How did China go from POVERTY to becoming a GLOBAL SUPERPOWER? : China Growth case study

Summary

This video explores China's remarkable transformation from an impoverished nation to a global economic powerhouse, second only to the United States in GDP. It delves into the strategic policies that fueled China's ascent, such as the open-door policy, establishment of special economic zones, and aggressive investments in future industries like solar and electric vehicles. The video also highlights China's geopolitical strategies, including the Belt and Road Initiative, and concludes with lessons for other nations, emphasizing the importance of leveraging population, future resource planning, and creating geopolitical leverage.

Takeaways

• 🌏 China's economic reforms, particularly the 'open door' policy and the establishment of Special Economic Zones (SEZs), played a pivotal role in its transformation into a global economic powerhouse.
• 🏭 The SEZs attracted foreign investment by offering incentives such as reduced import duties, affordable land, and tax exemptions, which bolstered China's manufacturing sector and earned it the title of 'the world's factory'.
• 💹 China's strategic investments in future industries like solar and electric vehicles (EVs) have positioned it as a dominant player in these sectors, with significant control over the supply chain.
• 🔋 The foresight to secure resources like cobalt in the Democratic Republic of Congo has given China a significant advantage in the EV battery market, as cobalt is a crucial component for these batteries.
• 🌞 China's aggressive push into solar energy, including government support for solar companies despite initial losses, has led to a drastic reduction in the cost of solar energy, making it competitive with fossil fuels.
• 🚀 The Belt and Road Initiative is a key component of China's geopolitical strategy, aimed at enhancing its global influence and economic ties with partner countries.
• 📈 China's economic growth has been astonishing, with a 17 trillion dollar GDP, making it the second-largest economy in the world, just behind the United States.
• 📊 The People's Liberation Army's capabilities have been bolstered by the country's economic growth, reflecting China's ambition to become a global superpower.
• 📈 China's long-term strategic planning and investment in key industries and resources have been instrumental in its rise to global prominence.
• 📚 Lessons for other countries, including India, involve leveraging population size, anticipating future resource demands, and developing strategic geopolitical leverage.

Q & A

What major policy shift in China led to its economic transformation?

The major policy shift was the 'open door' policy introduced by Deng Xiaoping after Mao Zedong's era, which included the establishment of Special Economic Zones (SEZs) to attract foreign investment and promote economic growth.

How did Special Economic Zones contribute to China's economic growth?

SEZs contributed by offering foreign companies incentives such as low import duties, cheap land, and tax exemptions, which attracted multinational corporations to set up manufacturing hubs in China, creating jobs and boosting the economy.

What is the significance of China's Belt and Road Initiative in its geopolitical strategy?

The Belt and Road Initiative is significant as it helps China expand its global influence, secure resources, and strengthen economic ties with participating countries, thereby enhancing its geopolitical leverage.

How did China become a dominant player in the solar energy industry?

China became dominant by heavily investing in the solar energy supply chain, particularly in polysilicon production, and supporting solar companies through subsidies and funding, even during initial losses, to establish a strong foothold in the industry.

Why did China invest in the Republic of Congo during the 2008 economic crisis?

China invested in Congo to secure access to its vast cobalt reserves, which are crucial for electric vehicle battery production, demonstrating China's strategic foresight in securing valuable resources for future industries.

What is the role of the People's Liberation Army in China's pursuit of global superpower status?

The People's Liberation Army has been building up its capabilities, with economic growth providing the resources needed to boost military research and development, contributing to China's overall global power.

How did China's approach to economic policies differ from other countries with cheap labor?

China's approach differed by not only leveraging cheap labor but also by strategically investing in future industries like solar and electric vehicles, and securing resources like cobalt, which set the stage for long-term economic dominance.

What lessons can India learn from China's economic rise?

India can learn to effectively utilize its large population, strategically invest in future industries, and develop geopolitical leverage through strategic investments and initiatives.

How did China's economic policies impact the global manufacturing landscape?

China's policies turned it into the 'world's factory' by attracting global manufacturing, which reshaped the global manufacturing landscape and made China a key player in the global supply chain.

What is the significance of the 'open door' policy in China's economic history?

The 'open door' policy was significant as it marked a shift from isolation to global integration, leading to rapid economic growth and China's emergence as a global economic powerhouse.

Outlines

00:00

🌏 China's Economic Transformation and Global Ambitions

This paragraph discusses China's remarkable economic transformation from an impoverished nation to a global economic powerhouse, second only to the United States in GDP. It highlights China's strategic efforts to become a superpower, including the strengthening of the People's Liberation Army and the Belt and Road Initiative to expand its influence. The script also touches on China's astonishing economic growth, which has been fueled by resources allocated to military research and development. The narrative contrasts China's current status as a leader in futuristic industries like solar and electric power with its past, where the country was struggling with a 60% poverty rate and a predominantly agrarian economy. The video aims to explore the business and political strategies behind China's rise and what lessons other countries, particularly India, can learn from this ascent.

05:00

🏭 The Impact of Special Economic Zones on China's Growth

The second paragraph delves into the concept of Special Economic Zones (SEZs) as a catalyst for China's economic boom. It explains how SEZs were established to attract foreign investment by offering incentives such as reduced import duties, affordable land, and minimal taxes. The example of Apple is used to illustrate how these zones benefited both multinational corporations and China's economy. The influx of foreign companies led to job creation, poverty alleviation, and increased tax revenue. The paragraph also discusses how China's low labor costs made it an attractive manufacturing hub, contributing to its status as the 'world's factory.' Additionally, it touches on China's strategic investments in emerging industries like solar and electric vehicles, positioning the country as a dominant player in these sectors.

10:02

🔋 China's Dominance in Solar and Electric Vehicle Industries

This paragraph focuses on China's strategic foresight and investment in the solar and electric vehicle (EV) industries. It outlines how China became a monopoly in the solar industry by controlling a significant portion of the global polysilicon and wafer production. The narrative explains the government's support for solar companies, even during initial losses, with the vision of future energy needs. Similarly, the paragraph discusses China's early and aggressive investment in the EV market, particularly in the acquisition of cobalt resources from the Republic of Congo. This strategic move positioned China to dominate the supply chain for EV batteries as the global demand for cobalt surged. The paragraph emphasizes China's ability to leverage its resources and geopolitical strategies to become a superpower in manufacturing and valuable resource control.

15:04

📈 Lessons from China's Rise for India and the World

The final paragraph draws lessons from China's economic ascent for other countries, especially India. It emphasizes the importance of leveraging a large population to drive economic growth and the need to anticipate and capitalize on future resource demands. The paragraph also discusses the significance of geopolitical leverage and strategic investments in shaping a country's power and influence. It concludes by encouraging viewers to reflect on India's potential leverages and strategies for the future, highlighting the importance of learning from China's success story.

Keywords

💡Global Economic Powerhouse

A 'Global Economic Powerhouse' refers to a country that has a dominant influence on the world economy due to its significant economic size, influence, and contributions. In the context of the video, China is described as a global economic powerhouse, second only to the United States in terms of GDP. This highlights China's rapid economic growth and its pivotal role in global economic affairs, as discussed in the script where China's economic transformation is a central theme.

💡People's Liberation Army (PLA)

The People's Liberation Army is the armed forces of the People's Republic of China. The script mentions the PLA in relation to China's efforts to become a superpower, emphasizing the military aspect of China's comprehensive national strength. The PLA's capabilities are seen as a crucial component in China's strategy to assert its influence on the global stage.

💡Belt and Road Initiative (BRI)

The Belt and Road Initiative, also known as 'One Belt, One Road', is a development strategy adopted by the Chinese government to promote economic cooperation and connectivity between Eurasian countries. The script describes it as the most expensive infrastructure project in history, aimed at building China's influence. It is a key part of China's foreign economic and geopolitical strategy, as highlighted by the video's discussion on China's global outreach and investment.

💡Special Economic Zone (SEZ)

A Special Economic Zone is a geographical region within a country where business and trade laws differ from the rest of the country. The video script explains how China utilized SEZs to attract foreign investment by offering incentives like reduced taxes and import duties, which helped transform China into a manufacturing hub. This concept is central to the video's narrative on China's economic liberalization and its impact on global trade.

💡Open Door Policy

The 'Open Door Policy' refers to China's economic reform policy initiated in the late 1970s, which marked a shift from a closed, centrally planned economy to one open to foreign trade and investment. The video script describes this policy as a turning point in China's economic history, leading to the establishment of SEZs and the subsequent economic boom that propelled China to become a global economic power.

💡Manufacturing Hub

A 'Manufacturing Hub' is a region or country that specializes in the production of goods on a large scale, often due to favorable economic conditions. The script mentions how China became the world's factory, with over 20% of global manufacturing happening within its borders. This concept is integral to the video's exploration of China's economic development and its role as a major player in global manufacturing.

💡Renewable Energy

Renewable energy refers to energy sources that are naturally replenished on a human timescale, such as solar, wind, and hydro power. The video script discusses China's strategic investment in the solar industry, positioning itself as a global leader in renewable energy. This is an example of China's forward-thinking approach to energy security and its impact on the global energy market.

💡Industrial Revolution

The term 'Industrial Revolution' refers to a period of major industrialization and technological innovation that led to significant changes in economic and social structures. The video script alludes to a new era of industrial revolution, where China is positioning itself to capitalize on emerging technologies and resources, such as electric vehicles and renewable energy, to maintain its economic dominance.

💡Geopolitical Strategy

Geopolitical strategy involves the application of a country's power and influence to achieve specific goals in international relations. The video script highlights China's geopolitical strategy through initiatives like the BRI and its investments in strategic resources like cobalt. These strategies are crucial to China's rise as a superpower and its ability to shape global dynamics, as discussed in the video.

💡Resource Leverage

Resource leverage refers to the strategic use of a country's natural resources to gain economic or political advantages. The script discusses how China leveraged its labor force and resources like cobalt to become a dominant player in industries like electric vehicles and renewable energy. This concept is central to the video's analysis of China's strategic planning and its pursuit of global influence.

Highlights

China's economic reforms in the late 1970s led to it becoming the world's second-largest economy.

The People's Liberation Army has been building up its capabilities, supported by China's astonishing economic growth.

China's Belt and Road Initiative is the most expensive infrastructure project in history, aimed at building China's influence.

China's long-term strategy is to become the world's leading economic power.

China's transformation from a country with a 60% poverty rate to a global economic powerhouse in 45 years.

The open-door policy and the establishment of Special Economic Zones (SEZs) were pivotal in China's economic turnaround.

Foreign companies were attracted to China with incentives like low import duties, land leases, and tax exemptions.

China's strategy to lift its population out of poverty by creating jobs in foreign-invested companies.

China's low labor costs have been a significant factor in attracting global manufacturing.

China's dominance in the solar industry, producing over 80% of the world's polysilicon and 98% of wafers and ingots.

China's foresight in investing in solar energy and electric vehicles (EVs) as part of its global dominance strategy.

China's control over the supply chain of solar energy and its impact on the global industry.

China's strategic investment in the Republic of Congo's cobalt mines to secure a majority share in the world's cobalt reserves.

The geopolitical strategy of China's Belt and Road Initiative to strengthen its global influence.

Lessons for India and other countries from China's rise, including leveraging population and investing in future resources.

The importance of geopolitical leverage and strategic foresight in shaping a nation's global power.

Transcripts

foreign

economy opened up to the rest of the

world a move that ultimately turned

China into a global economic Powerhouse

second in GDP only to the United States

China is engaged in a whole of State

effort to become the world's only

superpower by any means necessary

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the people's Liberation Army has been

building up its capabilities

astonishing economic growth over the

decades has provided resources needed to

boost military research and development

China's belt and Road initiative is the

most expensive infrastructure project in

history the initiative is also building

China's influence I think China's

playing the long game here but they want

to be the number one in economic power

in the world

hi everybody

China has one

Wondries in the world and it is so so

hard to believe that a country that is

known today as the second largest

economy in the world with a 17 trillion

dollar GDP just 45 years back the same

country was crippling with a 60 percent

party rate why on one side today we see

China as a futuristic solar and electric

superpower the same country in the 1970s

was so backward that the Chinese knew

nothing but farming and that too during

the time of industrialization and lastly

while on one side we see this glamorous

skyline of Shanghai it is so hard to

visualize that once upon a time this

country had such a bad economy that

millions of people died due to

starvation so the question is what

exactly happened from 1978 to 2018 that

China went from being an impoverished

country to becoming a global superpower

what exactly were their business and

political strategies that made them so

so powerful and most importantly what

are the lessons that India needs to

learn from the rise of China this video

is brought to you by cuckoo FM but more

on this at the end of the video

this is a story that dates back to late

1970s this is when Mao Zedong was

leading China and the condition of the

country under Mao got so bad that while

the Nazis killed about 15 million people

20 million people were killed under the

Stalin regime but the number of people

who died under Mao Zedong alone is

estimated to be between 50 to 80 million

people and a majority of them died due

to starvation this was majorly because

of the adverse Community principles

adopted by Mao Zedong and his people and

needless to say all these policies

failed and China was crippling with a

party rate of 60 percent

so the question is how did this country

go on to become a superpower and that

too in just 40 years well the answer to

this lies with the policies of this man

named Tang Zhao ping who took charge

after Mao Zedong passed away in 1976.

after visiting multiple countries to

understand their economies tank shopping

came out with some incredible policies

that changed the face of China and one

of the most revolutionizing policies of

all was something called the open door

policy and under this policy they set up

something called the special economic

zone and this growth model is also

something that India is trying to pursue

so let's try to understand how does a

special economic zone function let's say

apple is a company that has been

operating in the US where it took care

of everything so ideation designing

manufacturing and distribution all of it

was done in the US itself but by the

1970s and 80s when the cost of Labor in

the U.S started increasing these type of

companies started Outsourcing their

labor intensive processes as in

manufacturing and assembly started to be

outsourced to the Emerging Markets this

was because the labor cost in these

Emerging Markets was extremely cheap why

because in these countries most of the

people lived in poverty so any bit of

income for them was a lot of income so

this way the American companies got

cheap labor and the people of that

country got a source of income but you

know what guys the biggest challenge for

a company like apple was not labor but

other major expenses like buying land

Building Factory importing the machinery

and importing raw materials and back

then in a non-liberalized country like

India these kind of foreign investments

were either not allowed or import duties

were as high as 100 but in a special

economic zone the government of a

particular country gives special

privileges to eliminate all these four

cost barriers like input Duty land

construction and raw material Import in

this case a country like China would

tell Apple that we will charge you only

one percent import Duty on your machines

give you the land for a 99 year lease

and that too at 110 the cost and thirdly

we will charge you a bare minimum of

just one percent import Duty on raw

materials all you have to do is build

the factory invest a minimum of 10

million dollars or more and start

operating in some cases the government

might even wave off the taxes on profits

for three years if the company needs

time to break even and even after that

if the taxes in Mainline is 33 in a

special economic zone it would be only

15 percent this is the reason why

hundreds of companies from all around

the world started flocking to China to

set up their manufacturing Hub now the

question over here is companies like

apple benefit from this that's fine but

if China gives out such a huge tax

exemption to huge companies like apple

how does China make money well the way

China benefits from this is that when

Apple recruits 20 000 workers to work at

the plant these workers and their

families will be lifted out of poverty

so if each worker gets paid five dollars

per day every month three million

dollars worth of income is coming to the

people of China and what will these

workers do with all this money they

would go on to buy food grocery and

medicines so this way money starts

flowing into the economy and the

government doesn't have to spend on

welfare and subsidies to actually

support these people on top of that

because these people and their families

have been lifted out of poverty they

would send their child to a better

school who would then go on to make 10

times more money after she graduates so

you see an entire generation is being

lifted out of poverty and after 10 years

when the Sons and Daughters of these

workers make money they would go on to

become permanent and premium taxpayers

to the economy of China secondly after

these companies have made hundreds of

millions of dollars worth of Investments

none of them will leave China for the

next 30 years at least and the best part

was that the labor cost in China was so

low that even after 22 years of

liberalization the cost of Labor in

China was 53 times lower than the us so

you can imagine how amazing China was

for the U.S companies

this is the reason why you will see that

the biggest companies in the world

including Apple Tesla Samsung and

hundreds of other companies have their

manufacturing Hub in China in fact today

China is known to be the world's Factory

with more than 20 percent of the entire

world's manufacturing happening in China

itself now the moment I say cheap labor

and China most people would say yeah bro

so what anybody can give out cheap labor

and become developed right because

that's what Bangladesh Vietnam Indonesia

are doing

but you know what guys the Chinese did

not stop there other than becoming the

world's Factory with cheap labor the

Chinese government has an extremely

futuristic approach for their Global

dominance and it's absolutely

mind-boggling to see how far they can

actually think two classy examples of

the same are the solar and EV Industries

you see this chart back in the 1990s the

US was the Pioneer in solar with more

than 40 share of the global PV cell

Market

but then something crazy happens later

on U.S went down to less than 10 share

and China and Taiwan crossed more than

50 percent of the global market share by

2010. now if you look at the process of

making solar panels you will see that

first we have polysilicon which is

melted and shaped into ingots then

ingots are sliced into Wafers Wafers are

doped into cells and finally the cells

are assembled into finished solar panels

and guess what as of 2021 China produced

more than 80 percent of the entire

world's polysilicon and roughly 98 of

the Wafers and ingots the question is

out of all the countries that stand

today how did China become a monopoly

the answer to this lies in this chart

now if you look at the cost of producing

solar energy back in the early 2000s it

was at 750 per megawatt hour whereas the

cost of producing energy from coal was

at 120 to 150 so even though several

solar manufacturing companies popped up

in the US they couldn't make profits and

eventually they had to be shut down

because no one could afford to buy solar

panels at that cost

but the catch over here is that in 2003

four when solar companies started

emerging in China even they started

incurring losses but they survived in

spite of all these losses for the next

15 years you know why because the

government of China recognized the

importance of solar companies 20 years

down the line so the government itself

gave out free land free electricity free

capital and at times even free laborers

who were paid by the state itself so the

government kept these laws making

companies alive with its own money gave

them special rebates for research and

development and kept on funding The

Innovation for solar energy just to make

sure that the solar companies are alive

when the time is right and what happened

next took the entire world by surprise

in the next 20 years by 2019 while the

cost of energy from coal still cost 109

dollars the cost of solar has decreased

by 89 going from 359 dollars to just 40

dollars per megawatt hour and now it's

just eleven dollars per megawatt hour so

for the first time in human history

renewable sources look way cheaper than

fossil fuels now I don't know if you

realize this or not but then this is as

big as oil and today while everybody is

rushing to make solar panels the country

that controls the supply chain of solar

is the superpower of the industry and

who's that now China why because they

bet on solar energy 15 freaking years

back and not just that somehow the think

tank of China also realized that

electric vehicles are going to be the

future and they somehow became a

dominating force in the EV Market also

to tell you about it this story dates

way back to 2007 and 8 and this is when

the world was witnessing one of the

worst economic crisis in its history

let's talk about the speed with which we

are watching this Market deteriorate

we're down over 16 percent down at the

same time has fallen about 8 18 percent

it was the worst day on Wall Street

since the crash of 1987. what started in

America last year has now spread to

every part of the world this could be

the most serious recession in decades

and that means life as most Americans

know it is about to change in some cases

dramatically and while the entire world

was trying to recover China was busy

entering a country called the Republic

of Congo this country was ravaged with

Wars its economy was crippling and

barely any countries were interested in

investing in the Republic of Congo but

suddenly China became extremely friendly

with this nation and provided a 5

billion dollar loan for developing the

infrastructure in Congo now the question

is why would anyone invest in a country

like Congo and that too during a

recession

well as it turns out the Republic of

Congo has the largest Cobalt mine in the

world and why is Cobalt important

because it's one of the most crucial

Metals used for making EV batteries

and guess what Congo has 3.5 million

tons of cobalt reserves as of 2021 and

these mines are so valuable that they

account for 51 of the entire world's

Cobalt Reserves but back in 2008 nobody

bothered to buy Cobalt but this is when

the Chinese sees the opportunity and

signed an infrastructure for mineral

deal with Congo which meant that China

will give Congo money and Loan and in

return Congo will give China the rights

to extract metals and minerals from

Congo

they set up a joint venture way back in

2008 that was named Sino congolize Des

mines and in this Venture the Chinese

have a majority shareholding of 68 so

basically all the Cobalt that comes out

of Congo China gets a majority share of

the profits and what blew my mind is

that almost 70 percent of the Congolese

mining portfolio is under the Chinese

control this is what China started doing

15 years back way before the world took

EVS seriously and now fast forward to 15

years later when every single country is

racing to buy Cobalt when Cobalt prices

have shot up by 400 percent

guess who's selling Cobalt to the world

and now the demand of cobalt is expected

to grow by another 400 in the next eight

years and China is just waiting to show

its dominance to the world this is how

China's extremely futuristic vision and

an aggressive investment strategy have

enabled it to become a superpower not

just in terms of manufacturing but also

with the most valuable resources in the

world and lastly it's the geopolitical

strategy of China that is making it

super powerful a prime example of the

same is the belt and Road initiative

that we have covered in our previous

Series this project started way back in

2013 By the way and is expected to be

completed by 2035. you see that is an

insanely well thought project for 22

long years we've already made a five

part series on it so if you haven't

watched it yet I'll give you a link in

the description

this is how China went from being an

impoverished country to becoming the

second largest economy of the world and

one of the most powerful countries of

the 21st century and this brings me to

the most important part of the episode

and that are the lessons that India and

every other country needs to learn from

the rise of China

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to the lessons the first thing we need

to learn is that population is a

double-edged sword if utilized properly

it will go on to make you a superpower

and at the same time if you don't

leverage it it will become your biggest

liability and will crumble your economic

in case of china they turned it into an

asset and became a superpower in just

four decades so as citizens of India

keep an eye on the government policies

and see what the government is doing to

use this humongous population to our

advantage lesson number two the world is

moving towards a new era of Industrial

Revolution and this era will kill the

demand of old resources and bring in

massive demand for new resources so the

question is what are we doing today to

capitalize on the resources that will

become valuable 20 years later the U.S

did this with technology China did this

with solar and Cobalt industry so the

question is what is India doing to bet

on the future and lastly in the world of

geopolitics Leverage is the most

important factor that defines power in

this case the Chinese first leveraged

their labor then they went on to

dominate Cobalt and solar industry and

now they are using their belt and Road

initiative to strengthen their

geopolitical position 20 years down the

line now although the ethics of it are

quite debatable it has undeniably

created a factor of Leverage that the

world is going down to so the question

that we go to ask ourselves now and 20

years down the line is what is the

leverage that India has over the world

that's all from my side to today guys if

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you so much for watching I will see you

in the next one bye bye

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foreign

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