessel hayong Dy 8 illegally entered Malaysia's Maritime exclusive economic zone untila a Malaysian state-owned oil company's contracted ship on the 22nd of May 2020 Beijing announced an$ 178.6 billion military budget an increase of 6.6% from 2019 also in May the ccg harassed Japanese fishing vessels in the Dau Saku Islands the militarization of contested islands and harassment of foreign vessels from Dau Saku down to the Malay Peninsula exposes China's intention and strategy to control the first island Shain on top of overpowering the first island chain CCP is also trying to build infrastructure and the world to overcome this obstacle many experts have pointed out that ccp's Flagship belt and Road initiative is a way of making sure that China has reduced its dependency on the Pacific Ocean routes China has built pipelines both in Myanmar and Pakistan from the coast to Inner City China it secured Longport leases in Pakistan and Sri Lanka similarly China has also set up a military base in jibou to control Bob El de a vital straight off the coast of jouti that links the Red Sea to the Indian Ocean Persian Gulf and Asian exports Bound for Western markets must first pass through Bob Eland Deb before reaching the sus Canal between 12.5 and 20% of all global trade passes through the straight only 8 miles from China's base is Camp lemon as China got stronger it made moves to set itself free of the island chain this left many Pacific Ocean countries worried that China is preparing for increased aggression and bullying near Taiwan and South China Sea it's not just the first island chain that China is targeting it's also building up strength to overcome the second island chain in the middle of the Pacific just a reminder the second chain consists of the islands of Japan stretching to Guam and the islands of Micronesia China's presence in the second island chain would give Beijing control of the middle of the Pacific which serves as a strategic military and economic Outpost the US's withdrawal from the trans-pacific partnership in 2017 has EMB bolded China to fill the vacuum of influence in the Western Pacific in September 2019 China's economic support for the Solomon Islands led the Pacific state to switch its diplomatic recognition of Taiwan to China soon after kirati followed suit in December 2019 China vowed to provide economic assistance for infrastructure development to Micronesia notably Micronesia could serve as a strategic location for China to counter American Military presence in Guam however the US has agreements with Micronesia palao and the Marshall Islands the compacts of free association which gives the Us exclusive access to the land sea and air routes of these Island States although China courts the Pacific Islands with Promises of economic Investments they are still traditionally tied to the US this fact adds difficulty for China as a military presence without a strategic basing to penetrate the second island chain will be hard to achieve but coming back to the South China Sea China's actions have left the USA with two choices either strengthen the first island chain to gain back the advantage in deterrent strategy or ditch protecting American Allies in the the Pacific Ocean so obviously America has stepped its efforts to reinforce the first island chain to safeguard its allies interest just this year the US Marine Court marked the opening of a new base on America's Western most Pacific island Guam this will be the first new Marine base since 1952 and whil 5,000 Marines charged in the short term with deterring and detecting threats in the region longer term the Guam base almost equidistant from Japan and Taiwan is also stated to be a hub for Marines on Guam and across the northern Mariana Islands to train for protecting Pacific Islands including vital sea Lanes in the event of an invasion if there is a conflict with China the Marines would be among the first Ground Forces to respond around the same time the USA reached an agreement with the Philippines that gives the us access to four military camps in the country even though this doesn't give us military permanent bases there it does give us troops rotating in and out of the Philippines a bird's eyye view of two critical spots the Taiwan straight and disputed regions of the South China Sea there are about 500 US troops in the Philippines on any given day but thousands rotate in and out over the course of a year for military exercises humanitarian Aid training and other missions according to officials the Philippines allow American forces to stay in Barracks within designated Philippine camps the US already had access to five Philippine military bases on top of this the US would also increase its deployment of advanced military assets to the Korean Peninsula including fighter jets and aircraft carriers to boost joint training and planning additionally us and Japan agreed to adjust the American troop presence on the island of okanawa in part to enhance anti-ship capabilities that would be needed in the event of a Chinese incursion into Taiwan or other hostile acts in the south or east China Sea they also added a formal mention of outer space in the long-standing US Japan security treaty making clear that attacks to from and within space could trigger the mutual defense provisions of the treaty and Japan announced it would begin constructing a pair of runways on the small Southern island of mosima where joint exercises amphibious operations and missile interception could begin in about 4 years the island would be a hub for troop deployments and munition supplies in case of a conflict like a Taiwan emergency the changes in the US deployment on okanawa will transform the 12th Marine regiment into a smaller more rapidly mobile unit the 12th Marine loral regiment which will be better equipped to fight an adversary and defend the US and its allies in the region the US is doing everything in power to send the signal that if there's any aggression near the South China Sea it will be far more of a guaranteed win for China goal of all this is deterrence by denial the US has also been busy diplomatically the US opened an embassy in the Solomon Islands this year in a direct effort to counter China's growing influence there there had been an embassy in the Solomons for several years but it was closed in 1993 as part of a global reduction in diplomatic posts Over time however the us became concerned about possible weakening ties with with the country the Solomon Island switched Allegiance from the self-ruled island of Taiwan to Beijing in 2019 and last year the Soloman signed a security pact with China raising fears of a military buildup by Beijing in the region reopening an embassy there the US state department said was a priority to counter China's growing influence in the region the embassy in the capital honiara is starting small with a charg day Affairs a couple of State Department staff and a handful of local employees just to add insult to injury India has also started its strategy to encircle China and contain China's growing influence after seeing all the moves China has been making a lot of military experts have pointed out that the Belton Road is not just a geoeconomic plan it also has a military strategic Advantage the ports have increasingly come to play a potentially more menacing role as dual use ports that can give the strengthened Chinese Navy a global reach it lacked entirely just a few years ago these strategic Investments are nicknamed The String of Pearls as the goal is to encircle India and put pressure on new daily India was aware of this already but the war in Ukraine showed every country in the world how important it is to secure your economic interests in the modern world wars can be won and lost before even stepping a foot on the battlefield India realized that in the case of a war China's String of Pearls can be used as a way to choke off India's access to the World on top of safeguarding Chinese interests adding to this countries that received Chinese money were slow to criticize China whenever it would start skirmishes on the disputed border with India like it did in 2017 and 2020 there's also a rumor that China plans to start setting up military bases in countries that received Chinese loans and of course this was undoubtedly stressful for new daily as it didn't want to be surrounded by the Chinese military so India started laying out its own plan to safeguard its economic interests but it didn't just stop there later in the video we will go over how India is taking advantage of China's trade war with the USA to hurt China where it's the strongest its Manufacturing but first let's go over how India is countering China's military to counter The String of Pearls India started its own alliances to encircle China nicknamed the necklace of diamonds India is expanding its Naval bases and is also improving relations with strategically placed countries to counter China strategies in 2018 India partnered with Singapore and Indonesia to get access to their Naval bases of Changi and sabang this increased India's influence and access to the straight of malaka one of the most important choke points for China and the rest of the world in terms of trade that same year India also got military access to the port of dukum in Oman the port facilitates India's crude imports from the csian Gulf in addition to this the Indian facility is located right between two important Chinese pearls jibuti in Africa and guad in Pakistan India's also signed an agreement with SE chilis for a naval base in the region which will increase India's presence near the African continent while doing this India is also extended ended credit lines to Iran and agreed to build a port in the country to extend access to trade routes in Central Asia additionally India has extended credit lines in Central Asia to countries like Mongolia where Modi has agreed to develop a bilateral air Corridor new Dei has invested a lot in policies to improve relationships with Japan and Vietnam these relationships have helped increase Indian train and consequently India's influence on countries around China China's Hemy not only in Asia but in the world is ending a lot of factors that the co pandemic and the Chinese Communist party's own hostile foreign policies have contributed to the mix of the decline of the Chinese Empire One Nation however has emerged as a beneficiary of China's wo and an accelerator of China's problems rising to glory in the wake of China's burning ashes that nation is none other than the Asian country of Vietnam Vietnam is emerging as a lowcost alternative to China the opportunity in Vietnam is is uh is huge since November 2022 we see a huge amount of foreign investor coming back to the market with a plentiful Workforce the government opened its doors to high-tech companies looking to bring them from China where a worker's average salary is three times that in Vietnam when you consider the rating which Vietnam is on it's a very attrative market for the long term Vietnam which is one of 12 nations in the pack is positioned to hugely benefit economically the agreement could also loosen Vietnamese to eyes with China the world is now abandoning China as companies like Nike Adidas and Samsung are choosing Vietnam over China it legitimately seems like China's day in the sun is over and Vietnam's Glory Days are just beginning in today's video we will be going over exactly why this is happening and how Vietnam is checkmating China we will discuss Vietnam's rise to power and the factors that have given it an edge over China in recent years lastly we will discuss China's role in all of this and if truly the Great Dragon of the East is down for the count or if the world's media is rushing to make an early verdict on a battle that still has life in it so without taking much time let's get into it as we do that please take a second to like this video and drop a comment on the next topic you'd like us to cover by liking the video you can help push the ever hostile YouTube algorithm in our favor these videos take time and effort to make so your response as a community means a lot to us something we're grateful for okay now let's get to talking about Vietnam we know some of you might be surprised to hear that Vietnam is well on its way to becoming a global economic giant but to be fair this was a long time coming Vietnam has always been living in the shadows of other Asian Nations like China and India but that's not to say it hasn't been if not more Progressive with its economy in the past 30 years alone the nation has undergone a transformation and poverty reduction has played a fundamental role in bringing the nation to where it is today as reported by the World Bank the poverty headcount in Vietnam fell from nearly 60% to 20.7% in the past 20 years that is miraculous growth if nothing else from within the Shadows it seems like Vietnam has quietly transitioned from being one of the poorest Global economies to one of the fastest growing with room for even more growth let's trace this progress path now shall we most people especially here in the United States are only familiar with Vietnam because of the Vietnam war that went on from 1954 to 1975 the war was a long drawn out conflict that pitted the communist government of North Vietnam and its allies in South Vietnam known as the Viet Chong against the government of South Vietnam and its principal Ally the United States the war ended up being a proxy war between Russia and the us and what was almost an idealistic War a Battleground for the Cold War most Americans will remember it as a costly Affair that showed the fighting Spirit of the Vietnamese people even against a superior power well after the US military retreated from Vietnam in 1975 the country's economy experienced severe developmental issues resulting from the inefficiencies of a centrally planned economy residual War effects and low productivity rates that made it import dependent these issues stifled growth making the Asian Nations suffer economically on top of all the instability that came with Decades of post-war fever to add to that boiling mess of Hot Cheetos Vietnam's invasion of Cambodia in 1979 to remove the kimer Rouge government complicated the economic woses the country was already suffering from by redirecting resour resources to the war effort these are resources that the struggling Nation could have used for its people but no they were being used to fund yet another War as a result of this Vietnam faced the Wrath of the International Community which condemns such actions in fact the US went as far as to impose sanctions a situation that only served to further collapse the Asian Nation all these economic deficiencies and Global tensions resulting in Vietnam's economy being one of the poorest in Asia with a GDP growth rate of 2.8% in 1985 and a 378 inflation rate in 1986 one could say that reaching this bottom barrel of poverty is what inspired change to come this is because in 1986 the Vietnamese Communist party or vcp as what be referring to it set out to transform its economy we suppose they woke up one day and decided that enough was enough and that it was time for a change the vcp then shifted the economy from a centrally planned model to one that utilized Market forces to allocate resour forces the reforms popularly known as dooa encouraged Private Industry recognized private land rights and abolished Collective farming the main thrust of the dooa was to promote a multi- sector economic system emphasizing the state sector while encouraging the private sector to achieve economic integration the open door would be implemented gradually in order to stabilize the political and social situation dooa in its early stages was focused mainly on the removal of self-imposed barriers to progress and the utilization of various Market oriented measures including liberalization of the domestic Market encouragement of foreign District investment and the private sector and reduction in subsidies to state-owned Enterprises these changes along with Vietnam's military withdrawal from Cambodia in 1989 set the country on a course toward one of the quickest and most impressive periods of economic development in world history an achievement whose successes we are discussing now in 1986 when the vcp first implemented these reforms Vietnam was one of the poorest countries in the region with a poverty rate above 70% that means that over 70% of the nation's citizens were living in abject poverty that's one in every 10 people that is quite the number however by 2020 this rate had declined to 5% as in 0.5 people for every 10 that is quite an improvement also as a result of the reforms Vietnam went from a country faced with Perpetual food shortages to in 1989 for the first time exporting 1 4 million tons of rice it has since remained a rice exporter in 2008 it exported 4.7 million tons becoming the world's second largest rice exporter after Thailand indeed Vietnam's exports were instrumental in stemming the threat of a severe International Food crisis in early 2008 Vietnam hasn't looked back since with it in 2022 being the third top rice exporter in the world it's very clear to see that the vcp's reforms have had such an impact on the nation looking at the numbers you can see that in the 2010s alone over 10 million people were rescued from the jaws of poverty by these vcp reforms in less than a 30-year period as well the country's GDP per capita also increased nearly tfold from under $300 in the 1980s to $2,800 in 2020 let's be honest if the world was a classroom Vietnam would definitely be getting the prize for the most improved student a lot of factors over the years have contributed to Vietnam becoming what it is today and all this has led to the nation becoming one of the best investment places of the new age the small nation has become a key part of the global supply chain for textiles becoming an alternative in some cases a better one to Nations like China and India the manufacturing capabilities of Vietnam have been so great that Footwear and textiles made up 18% of its exports in 2018 while electronics and electrical equipment made up 40% this number has only risen getting higher and higher over the years as this number has risen so is Vietnam's relevancy so far as manufacturing is involved this relevancy has been so much so that major companies like Adidas Nike and Samsung among many others now have a manufacturing presence there as a result of this it is no surprise that Vietnam's foreign direct investment has grown over 200 times since 1986 from $40,000 in 1986 to around $15.8 billion in 2018 meanwhile its exports increased by 19% from 2020 to 2021 and have only grown higher today date Vietnam's growth in the region is now directly affecting and competing with China the world's current biggest manufacturing Hub Vietnam has been growing at a steady pace and in Silence with its own economic growth eclipsing China in relation to its own economy that means that even though China is still outpaces Vietnam by far Vietnam's growth rate has been higher than China's and higher than any Asian Nation overall take a look at this table of growth projections in Asia Vietnam leads the pack while China's own growth is slowing down there almost seems to be a direct inverse correlation to the success of Vietnam and the misfortunes of China it seems that as China slows down and loses out on growth Vietnam is growing and developing more is there a direct relation well we think yes and no let us explain firstly the yes part an undeniable fact of the matter is that part of Vietnam's growth a huge part of it is due to the great power competition between the United States and China the rising tensions between the world's two most powerful countries the United States and China game on here a trade war between the United States and China is here it's real at the stroke of midnight the US hit China with tariffs on 34 billion dollar worth of goods a battle between China and the us over the self-governing island nation could result in devastating Mutual losses so we don't have trade with we don't have anything near free trade with China we've we've opened up our markets to the Chinese for 25 years this is my point tensions between China and the United States as a mentioned are running High their defense Chiefs are in the water words it's China's fault and you know what it's not your's fault that it came here either it's China's fault you see in the past couple of years as the tension between the United States and China has grown the Chinese Communist party has taken a less business-friendly posture American businesses operating within China have found themselves on the short end of the stick as they have faced tons of retaliatory measures from the Chinese government almost as a punishment for the US government hostilities let us give you a simple example after Micron an American tech company were buffed a 2015 takeover attempt by a Chinese state-owned company it washed with disbelief as its Innovations were stolen and copied by a Chinese competitor and its business was blocked from China it is China's treatment of American companies like Micron that contributed to former US president Donald Trump's decision to unleash a punishing trade war with the world's second largest economy a fight he said would Hal beijing's use of unfair practices to undermine the United States another example is the Marriott Hotel incident an incident that shows that China has and will retaliate against companies is displeased with after Marriott had referred to Taiwan as a separate country on its website the Beijing government shut down its online reservation site in China for a week the company then had to issue an apology in an attempt to rectify the matter the chief executive Arie Sorenson wrote in a statement on the company's website saying Marriott International respects and supports the sovereignty and territorial Integrity of China we don't support anyone who subverts the sovereignty and territorial Integrity of China and we do not intend in any way to encourage or incite any such people or groups we recognize the severity of the situation and sincerely apologize these are all examples of how the Chinese government could easily and has been making life difficult for American companies things like slowing down the permitting process for new stores or imposing stiff fines for minor infractions have not been known to be foreign add to the mixture the harsh zero covid policies that China has been putting into place and what we have left is nothing short of a horrible business environment for most companies particularly us ones this has left companies feeling limited insecure and seeking alternative Supply chains in a bid to reduce risk if and when any disruptions occur Perhaps it is no wonder then that in 2021 alone more than 11,000 foreign firms canceled their company registration in China that's a big number others like Apple Samsung and Hasbro which have had significant and long-standing Manufacturing operations in China have decided to reduce their operations in the country and you know who they turn to in all of this sweet reliable Vietnam all this makes us think that Vietnam is the sweet best friend who capitalizes when a toxic couple breaks up and then ends up getting the girl you know your typical romcom plot in this case Vietnam got the us or rather a good portion of the business that the US was giving China Vietnam has really benefited as major companies have moved their manufacturing there to take advantage of the low costs developed infrastructure supportive business environment and success in mitigating the economic effects of covid-19 for instance Fox con The prominent electronic manufacturer that contracts with all major technology companies including the Behemoth Apple announced it would invest 300 million in a new Factory in Northern Vietnam another giant Google has announced recently that it plans to ship as much as half of the production of its pixel phones to Vietnam while Microsoft has utilized Vietnam for some of its Xbox production a few years ago these corporations would have exclusively produce these items in China but now Vietnam is getting a big piece of the cake the fact that these companies are also investing in factories and the like in Vietnam means that this is not a fad but a long-term commitment that will only serve to benefit Vietnam more as the years progress the Asian nation's growth however had not just been due to the US China trade deficiencies there have been other pull factors that have made Vietnam an attractive Choice let's get into those shall we smartphones and other gadgets are manufactured in China these days but what about Vietnam Vietnam's economy jumped by 8% this year the pbh is even the Adidas and the Columbia Sports Wares they've all uh sourced product out of Vietnam and they have been doing that for years it's emerging as an alternative to China with its tax incentives and cheaper Workforce us is importing 40% more from Vietnam than this time last year while imports from China down 133% okay we've warmed you up on the successes of Vietnam so we know you're asking yourself now saying how did this growth Miracle happen other than the opportunist IC approach it took with the US China trade War Vietnam has had other factors accelerate its growth analysts from the World Bank think that the nation's entire growth can be condensed together into three main factors factors we're about to dive into right now the first of these factors is the simple fact that due to the vcp's policies Vietnam has thoroughly embraced trade liberalization with gusto with 95% of Vietnamese people agreeing to say that trade is good in a 2014 Pew research survey it makes sense that the people think so because trade and globalization have been incredibly good for the nation Vietnam's exceptionally globalized economy is a result of its focus on exports for economic growth over the past 20 years Vietnam has signed numerous free trade agreements in order to become a contender on the global stage in 1995 Vietnam joined the aan free trade area in 2000 it signed a free trade agreement with the US and in 2007 it joins the World Trade Organization since then further aan agreements followed with China India Japan and Korea and recently the amended trans-pacific partnership went into effect these agreements were made with the hope of gradually lowering the tariffs imposed on both imports and exports to and from Vietnam thereby making it more trade friendly and making the trading itself cheaper to do suffice it to say this has worked out quite well like China before it Vietnam has opened up its cheap labor market to foreign investors and become a hub for lowcost manufacturing the country is now a major exporter of electronics and apparel with with the United States and China as the main destinations for its goods in order to make those goods Vietnam is a major importer of machine parts and natural resources from South Korea and China all this has seen Vietnam's GDP per person grow from about $1,500 in 1990 to about $6,500 today quite the significant rise if we do say so ourselves also unlike in some fast growing economies its new Prosperity has been shared in the nation the proportion of people in extreme poverty fell from above 70% in the early 1990s to around 10% in 2016 the World Bank credited the jobs created by Vietnam's export sector for this remarkable poverty reduction in a recent report perhaps most importantly the economic growth was fairly inclusive according to the world economic forum's inclusive development index Vietnam is part of a group of economies that have done particularly well at making their growth process as more inclusive and sustainable women too fared better their employment rate is within 10% of that of men notes the World Bank and women L households are less likely than those by men to be poor although inequalities remain that's the kind of growth that's admirable oddly enough even as Vietnam is checkmating China by taking business from them data from the general department of Customs shows that in 2022 China was Vietnam's largest trading partner with a total two-way trade turnover of 17557 billion this is a lot of trade being had there this was followed by the US who had 12 $ 2 3.86 billion the Republic of Korea who had $ 86.3 billion and Japan who had 4761 billion all worth of trade trade between Vietnam and the US has been particularly good with Vietnam being one of the top 10 largest Goods trading partners of the United States the total two-way trade value of goods in 2020 with the US was 89.5 billion Goods exports to Vietnam from the US totaled $9.9 billion while Goods imports from Vietnam total $ 79.6 billion this figure has only risen with time as in 2021 Vietnam exported 99.3 billion to the United States the main products exported from Vietnam to United States were broadcasting equipment 17.4 billion other Furniture $6.23 billion and seats worth $ 4.53 billion among other things don't find these objects surprising it's simply what the US mostly imports from Vietnam in fact in the past month the top three us imports from Vietnam also by value were cell phones related equipment computers and Furniture parts we had to mention that for those of you who might have been surprised that the US Imports furniture and seats in 2022 the total two-way trade value between the Nations was as we mentioned a second ago $13.86 billion we emphasized this to show you just how much these trade figures keep going up as trade between the two Nations keeps improving year after year so yes we think it is quite safe to to say that trade and globalization has been an important tool that Vietnam has managed to use in its favor the second factor that Vietnam has going for it is that through its own domestic policies and extensive reforms the nation has managed to put in place business-friendly regulations all while lowering the cost of doing business in the nation while trying to make foreign friendly policy the government's drive towards an open economy also included domestic reforms that targeted matters of governance from the inside in 1986 the country created its first law on foreign investment enabling foreign companies to enter Vietnam since then Law Firm Baker and McKenzie said in a 2016 report the law has been revised a number of times mainly to adopt a more pro- investor approach while aiming to reduce administrative bureaucracy and better facilitate foreign investment into Vietnam this is worked seeing is that the foreign direct investment in Vietnam averaged $7.29 billion from 1991 until 2023 reaching an all-time high of $27.72 billion in December of 2022 these were astonishing figures and of course they did not go unnoticed in international rankings in the world economic forums Global competitiveness report Vietnam Rose from 77th place in 2006 to 55th in 2017 in the world bank's ease of doing business rankings meanwhile Vietnam Rose from 104th Place in 2007 to 68th place in 2017 last year the bank said Vietnam made progress on everything from enforcing contracts increasing access to credit and electricity paying tax taxes and trading across borders that's quite an achievement to make and that is all thanks to Vietnam's own domestic reforms finally the last factor that has contributed to the nation being where it is today is the fact that Vietnam has invested heavily in human and physical capital predominantly through public Investments the Asian nation has truly invested a lot in its human capital and infrastructure facing a rapidly growing population one that stands at just under 99 million today half of whom are under 35 and up from 60 million in 1986 Vietnam made large public investments in primary education this was necessary as a growing population also means a growing need for jobs in addition to this Vietnam also invested heavily in infrastructure ensuring cheap Mass access to the internet this might sound minor but with the fourth Industrial Revolution knocking on Southeast Asia's door having a sound it infrastructure in place is essential preparation at the end of the day looking at Vietnam one can see that those Investments have paid off armed with the necess infrastructure and Market friendly policies in place Vietnam became a hub for foreign investment and Manufacturing in Southeast Asia Japanese and Korean electronics companies like Samsung LG Olympus Pioneer and countless European and American Apparel makers has set up shop in the country only serving to increase the nation's economic benefit in fact due to the infrastructure and labor investments in the nation Vietnam is the fourth largest textile exporter in the world that's quite the achievement for such a small nation the amount of their exports is estimated to be over $38 billion specialization modernization and the manufacturer of high quality products are their primary goals to compete in this competitive market and it definitely is working out for them the nation's textile industry is made up of the downstream sector fiber production and Upstream garment manufacturing growing garment exports to the United States Japan the European Union and South Korea are a significant component fueling the expansion of Vietnam's textile sector as keeps growing it will be no surprise to see Vietnam directly rivaling China in the textiles industry in the years to come as the company is on what can only be described as an unbelievable grow spurt these free factors have collectively LED Vietnam's GDP growth to increase with it being at least 5% per year and just last year it peaked at a whopping 8% this is in Stark comparison to China which Grew From just 2.99% its lowest since 1990 just looking at this graph of Vietnam's GDP growth shows a tale of nothing but progress and increase with such rapid economic growth over the years the country has grown from one of the poorest countries in the world to a comfortably middle- inome one so all this said is there anything that can stop Vietnam from checkmating China despite all the High Praise that we carry for Vietnam the nation still faces severe hurdles to Future growth perhaps the most important and the most limiting factor to the nation's ability to properly Checkmate China is the country's population size quite frankly it will never amount to more than a fraction of China's you see Vietnam is slightly less populous than China's Southern Guangdong Province the birthplace of Chinese special economic zones in 1979 and still a key component in its manufacturing foxcon even had its Flagship campus in Guangdong while Chinese Tech Giants Huawei and ZTE are headquartered there these companies are centralized there mainly because of the province's easy access to Hong Kong and Coastal ports in access to the Chinese labor pool Vietnam on the other hand has none of the benefits that come with being a province of a vast economically Diversified Nation with the world's largest Workforce that's where they start to lag behind according to a Beijing National census conducted in 2010 around one-third of guangdong's population of 104 million were migrants from elsewhere in China while Vietnam's rural population of around 65% certainly leaves room for urban migration to bolster manufacturing the country lacks China's hundreds of millions of people ready to travel to fill positions as they arise the factories in the Pearl River delta churning up iPhones and Nike sneakers can rely on a steady stream of migrants from across China to man the assembly lines while Vietnam has only itself to turn to with a small population what this means is that as the growth intensifies Vietnam might not be able to keep up with demand based on the simple fact that it'll run out of Labor this puts a cap on the level of growth they can experience in addition to this in comparison to China Vietnam's Workforce is relatively low skilled and its energy Supply is having a hard time keeping up with demand and although the country has made significant advances in infrastructure development it still ranks 47th out of 160 countries in this regard that's yet another setback to Vietnam's plan to Checkmate China we know that some of you are asking yourself other than labor shortfalls can anything stop Vietnam's Ascent to the top of the Asian food chain well just like with most things yes and no with the appetite for globalization on the way in many parts of the country Vietnam looks particularly vulnerable and with good reason Vietnam's exports are worth 99.2% of its GDP yes 99.2% just to further clarify that figure what we're saying is that Vietnam's whole economy is basically based on foreign investment and trade if anything at all were to hinder supply chain movements or if the foreign policy of its Cho trading partner shifted against it Vietnam will be stuck in some very hot and unpleasant soup this is a real possibility given how geopolitics and the political economic landscape are always shifting however for now Vietnam looks to profit from rather than be hurt by increasing global trade tensions that constantly Rock our fragile World despite Vietnam making ground on China's economic territory the truth of the matter is China's Advanced supply chain and supplier Network driven by the government's long-term National policies make it a manufacturing giant at present no one country including Vietnam itself can fully replace China's manufacturing capacity let's take a moment to assume that in some way Vietnam could bridge this Gap and replace the dragon of the East Even If This Were possible it most certainly would not happen over overnight this is a process that will take time as businesses figure out which parts to relocate and how to navigate those Waters it will likely be messy to begin with but processes will get easier over time if they were to happen at all so you see it's a yes and no situation looking inward Vietnam's government has been pushing to move from being a lowtech manufacturer to high-tech manufacturing recent investments from Intel Samsung and UAC show that there is immense potential in the country and while it is safe to say that Vietnam absorb all of China's manufacturing it is well positioned to take on more production along with other countries in the region and to play an important role in global value chains we believe the best way to tell the tale of this Asian country is in this one statement Vietnam is growing at its own pace and its own way whether it will truly Eclipse China or not is something that time will tell China's stock market is collapsing one of its Benchmark stock indexes the CSI 300 is down nearly 40% since its peak in 2021 this index measures the value of China's 300 biggest publicly traded companies and currently it sits at a 5-year low 10cent has lost 60% of its stock price and that's China's biggest company by market capitalization in just 3 years all Chinese stocks combined have lost six trillion dollar in market value that's more than the economy of any other country except for the US and China now this may not seem all that important for Outsiders but actually it's a symptom of a wider economic downturn as the value of Chinese businesses is dropping China's economy is clearly not doing well and people are starting to lose confidence this is bad for the CCP especially because this is not happening in the United States The Benchmark index of the USA the S&P 500 is actually doing quite well at the moment it represents America's 500 most valuable public companies after a year-long downturn in 2022 the index has been rallying ever since so China is underperforming as compared to its rival and the rest of the world this has earned at the title of the worst stock market in 2023 for the CCP this is bad for its reputation both at home and abroad and it also raises some eyebrows when we look at China's GDP numbers numbers according to the CCP the Chinese economy grew 5.2% in 2023 that is still low for Chinese standards but there's a huge disconnect the authorities say that China's economy continues to grow while the markets say that it's absolutely collapsing with a little common sense it's easy to see what's happening the CCP is trying to spread a false narrative about its economy to remain in power and that's why it's currently censoring any negative takes on China's economy on the internet in this video we'll uncover what's truly going on with China's stock market and the underlying economy as you'll see China's once successful experiment with the free market might be coming to an end let's start with the economy as the stock market and the economy go hand inand so the GDP numbers from the Chinese National Bureau of Statistics might give us a wrong picture about the economy but first of all need to look at the shenanigans happening inside of the Chinese stock market you see at least a part of China's stock market is also fake in 2019 over 50% of China's stocks were owned by institutional investors and this number is on the rise institutional investors are organizations like Banks mutual funds pensions or insurance providers they buy stocks to grow their Capital these kinds of investors also have a huge share of the United States stock market but there's one key difference in China the CCP has a lot of influence over these institutions last year Xi Jinping announced a new Financial regulatory body called The National Financial regulatory Administration this organization centralizes the ccp's control over the financial sector basically XI jingping wants the banks to put Capital where the CCP needs it putting it into to free market Times by pouring Capital into the stock market the CCP is is already artificially keeping the prices up to fight the market crash according to the Swiss UBS Bank Chinese backed funds have already bought $ 57 billion worth of stocks this year the CCP owned China Investment corporation plans to continue pumping up the prices on the market but most importantly all of these non-ccp Banks might also be influenced with the new regulatory body Chinese Banks aren't allowed to hurt the ccp's political iCal goals right now that goal is to create an image of a strong Chinese economy this is why China's institutional investors might not sell as many stocks as they would want to still it's not hard to see how this won't work there's a reason for the huge selloff Chinese companies earning less revenue and profits than they used to keeping the price up will create a bubble which can only last so long but Xi Jinping doesn't blame himself for the financial trouble instead points the finger at the bankers right now he is cracking down on the hedonistic Bankers that don't align with the ccp's goals they've received huge pay cuts and bonuses were slashed by 60% recently China's anti-corruption agency released a warning to the financial industry it would seriously investigate and deal with the people who neglect the party's leadership in financial work and state-owned Enterprises it also said that Bankers should stop having a singular focus on money like in the west and that they shouldn't form a financial Elite so something that the CCP really hates is short selling basically Short Selling is where you make money when a price of a stock goes down through complex contracts the Chinese Security's Regulatory Commission said it had zero tolerance for short Sellers and that they would lose their shirts and rotten jail now to be fair there's definitely a point to be made against some bad financial practices after all we only have to look at the 2008 financial crisis to see how things can really go wrong however that's not completely what's going on here in reality the CCP is doing this to game its financial sector because the party can fire bankers at any point on the basis of degeneracy it basically owns them going back to the stock market this has some big effects as the banks and funds aren't allowed to hurt the ccp's image the real stock collapse might be even bigger even with the ccp's efforts though the stock market is still in a downward spiral this is because retail and foreign investors are selling off their Chinese stocks in Mass there's something fundamental that the CCP can't cheat its way out of an economic downturn the earnings of companies on the Chinese msci index fell for four straight quarters Apple which recently posted its first yearly increase in earnings had one week spot the Chinese market where the rest of the world had steady growth Apple's Revenue in China declined by 133% in general the Chinese economy has never really recovered from the covid pandemic other nations have seen a rebound since the lockdowns due to huge stimulus programs consumer spending increased so much that there was even an inflationary crisis all over the world but in China well the opposite happened it's now in a crisis of deflation that may sound unfamiliar to many because the United States last experienced deflation back in 2007 and 2008 it is the opposite of inflation meaning that prices go down over time this may sound nice for the consumers but it's terrible for the economy consumers will delay their purchases meaning that revenues of companies will go down let's say you've been saving up to buy a new car if you know the price is going to drop in the future you may decide to just wait a while but if everybody does this car dealers and manufacturers have a big problem this applies for every other industry as well and as a result the entire economy slows with Rising unemployment and declining Investments for China this is a real risk as deflation is increasing at alarming speeds in January of 2024 consumer prices in China declined at their fastest Pace in 14 years but actually this isn't what's plaguing the Chinese economy the most if we dig a little deeper we find another core problem the deflation is related to something called the debt deflation spiral because of problems in China's financial industry credit is drying up this is the root cause for the decline in spending and in turn the increase in deflation and as the financial sector and spending are related to the stock market these problems also lay the basis for the stock markets collapse so let's dive a little deeper into what's happening with this debt deflation spiral shall now you may think that the debt problem in the United States is getting pretty bad but then you haven't seen what's happening in China Washington holds about 120% of its GDP in government debt in China this debt to GDP ratio is a whopping 2 180% it's not the government in Beijing that issued these debts as the central government holds only 114th of the debt pile the bulk of it is held by local governments during the last 15 years they founded many local government financial Vehicles called lgfvs These are local government Enterprises that prop up the economy in 2022 there were almost 3,000 of them they held about 80 trillion yoan or1 trillion in debts to put that into perspective we're talking about approximately half of China's GDP in liabilities in total state-owned Enterprises held 2/3 of corporate debt more than 60% % of this debt was in the form of bank loans the problem is that most of these lgfvs aren't able to repay their loans a third of them don't have a positive cash flow and 60% struggle to pay their interest with their own earnings without support from the local governments many of these companies wouldn't have existed in the first place so this begs the question how much of China's GDP is actually real another problem is the huge bubble of non-performing loans that this has created after all who's going to pay for the1 trillion in debt last year XI jingping ordered State Banks to restructure lgfv debts at lower interest rates but of course he has a price to pay for this all of these bad loans hurt the Chinese economy because there's less Capital to invest in actually profitable businesses the same is true when we look at its real estate crisis over the last few years China's real estate sector has turned into a huge debt bubble this is a big deal as Chinese property is the single biggest asset class in the world it's gotten so bad that the CCP is pushing Banks to provide $446 billion to property developers 50 of them are on the brink of financial collapse including Infamous companies like country garden they've run huge Ponzi schemes which Came Crashing Down from 2020 onwards basically the developers bought land and sold houses that they haven't built yet with the money they received they bought more land and then just did exactly the same thing in 2019 and 2020 90% of properties were sold with this pre-sale model this led to huge liabilities on the developer side with Country Garden and evergr holding more than $500 billion of them this was made possible by corruption but also because local governments needed to meet GDP goals at its peak the real estate market made up 25 to 30% of GDP because it was one of the key drivers of growth local governments turned a blind eye to the Ponzi schemes and initially people weren't worried about the possible debt bubble there was incredible demand for housing and people thought prices would only go up in early 2019 the price for a new house increased more than 10% year on-ear approximately 70% of Chinese household wealth was stored in real estate and buying a house was very popular the developers thought that their debts were no big deal as housing sales would just continue but now the sector is in turmoil the recent collapse of the property giant ever Grand shows that the real estate boom didn't last forever in 2020 the CCP intervened to stop the debt bubble from growing it limited the pre-sale housing model and Banks stopped financing the property developers together with a Slowdown in housing sales this was the last straw in 2021 evergrand began to Mis interest interest payments on $300 billion of its debts after a period of battles with debt holders evergrand was finally liquidated earlier this year many fear that other property developers will follow in its footsteps now you may be asking yourself what the local governments and property developers have to do with the stock market but in fact the lgfv and real estate crisis are some of the biggest reasons for the collapse first of all we have to look at the financial sector China's economic growth of the past decades has been fueled by lending which allows massive investments into businesses and infrastructure and not just a little bit in China investment makes up 42% of GDP which is heavily dependent on credit between 2007 and 2016 China's credit grew 18.1% annually faster than the economy itself right now China's Financial system holds $53 trillion in assets more than half of the size of the world economy to put that in comparison US Banks only hold $30 trillion in assets so the credit growth caused the pile of Assets in China's Banks to balloon but this Chinese credit machine is coming to an end Chinese banks have to deal with a massive increase in non-performing loans basically money that they've lent and they're not getting back some analysts say that it ranges in the trill trillions of dollars although the official figures are much lower the insane amount of borrowing has backfired because many loans weren't really even viable in the first place apart from raising the risk of bank insolvencies this also means that overall spending will slow as credit dries up the bad debts show that China's Financial system can't keep expanding forever we can already see this in China's outside Investments but as you can see on this chart from Boston University it looks like China's belt and Road initiative funds have fallen off a cliff many of the $1 trillion already planned projects have also been cancelled the same happened with China's Holdings of us debts which dropped 40% to a 14-year low this all shows that Chinese funds and Banks need the money at home what's even worse is that this financial turmoil results in deflation Banks giving out less loans means there's less money available using basic supp in demand economics this causes prices to go down but there's a catch this can spiral out of control during a period of deflation the real value of debt increases because the value of money goes up in simpler terms businesses with debt carry a load that just keeps on getting heavier eventually this can lead to the collapse of these businesses because it's hard to stay afloat with that much weight on top of you in turn this leads to even more more non-performing loans less lending by Banks and more deflation the stock market is anticipating something like this because it thinks that the Chinese economy is heading for a debt deflation loop it's like a domino effect one problem leads to another and the whole Market feels the impact before talking about the next effect I need to ask for something because bad news about China's economy often gets censored this video won't get far in the algorithm without your support by leaving a like down below you help us tremendously all right without further Ado let's get back to the basics these problems in China's financial sector also have a huge effect on the confidence in China's economy to understand this we have to look at the price to earnings ratio on the Chinese stock market this is the price of the stocks divided by the earnings of the underlying companies for overall confidence these numbers are very telling the higher the price to earnings ratio the more expensive the companies are and the more trust there is in the future after all you only pay a higher price if you think the businesses are about to grow when the price to earnings ratios go down well it's the exact opposite people think growth is coming to an end and they pay lower prices for companies that's exactly what happened in China as we can see on this chart from JP Morgan in 2021 the price to earnings ratios peaked at 19 so stocks were 19 times their underlying earnings at the start of 2024 however the stock prices were only nine times their underlying earnings so the price to earnings ratios were down more than 50% in other words trust in the future was cut in half we can see the same development in The Price to Book ratio this is the price of companies compared to their Book value the money they're worth if they sell off all their assets you can think of this as their net worth in the United States stocks are worth four to five times as much as their Book value vales that means companies are expected to grow in value and not go bankrupt in China however the price to book ratio is only 1.7 dropping to a 5-year low so the data are clear people don't have confidence in Chinese businesses anymore this is also true for foreign investors for years Banks and investment funds invested a lot of capital into the Chinese economy because of its growth miracle in 2021 foreign direct investment peaked at more than $300 billion but now the country has the first outflow of foreign direct investment in 25 years as you can see on this chart it reached 11.8 billion in the third quarter of 2023 last January the outflow in the stock market reached more than $2 billion this is the longest and strongest outflow of foreign Capital since 2014 the debt deflation spiral is obviously one of the biggest reasons for the lack of confidence but we also have to talk about the increased geopolitical risks because China and the United States are competing for power there has been an economic Faceoff this began to gain steam during the Trump Administration where he placed many sanctions on CCP entities and put import tariffs on Chinese Goods his argument was that the massive trade deficit with China which reached $418 billion in 2018 was hurting theer American economy in the following trade War the United States and China increased tariffs on hundreds of billions of dollars worth of trade US President Joe Biden left the tariffs on $350 billion worth of Chinese Goods in the area of Technology he even escalated the trade War the United States has tried to cut China off of technological developments by limiting its chip access there are just a few American Dutch and Japanese companies that control the Advanced chip supply chain all of these companies are not allowed anymore to sell their most advanced products to China for example Nvidia can't sell its most advanced AI chips to the Chinese market China's own chip companies are several years behind the Western ones so this is a huge obstacle for its technological progress and there are fears that the geopolitical turmoil could get even worse there's a real chance that China invades Taiwan in the near future a US general predicts that this could happen as soon as next year xijinping is already 70 years old and he may want to reunify China before he passes away if the situation around Taiwan escalates the trade war between the United States and China will obviously worsen Washington and its allies could adopt the same strategy as Russia namely to cut China off from World Trade but the thing is this that's already happening to some extent as the relation between Washington and Beijing worsened company started to diversify out of China the new Apple manufacturing plant in India is an example of this because of these geopolitical developments China is slowly losing its position as the world's manufacturing Powerhouse this also has its effect on the stock market as the future of China looks a whole lot less bright but the fact that the stock market shows all of this also has political consequences it's not hard to see why the Chinese Communist party and the stock market aren't a match made in heaven the stock market is one of the Hallmarks of capitalism and that's something China isn't very comfortable with or is it starting in 1978 the country started to implement free market reforms under Deng Xiao ping he created special economic zones which don't have a planned economy as we all know this was highly successful millions of Chinese moved from rural areas to the cities and real wages exploded as you can see on this chart although the CCP still likes to classify China's economy as developing it's really a developed one already GDP growth was in the double digits for years and China has risen on the global economic leaderboard where it was the seventh biggest in Real GDP in 1980 it quickly became second overtaking Japan it went from a GDP of 396 billion to almost $0 trillion a 50-fold increase the reason for this was quite simple China had something to offer the world's free markets it had an abundance of cheap labor so could outcompete anyone in the field of manufacturing although the Chinese government was still communist in name it increasingly adopted capitalist ideas the Shanghai stock exchange which was first opened in 1866 was reopened in 1990 in 1993 the CCP went as far as to amend its Constitution and to create a socialist market economy system it's basically capitalism with a lot of wiggle room for government influence this marked the end of China's maest period with the disastrous greatly forward and Cultural Revolution but when sheing ping Rose to power in 2013 things started to change where his predecessors liberalized and decentralized the country he did the exact opposite by removing the term limits for the presidency in 2018 xiin ping has practically become China's supreme leader for life this has also had its effects on the economy she sees the free market economy as a huge threat to his power which is why he may be ending the capitalist experiment he doesn't see the private sector as something on its own but as something to serve the ccp's goals the party wants to cultivate a team of private economic persons who are Resolute in Walking with the party if you phrase this a little differently it wants private Enterprises to do what the CCP says to achieve this it is established CCP bodies in many of China's companies 92% of China's top 500 companies have these bodies a number that has been on the rise during xi's presidency to further solidify his rule over the private sector Xi Jinping has also been cracking down on many of China's entrepreneurs in the last few years China has arrested multiple minent businessmen including Jack ma xingping says this is to fight corruption but many experts think it's something different the Chinese president wants the most powerful citizens to know who's in charge with these political changes in mind we can look at the possible reactions of the CCP to the stock market collapse for XI jingping it's both a huge threat and a giant opportunity on the one hand it reveals that he failed with his economic policies the reason why the Chinese put up with she's power grab is that he provides stability prosperity and growth as the stock market shows the situation is now the exact opposite this could result in him losing support but if xingping plays his cards right he can also benefit from the current stock market crisis he can just point the finger at the private sector as he already does to some extent this gives him a reason to return to a centralized economy giving him even more power all in all the stock market shows a very interesting story it reveals a lot about the false CCP narratives the underlying problems of China's economy and the lack of trust in the country's future this definitely won't be the last video I do on China's economy so be sure to subscribe and keep updated and as always thanks for watching YouTube's algorithm thinks you'll like this video the most click and find out if it's right CCP 's great plan to take over the world is failing spectacularly belt and Road initiative has suffered yet another blow the Philippines has decided to exit it Italy the G7 member to join China's belt and road is dumping China's biggest International project belon Road participants have been struggling to pay back billions in loans many of China's loans have fared badly is this the beginning of the end of B Italy was one of the most important members of ccp's belt and Road initiative as it was the only country from the G7 in there but now Italy is pulling out of B and starting a domino effect that will kill all of ccp's hopes and dreams of taking over the world but PR was destined to fail long before Italy's withdrawal as many countries had figured out ccp's Sinister motives behind the project and they had started preemptively killing brri before CCP had a chance to take over the country here are two pictures to show the downfall of BR here's the member picture at the start of the project and here's a time lapse of member pictures from last 3 years every year more and more countries drop out soon it will just be Z and Putin left standing at the Bri grave so let's get into why countries are leaving brri and what this means for the future of CCP first please please take a second to hit the like button below CCP Bots are not happy when we C China and often videos are downloaded by the Bots to kill it in the algorithm so your likes help us out a lot let's start I know the first question everyone is going to have is why was Italy in belon road to begin with if you know anything about belon Road initiative you know China is purposefully targeting low-income countries so let's first dig into Italy's reasoning behind joining before we get into why many of countries including Italy are wanting out of B Italy joined the Venture back in 2019 long after the program was started so we have to back up a little to 2019 and look at it Le's economic and political climate during that time to understand the motivation behind joining Italy always had an economic relationship with China in 1980s Romano pra future Prime Minister of Italy was the president of Italy's Institute for industrial reconstruction this is when China asked him to build a factory in tenin in return his Chinese counterparts helped him build a factory in what was then the Soviet Union once he became the prime minister in 1997 C led a massive trade mission to China bringing over 100 companies to promote join ventures in engineering pharmaceutical food textile fashion and finance most Italian Prime Ministers since then have shared prot swed towards China ccp's launch of BR only made this relationship more enticing for Italian at least at the time they noticed that whenever China invested in a European country that country saw a massive uptake in economic activity in short term we'll dig more into this point later in the video for now a great example of this was when a Chinese shipping company bought a controlling stake in the Greek Port of pares in 2016 mtime trans is an important part of the BR because the vast majority of China Europe crate travels on ships after China acquired the port of pias 133% of Chinese trade passed through Greece compared to just 2% 7 years earlier Italy feared that if it stayed out of the brri it could miss trade opportunities and maybe lose business as it gets stolen by other countries in BR specifically Italian ports on Adriatic Sea could lose business should the port of Paras become linked to Central Europe we are rail because this would mean that the trade bypassed Italy entirely instead of Landing in Italian ports and being transported by Italian Railways Italy also hoped that with signing into BR they would fix the imbalance in trade between China and Italy at the time China was exporting heavily to Italy and very little Italian export went into China on top of this the Italian government at the time was already clashing with the EU budget deficit being a big arguing point between both of them election time promises had raised Italy's budget deficit to 2.4% which broke agreements with EU that Italy had made earlier dealing with the CCP was Italy's way of showing the EU that they have other friends that they are willing to turn to it moves also came at a time when EU was trying to tackle China's growing influence in Europe and Africa Italy's decision seemed like it was undermining the eu's attempt to compete with China's economic might but 4 years later Italy now realizes that b was not all that CCP made it out to be they realize that BR was just a way for China to help its economy while not providing anything to other countries so let's quickly go over why China launched BR and what was ccp's original plan all along for this we need to back up a little to 2013 China was one of the fastest growing countries in the world at this point and it was becoming bigger than just a factory for walls manufacturing it was a powerful and Rich Nation but the future was bleed growth was slowing down the Y population that had fueled China's past grow up was getting old and ccp's one child policy had put a huge dend in China's future population but this all did not deter the communist government from focusing outwards and growing its power around the world so Zing ping launched the most ambitious project in the history to increase China's influence around the globe China would give out loans to poor struggling nations in the name of help but in return China would gain control over a country's valuable resources or strategic locations now you may ask what if these countries can pay back the loans well then China would just get control over import resources like gold silver and oil but I'm getting ahead of myself we'll get more into this in just a second let's get back to the story initially the project was called one belt and one road project but some countries wonder why is it named one belt and one road is it because China would be the only one in control So to avoid any misunderstanding CCP changed the name to belon Road initiative and the plan begin China's belt and Road initiative B is a gigantic plan for a Global Network of ports roads Railways and other infrastructure to connect China to the world he's also way through which China confirms its role as a global power together they account for 40% of the global GDP 65% of the world's population and 75% of the known energy reserves China started loaning out billions of dollars to countries all around the world it had given 12 billion to Sri Lanka $26 billion to Pakistan and $3 billion to Tajikistan in total it would have given close to a trillion dollars to more than 100 countries most of them being poor and struggling so when these countries default China is able to get access to valuable resources and spread its influence it controls power plants and strategic ports in Pakistan gold and silver mines in tesistan and quite famously the Hanto port in Shir Lanka we'll talk more about this soon but first you guys might be wondering why would these countries accept loans if they know China's true intentions well unlike what Dave Ramsey says loans aren't necessarily a bad thing now things get widely complicated when you look at a whole economy so for Simplicity purposes I'll use a simple example for the explanation let's say you're ahead of a car rental company which has three cars right now you're making $1,500 in profit per month renting out cars now let's say someone comes to you and offers to loan you some money so you can buy a Ford car which can make you another $500 in profit now as long as you use the loan to buy a car like Toyota whose monthly payment is less than $500 then this is a profitable business move for you as the car will be making more than what the loan payment is but if you buy a car like Mercedes which has monthly payment of more than $500 even though the car looks good it's not really a good business move because now you're actually worse off compared to before you took out the loan you're actually making less profit since now you have to use the profits from other cars to pay off the loan for the Mercedes now a country's economy is lot more complex than the example I just gave but the basics are still pretty similar for any project that's built using the loan as long as the output in GDP is higher than the cost of the loan the country would consider that loan a good thing but if the project from the loan doesn't turn out productive then it's extremely bad news for these developing countries as it pushes their economy even further back and if China is involved that just makes things 10 times worse as you learn soon now this is why when the World Bank gives out loans to poor countries they come with conditions they have to show where the money is going how it's being used and if it even makes sense to use that money on certain projects this helps eliminate or at least limit corruption and malinvestments from these loans this is why H too port in Sri Lanka was denied the construction by several other lenders because the investment just didn't make sense from an economic standpoint Sri Lanka already had a thriving port in the capital Columbo and even though the demand was growing it was nowhere near close to a point where it would make sense to sink so much money into a new Port China on the other hand didn't really care about the feasibility of the port when it loaned out the money to Sri Lanka in fact it didn't really care about how money was used in most countries and it was all by Design you see China's goal with these loans was not to increase the economic output of the developing Nation no no no its main goal was to gain influence over its politicians politicians who had decision-making powers in the country politicians who could sway the public opinion in favor of China and politician who could push China's agenda on the international stage China would just give out loans with no oversight so the politician can use the funds to win elections and stay in power that's exactly what happened with the HTO Port as it was built in then president Raza pxas Hometown just to win political points with the public eventually the Roger pxa family's corruption led to Sri Lanka's thriving economy to bankruptcy and the family fled the country to avoid charges but as long as politicians are closing up to China CCP doesn't really care about how these loans are used I'm sure that the communist government prefers that these corrupt politicians stay in power as long as possible when China took over the H Toto port a lot of experts gave them the benefit of Doubt and explained that this was purely a business deal to recoup the loan money and China had no plans to turn it into a military Naval Base but according to recent news reports as soon as Sri Lanka goes bankrupt China tries stationing a military ship in the poort and that plan was only delayed because India showed a strong protest against China setting up a military base in India's backyard China has constantly encroached on ind's Northern borders and India has no plan on giving into China's aggressive behavior but that's the story for another video the chinaese policy in Africa is often described as a dead trap at a summit with African leaders China's president dismissing claims of a new colonialism it is a part of a deliberate strategy to loan unmanageable sum sums to African countries Beijing is winning line share of construction projects in Africa a win-win partnership for a debt trap now let's talk about Africa CCP has used the same tactics on countries in Africa to gain influence or politicians there this is how China was able to set up a military base in this small but important country Djibouti jibuti controls the axis between the Red Sea and the Indian Ocean one of the busiest Maritime trade route and now China has a military base there and a controlling stake in the port that sits right on the choke point China has also built the headquarters of the African Union in Ethiopia but Chinese companies left something behind when they finished the projects they had bucked the whole building and its servers because of this CCP always knew what African politicians were discussing and planning and this way CCP always had influence over Africa Johnny Harris has a great video on this that I'll link at the end but you guys might be wondering why a Chinese company was building the headquarters for the African Union well this is where we need to look at the terms of these loans that China was giving out you see these loans came with a lot of strengths and all of them were in favor of China One of the most common terms in all these loan is that any project funded by these loans must be given to a Chinese company to build so if a country wants to build a port they hire a Chinese company they want to build a power plant they hire a Chinese company and if they want to build a pament they hire a Chinese company this is how the CCP was able to BU the African Union Parliament but problems don't just end there these Chinese companies mostly bring workers from China to work on these projects even food for these workers is imported from China so at the end of the day most of the money that China is giving out as Lan ends up finding its way back to China while these developing countries are stuck holding the bills and on to that a lot of these projects are becoming a nonproductive part of the economy there's the port and airport in Sri Lanka that no one is using there's another port in Pakistan that's barely used for commercial purposes and there are thousands of new apartment buildings in Angola that are simply sitting empty these are just few examples of Mal investments from Chinese loans that are all too common big reason behind these failures is that most of the time there is no demand for these services but since there is no oversight with these loans they end up being built anyway because of these these projects add little to no value to the local economies and the loans behind the project actually take money away from the local budget in form of interest payments and debt repayment this has turned into a horrible situation for a lot of countries if we remember our car example because of these bad Investments countries are now stuck using their money for paying these loans instead of reinvesting that money into actual beneficial projects some of these repayment terms on these loans are also a bit aggressive to say the least usually when the World Bank gives out loan it comes with the interest of 1 to 3% and payback period of 30 years but these Chinese loans come with an interest rate as high as 7% and payback period of only 15 years because of this a lot of struggling countries were unable to make payments and defaulted on their loans this is when China came up with a solution it went to the struggling nation and said hey since you can't pay back the loan would you be fine with us just taking over the resource mines and will forgive the loan or you can just lease us this important port and we will extend the loan so you have more time to pay it back or in Angola's case China got Count's oil when the country defaulted on the Lots it even went as far as asking countries to stop recognizing Taiwan as a country and vote in favor of China's agenda during important United Nation votes and if a country doesn't listen to China well then ccp's economic blackmail begins Lithuania is a perfect example of this in 2021 Lithuania set up a diplomatic office in Taiwan and invited Taiwan to set up an office in Lithuania under the name Taiwan this is a big deal just for context usually countries don't let Taiwanese offices use the name Taiwan so not to anger CCP or their one China policy it is a common practice for Taiwan to use the name taipe overseas but Lithuania let them use the name Taiwan which didn't please the CCP so what did the CCP do launch an economic blackmail against Lithuania first CCP banned all the export and imports to Lithuania but that didn't really make a difference since these two countries didn't have a big trade relation to begin with so to increase the pressure CCP started pressuring foreign companies to stop trading with Lithuania in December 2021 Beijing warned firms that sourced products from Lithuania that they could find their commercial Rel relations with China restricted soon after that it was reported that Automotive Parts produced by Continental a major German company that sources components from Lithuania were unable to clear customs in China these informal secondary sanctions have also increased the economic Price born by domestic firms in Lithuania biggest issue of all this is what China is doing with secondary sanction is a big violation of World Trade Organization rules which China is part of if China was never accepted into WTO in 2001 then it wouldn't be where it is today economically and now China is brazenly just breaking its rules this is just one of many examples of China bullying other nations especially the smaller ones but Lithuania didn't back down and it's still going anyways coming back to the BR as the news of China's practices with the loans spread across the world the countries got more cautious about accepting Chinese help and some countries went as far as to cancel all the projects they had agreed to already but that didn't stop the CCP to avoid bad publicity CCP started requiring countries to not disclose any loan amount or loan terms to the public so often time when a poor government takes on a loan from China it's quite possible that the country citizens might not find out about it because of its aggressive lending China became one of the biggest lender in the world loaning Out close to a trillion dollar this is where it made a big mistake it was a bit too aggressive due to the aggressive terms a lot of the countries have started to default and China was not expecting such a high rate so soon Co did play a big part in nation not being able to pay these loans but even before Co failure rates on these loans were high China was often forced to loan out more money to keep countries afloat as you can see in this chart between 2019 and the end of 2021 Beijing granted $104 billion in rescue loans a figure almost as large as China's bailout lending worldwide in previous two decades this makes the question why was China helping countes stay afloat after everything we just talked about well because much like in Sri Lanka if a country defaults the government is overthrown and China would lose its influence over the corrupt politicians which it had bribed for so long now every time I mention Sri Lanka on this channel a lot of people point out that according to official figures only 10% of Sri Lanka's debt was owed to China now that number may not be correct as I mentioned earlier because because of bad press a lot of Chinese loan were lent out in secrecy on top of that a good portion of Sri Lanka's loans were owned by Chinese Banks and we have to remember there's no such thing as a private company in China CCP has tremendous amount of influence over these Banks just wanted to clarify that now back to the video one of the worst examples of Bri failure is Pakistan Pakistan's foreign Deb has nearly doubl since 2015 to $100 billion with Chinese lenders collectively being the largest creditor at around $30 billion Islamabad spends around half of country's revenue on servicing foreign debt and needed a $3 billion loan from IMF in June to avoid defaulting amid an acute financial crisis Pakistan isn't alone increasing numbers of BR borrowers are being pushed to the bring of insolvency by a Slowdown in global growth Rising interest rate and record high debt levels in developing World while the West is trying to figure out a way to restructure these debt China has been blocking these negotiations you see Western countries have something called the Paris Club it's a group of major creditors whose role is to negotiate debt restructuring when payment difficulties are experienced though China is not part of the Paris Club the organization has invited China to negotiate debt for the struggling countries being that China is now the biggest bilateral lender but China has always refused to work with other creditors to help struggling countries making it more difficult for other creditors to restructure the debt China in fact wants the Western creditors like the IMF and the World Bank to forgive their debts so the poor countries can repay the Chinese loans which is of course not good for these struggling countries or the IMF only party that benefits is the CCP first it was the CCP who gave out unsustainable loans and now it wants others to bail out China Biggest Losers of all this are the developing countries that were just trying to help their citizens zomia is a prime example of roughly $20 billion of external debt that IMF tallied in 2022 2.7 billion was lent by International Development Banks 1.3 billion comes from various Western governments bank loans come to $1.6 billion local Bond debt comes to $3.3 billion and international dollar Bond debt comes to $3.3 billion too but the biggest junk is nearly $6 billion or to China the IMF has reached a support agreement with zomia that is conditional on his debt burden becoming sustainable but China refuses to agree to the terms making it impossible to restructure Zambia's debt in the meantime Zombia says it has accumulated about $1.2 billion in a years since default and that number is only growing unfortunately Zombia situation is not unique currently 15% of the countries in the world are in De distress and how half of the countries in the world are at a high risk of falling into it all because China wanted more influence across the world luckily other Global Powers saw ccp's true motive with the BR early on and launched their own initiative to counter ccp's Ambitions us launched the International Development Finance Corporation in 2018 and then at G7 meeting in 2021 President Biden launched a build back better world initi initiative repackage it next year as the partnership for Global infrastructure investment the European Union in 2021 launched its global gateway which aims to leverage up a relatively modest amount of public money to fund 300 billion EUR of investment in connectivity projects over 6 years then lastly India launched its own investment fund to get out of CCP encirclement of important Indian trade routes let's go over all these one by one let's stop with the US program in 2021 the G7 Forum launched its own infrastructure project to counter China's belt and Road initiative the so-called built back better World b3w in short would provide hundreds of billions of dollars to under developed countries the idea was that the project would help with financing Global infrastructure project by giving out loans with low interest rates Africa with its huge infrastructure Gap was supposed to be at the core of this program the reason for starting the b3w appears to be simple countries like the United States Canada or the United Kingdom didn't want to stay behind on the huge Investments That China was making and similarly to the global gateway this new b3w program was value ruen The Forum wanted to focus on sustainability transparency gender equality and climate change the G7 argued that this value-driven approach is what separated BTW program from its brri counterpart the focus on quality loans and not just the quantity of them could lead to better results but to make an impact on a huge infrastructure Gap in underdeveloped countries you need a lot of money the estimates are that Africa needs hundred billion dollar annually to tackle its infrastructure deficit and G7 isn't unaware of this but even G7 as powerful as it is can't easily provide this kind of money that's one of the reason why BTW projects never really took off the program stayed really wague and it hasn't competed with China's brri in any way the fact that entire BTW project was renamed after one year says a lot in 2022 the US started a brand new and a game-changing project with its G7 allies keep in mind this was just one year after the build back Better World program was launched the 2022 version was called program for Global infrastructure and investment pg2 and short this new program is mostly the same as b3w just packaged under a different name the United States aims to mobilize $200 billion by 2027 and together with other G7 Partners it will mobilize $600 billion much of the funding will have to come from private sector the G7 won't actually provide this huge sum of money themselves but instead it looks at Banks and investment Farms to help out whether this will work out who knows in China the government can force this bank to help the belon road initiative but whether the US can access Capital this way is well questionable nevertheless it is clear that the United State and its allies are seeing the potential that underdeveloped countries and especially Africa have the G7 is trying to invest in the African continent to reduce the infrastructure Gap and to gain more influence the united state is also starting to realize just how important Africa will be in the future Washington is not only investing in the infrastructure through pg2 but it's also looking to expand Mutual trade relations with Prosper Africa initiative multiple US government agencies are working together to achieve this goal the project is connecting us businesses to African markets by providing helpful services with the initiative the US government wants to spark private Investments import and exports with the African continent through the private sector for example it has helped a Texas company win a contract with the government of Ghana if the United States succeeds in getting the private sector on board it will help with competing against China the US government can't launch massive programs as efficiently as the authoritarian CCP but it does have its good old capitalism and very power powerful businesses if the United States can convince its businesses to help win influence in Africa the Bri has a serious competitor apart from the US the EU and China there are many other players looking to invest in Africa for example India and the UAE are combining their forces to invest in African infrastructure Singapore is also strategically investing and building up trade relationships with the continent and other countries like South Korea Japan the United Kingdom are doing exactly the same let's talk about the EU for a minute the European Union responded to the Chinese Plans by launching its own program with the global gateway investment package the EU wants to help underd develop countries by developing digital transportation and infrastructure networks until 2027 the European Union will mobilize up to 300 billion e for its Global project of which 100 50 billion EUR will go to the African countries obviously the European Union started this program as a response to the Chinese belt and Road initiative after China started the multi-trillion dollar infrastructure project the EU couldn't just sit ideally and do nothing in response but many criticize the global gateway project for being nothing more than a PR stunt 300 billion e is nowhere near the amount that China has invested it will be hard for for Europe to compare against the Chinese Investments apart from the differences in size the EU project also have some different goals than is Chinese counterpart China's s pitch is building roads Bridges and Railways all of that fast and cheap but Europe's global gateway is focused more on sustainability and providing green Energy Solution the program doesn't only concentrate on hard infrastructure but also on soft infrastructure like healthcare and education systems the critics of the project say that this approach won't work in Africa underdeveloped countries in Africa want to get a lot of infrastructure fast and cheap whether it's sustainable or not they don't care and they have had enough of eight packages they want to solve the underlying problem which is the economic underdevelopment but in some cases the European approach with quality projects over sheer quantity of them may actually reap some benefits as we talked earlier there are numerous Chinese infrastructure projects in Africa failing due to poor planning and execution the standard gauge Railway in Tenya is an example of this a multi-billion dollar Railway project aimed to connect Uganda and Kenya with each other has failed dramatically the railway project was stopped before it even crossed the Ugandan border because the Kenya government couldn't pay the Chinese debt anymore the Kenyan government red up a total of $4.7 billion in debt from this Railway alone and that's with a GDP of just $10 billion think about that racking up more than 4% of your GDP in debt for one incomplete Railway adding to this the railway itself wasn't a feasible idea either during the first two years of operation the project lost $200 million the railway still bleeds cash even when it's offered operational the reasons for This Disaster vary from corruption to poor Planet this example is very telling sometimes the Big Shiny project turn out to be a terrible mistakes the European Union however focuses on smaller and more sustainable projects which gives it an advantage from constructing six small hydropower plants in Nigeria to constructing a solar energy plant in jibuti Europe can make some small impacts with this program and Europe does have some larger projects under the global gateway for example it's constructing a subsea power cable from Egypt to Greece to transmit renewable energy from Africa to Europe the cost of the project is estimated to be around €900 million e and for Africa working together with Europe certainly has it advantages Africa leaders that value sustainability and don't want to end up with failed Chinese projects could return to Europe instead but the problem is that Europe doesn't have much Capital with the six-year long global gateway the European Union is already struggling to scramble €300 billion EUR for the funding of the projects a lot of money needs to come from the private sector because the governments simply do not have the resources there are several reasons for this big one being that the economy of the European Union is smaller than that of China the EU economy amounts to around $16 trillion in GDP while China has a nominal GDP of around 19 trillion doll at least that's what it reports publicly like I've said in previous videos China's GDP figures are well disputed to say the least if you want the full video you can go check it out what it comes down to is that China's GDP numbers could be much lower than expected so China's advantage in GDP numbers could be minimal or even non-existent nevertheless the European Union has one more disadvantage when it comes to these huge investment programs many see European Union as a slow and bureaucratic organization this is because it is a union with tons of different member states every single country needs to agree on every single policy it makes when you're trying to organize billions of VI for a project like global gateway it becomes hard to execute the plan needs to go through several committees and councils which is a process that can take months to complete there are a lot of political differences within the European Union something that doesn't make cooperation go very smoothly in China however this is a whole lot different China has an autocratic government in which ging ping holds all the power now this has a lot of disadvantages when it comes to things like civil rights and democratic values and I'm not arguing that an autocratic government is any good but a foreign investment program like belt and Road initiative is much easier to execute for dictatorships remember the CCP indirectly controls a lot of Chinese Banks so it has access to tons of money Zing ping can access billions of dollars without having to go through the same procedures as the EU on top of that Z has control over a lot of Chinese businesses so he can direct his res resources top down and with his one party State Z isn't going to have opposition against his investment plans you can see why European Union is having a hard time competing against China but that doesn't mean the global gateway is at a headache for Chinese brri definitely is lastly we have India who has become quite a thorn in ccp's way to contain India China has built pipelines both in Myanmar and Pakistan from coast to into City China it has also secured long Port leases in Pakistan and Sri Lanka similarly China has also set up a military base in jibuti to control a vdal straight off the coast of Djibouti that links the Red Sea to the Indian Ocean all the Asian exports Bound for the Western markets must first pass through this vital straight before reaching the sus Canal between 12 to 20% of all global trade passes through this straight only 8 miles from China space in Camp LaMore after seeing all the moves China has been making a lot of military experts have pointed out that the Belin road is not just a geoeconomic plan it also has a military strategic Advantage the ports have increasingly come to play a potentially more menacing role as dual use ports that can give the strengthened Chinese Navy a global reach it lacked entirely just a few years ago the these strategic Investments are nicknamed The String of Pearls as the goal is to encircle India and put pressure on New Delhi India was aware of this already but the war in Ukraine showed every country in the world how important it is to secure your economic interest in modern world wars can be won and lost before even stepping a foot on the battlefield India realized that in the case of a war China's String of Pearls can be used as a way to chalk off India's access to the world adding to this countries that received Chinese money were slow to criticize China whenever it would encroach on Indian borders there is also a rumor that China plans to stop setting up military bases in countries that received Chinese loans and of course this was undoubtedly stressful for New Delhi as it didn't want to be surrounded by Chinese military so India started laying out its own plan to safeguard its economic interests but it didn't just stop there later in the video we'll go over how India is taking advantage of China's trade war with the USA to hurt China where it's the strongest its manufacturing provess but first let's go over how India is countering China's military to counter The String of Pearls India started its own alliances to encircle China nickname the necklace of diamonds India is expanding its Naval bases and is also improving relations with strategically placed countries to counter China's strategies in 2018 India partnered with Singapore and Indonesia to get access to their Naval bases of Changi and sabang this increased India's influence and access to straight of malaka one of the most important joke points for China and rest of the world in terms of trade that same year India also got access to Port of Dum in Oman the port facilitates India's crude imports from the Persian I Gulf in addition to this Indian facility is located right next to the two important Chinese Pearl jibuti in Africa and guad in Pakistan India has also signed an agreement with sells for a naval base in the region which increases India's presence near the African continent while doing this India has also extended credit lines to Iran and agreed to build a port in the country to extend access to trade routes in the Central Asia additionally India has extended credit lines in Central Asia to countries like Mongolia where Prime Minister Modi has agreed to develop a bilateral air Corridor New Delhi has invested a lot in policies to improve relationships with Japan and Vietnam these relationships have helped increase Indian trade and consequently India's influence on countries around China India has already started putting its economic growth to good use it's now lending money to Neighbors in order to avoid having them indebted to Chinese loans it has given $8 billion to Bangladesh $2.1 billion to bailout Sri Lanka $1.7 billion to Nepal and $1 13 billion to Maldives while India lags far behind China in overseas Landing New Delhi has stepped up its effort in recent years providing tens of billions of dollars in credit to neighboring countries Indian companies have also expanded rapidly in the region providing a counterweight to Chinese commercial activity Indian policy makers see countering the Bri as vital to avoid being surrounded by pro-chinese garments and infrastructure they speculate could one day serve beijing's military interest India has definitely stepped up its efforts in containing China India publicly downplays the competition with China but its actions show India doesn't want to be held hostage to China's economic or military mon on top of all this India has also formed two Partnerships with the USA that's scaring China first we have IMC and the second is quad let's go into both one by one just back in September India European Union United States and Saudi Arabia announced a mega deal to establish the India middle east Europe economic Corridor IMC the IMC is composed of two distinct Pathways the East corridor linking India to Middle East and the northern Corridor connecting Middle East to Europe This expansive Network incorporates a railway system a hydrogen Pipeline and high capacity optical fiber cables it supplements existing Maritime and landbased transport routes such as the sus Canal the north south transport Corridor and China silk routes thereby facilitating smooth Transit between India the UAE Saudi Arabia Jordan Israel and Europe given Indian Railway industry's Proficiency in constructing Railway Network in Aid regions it is poised to secure a significant portion of contracts from this proposed Corridor the initiative is anticipated to achieve a 40% reduction in time required for transporting Indian Goods to Europe additionally it is expected to result in a 30% decrease in the cost of transporting Indian Goods to Europe for the US this project accomplishes the objective of distancing India from Russia Iran and China for India this appears to be a well-defined strategy aimed at challenging China's extensive belt and road projects major blur to China is the fact that Italy with just withdrew from brri has opted into IMC last but not least the second project that India and us are part of is the quad us India Japan and Australia formed the alliance nicknamed quad the quad is seen as a security Focus grouping structured to deter Chinese aggression whether it be Bri related or not following its reconstitution the quad formed working groups in 2021 focused on issues of utmost importance including vaccines infrastructure climate change critical and emerging Technologies cyber security and humanitarian assistance this signals the quad's commitment to delivering Real Results to Regional Partners Beyond security concerns this doesn't mean that quad is not security focused at all quat regularly performs military exercises to help establish and enhance interoperability between capable Naval forces and aligned operating procedures for emergency response every time quad holds a military exercise China is quick to denounce it saying it hurts China's safety but in real it the quad has played a big role in deterring Chinese aggression by harnessing ambiguity the quad can endure and grow as a reliable source of public good contributing to reasonal prosperity and keeping great power tensions at a manageable level all this combined has created quite an issue for br and CCP as a whole